Kate Russell of the Central Association of Agricultural Valuers spoke on day two of the conference.
Key elements of Kates’ talk included:
The potential impact of Brexit particularly touching on
- what causes changes in land value and the potential impact of Brexit
- how these changes might play out socially and environmentally
What causes change in land values?
Supply and demand for farmland is affected by a huge range of factors, including:
- Performance of alternative investments
- General economic outlook
- Cost of borrowing
- Farm commodity prices
- Currency exchange rates
- Relative value of UK farmland compared to elsewhere
Over a decade of capital growth
- Capital values for average arable land increased from c. £2,000/acre in 2002 to c. £8,000/acre in 2016
- That period of growth came after a long period of near static values
- Current market is more textured: where there are buyers, good land still sells well
Potential impact of Brexit on land values
- Brexit is a process which will unfold over time – change won’t happen overnight
- At least initially, we will see similar amounts of support made available to farmers – but for what?
- In the longer term, levels of support may fall – in the EU as well as UK – which could affect rental values
Possible upwards pressure?
Upwards pressure on land values could come from
- Economic uncertainty
- Relative performance of other investments
- Increasing pressure from other land use – housing, infrastructure, etc
Possible downwards pressure?
- Institutional investors see the end of the bull run
- Trade deals unfavourable for UK agriculture
- Unfavourable currency exchange rates
- Uncertainty over agricultural incomes
How might these changes play out socially and environmentally?
- UK land market is fairly stable, both in sales and in lettings
- The Brexit process will unfold over time
- We can expect evolution, rather than revolution
Some themes – Do policy better, Improve competitiveness, More collaboration, Get farming businesses into the hands of those equipped to handle this
Do policy better
- Opportunity to fit policies better to UK agriculture
- How devolved will that be?
- Obligations to international treaties will remain
- EU anxious to avoid regulation dumping
- Industry and stakeholder input needed
- Inexorable pressure on costs
- More use of technology
- More production on best yielding land
- Marginal land uncropped or put to other use – ag-environment or PES schemes?
- Businesses expanding where that can lower overheads over the whole
Those who can’t compete in commodity markets may have two options:
- Add value to produce – Processing, niche markets etc
- Become a multi-income stream business – Diversify – Let land out to commodity producers – Use the resources in other ways
- Happening already – Farmer Clusters, Nature Improvement Partnerships etc
- Landscape scale delivery is attractive in policy terms
- Increases scope for delivery of PES type schemes
- Opportunities for AONBs?
The farmers of the future
- Businesses must be viable and resilient
- Lenders are generally supportive of the sector
- Opportunities are there for new entrants and growing businesses
- Succession and retirement planning remains a real issue – esp for housing
What about woodlands?
- Markets for timber are more active
- Large scale new forestry planting is returning to parts of Scotland
- Much talk of multiple benefits
- Does the National Forest offer a model?
- Change will be gradual
- Opportunities will be there for those who can adapt
- Although most farmers aren’t in it for the money, they cannot maintain our landscapes without it