Investing in farmland remains attractive – but changes to support make it harder to invest in farming, says Fen Tiger
“Now then, young man,” was the familiar phrase that bellowed from my mobile phone. And despite the caller being nearly 20 years younger than myself, I knew this conversation was going to be informative and told from the heart.
He farms more than 2400ha (or 6,000 acres in old money) and runs several successful diversification projects to keep the farm books balanced. Without these projects, his farm would struggle to maintain healthy profits.
What I have enjoyed about our farming relationship is his honesty. It is rare to meet such an honest man. Not only honest, but also able to admit his mistakes. He is always enthusiast and optimistic about the future of farming – and his own future too.
But on this occasion, his tone had changed. He said he felt totally fed up with the farming world. He had spent many a long hour scanning his farming profits, margins and general farming practices – and the future was far from rosy.
Young and old
He said he had felt concerned for some considerable time. But he had ignored it until he was encouraged to look further simply because of the number of phone calls he had received from like-minded people.
Other farmers were facing the same questions, he said. And they weren’t all old. Young farmers in their 30s and 40s were feeling unwanted or unappreciated by the government, the general public and often their local communities too.
Despite promises to Back British Farming, many of these farmers felt the government was interested only in sourcing the cheapest food from wherever it could. And if this meant sacrificing British growers and livestock producers, then so be it.
Like my friend, they were fed up with working for pence per acre profits – or in some years no profit at all. Weather patterns can be overcome but the lack of profit and re investment cannot be sustained for too long.
The reason for his phone call was concern for the long term rents he would be able to pay. His concern centred around the uncertainty of the government’s forthcoming environmental land management scheme which will replace direct payments.
At present, some rents are linked to grain prices. Until now, it has worked well and is fair to both parties. But with basic payments being reduced by at least 5% this year, his figures and forecasts made bleak reading.
From a landlord’s point of view, a proposed decrease in rent was unnerving. But having been on both sides of the fence, I could not disagree with his thinking. How long can farmland rents be sustained in the high hundreds?
For Grade 1 land, perhaps they will hold up for some time. But for average or heavy wheat land, three-figure rents are not going to be there much longer. The numbers simply don’t stack up. And they will become more challenging as basic payments are reduced further.
The public don’t seem to care. It’s not so much that they would prefer the money to go to schools or hospitals. It’s their general ambivalence towards farmers, lack of respect for the countryside and disinterest in where their food comes from.
Just look at all the fly-tipping and people roaming where they like during lockdown. Not to mention repeated reports of livestock worrying by dogs being walked off the lead.
Brave new world
There is a lack of information too about how this brave new work of environmental land management will work. Despite reducing our basic payments, there is little concrete detail about how the new system will function.
It makes planning and investing for the future difficult indeed. Land payments from the government in various forms have historically been worth about £250/ha (£100/acre) But that will be down to little more than £75/ha (£30/acre) by 2024.
Rents have been artificially supported by these payments so the only certain fact going forward is that rents have to decrease. Any decrease may be slowed when the new government schemes come into play – but we face a significant drop in income.
Given the challengers already faced by farmers, the situation has to be addressed. Whether these income levels will affect land values is open to question. Despite the drop in support, buying farmland is still attractive because of the tax breaks.
But it is clear that the centuries-old structure of farming is about to change. Whether it will be for the better remains to be seen.