Agriculture • Farming setbacks derail UK land price rally
Farming setbacks derail UK land price rally
The dismal year for UK arable growers, hit by their lowest wheat yields in 20 years and worst potato harvest for 36 years, has fed through into a fall in farmland prices, according to land agency Knight Frank.
Farmland prices fell by 1.2% to an average of £6,220 per acre in the July-to-September period, the worst performance since that in the first three months of 2009, at the depths of the global financial crisis.
Weather setbacks, including the wettest summer in a century, have led to a sharp drop in both yields and quality. Only 4% of group 1 wheat varieties have met full milling specification this year, compared with 40% last year.
The potato harvest will fall by up to 25%, Produce Investments said earlier this week.
"It has undoubtedly been a difficult year for the UK’s famers," Clive Hopkins, the head of Knight Frank’s farms and estates department, said.
However, the consultancy remained upbeat over prospects for farmland prices, which have proven a more lucrative investment than the likes of shares or residential property over the last decade
"Given that farmers have just experienced one of the worst growing seasons for many decades, conditions, the fact that farmland is only £70 an acre below its all-time high is a reflection of how robust the market remains," Andrew Shirley, Knight Frank head of rural property research, said.
Good arable land is regularly achieving more than £7,500 an acre.
The agency forecast that farmland prices would "start rising again soon", and appreciate by some 5% over the next 12 months, underpinned by the strong values of agricultural commodities.
As an asset class farmland prices have also shown strong returns over the past decade, up almost 200%.
While similar appreciation has been seen in oil prices over the same time frame, the FTSE 100 share index has risen by 57%. Average UK house prices are up 48%.
The appeal is in part based on rents which have seen "sharp"increases, rising up to 40% in three-year reviews for traditional farm tenancies.
"It has reached the point where landowners need to think very carefully before accepting the highest bids from prospective tenants,"Knight Frank said.
"On paper they look very attractive, but there is a danger that they will become unsustainable if commodity prices fall.
"If that happens, your tenant will struggle to pay the rent or may not look after your land as carefully as you would like."
Statistics: Posted by yoda — Thu Oct 04, 2012 9:44 am
View full post on opinions.caduceusx.com