The Effect of the CAP Reforms on the Farmland Market

Unlike the initial proposals in 2004, the current CAP Reforms will have little affect as they allow the transfer of Entitlements upon the sale or transfer of ownership of farms and farmland. As ever, with new proposals, there are some complications that need to be considered when selling a farm, such as:

• The prohibition against multiple transfers of entitlements - where will this leave lotted sales?
• A requirement for 2014 claimants to have submitted a claim in 2011 - which excludes new entrants.
• A requirement to establish ecological focus areas on 7% of the arable area- carefully consider whether to extend/ renew Agri-Environment Scheme Agreements in the meantime;
• A bar on ploughing and reseeding permanent pasture with arable crops- consider future crop rotation before the proposals are implemented.

It should be remembered however, that these are initial proposals only and it may be that subsequent drafts see these anomalies disappear.

Mark McAndrew of Strutt & Parker's Estates and Farm Agency Department says:
"The new proposals are undoubtedly going to affect the estates and farmland market due to a degree of uncertainty they will cause. The current position however is far preferable to that of 2004, when the initial proposals indicated that Entitlements would not be transferable upon a sale. This was revised, however, when those drafting the rules realised the effect that this would have on the estates and farmland market."

"It appears that the market may experience a slight fall in the supply of land being sold although as the new scheme rules are workable there is no reason to delay selling a farm or farmland."

"Unlike in 2004, I don't predict a fall in farmland values as values are already under pressure to increase as a result of an existing demand and supply imbalance. Whilst food and soft commodities remain in demand I predict that farm values will either remain at existing levels of £7,000- £8,500/ acre or continue to rise slowly. Agriculture and the farmland market are in a far stronger position than they were in 2004 and therefore the provisions will have less affect than before." 

"The key element of the new proposes is that it becomes important to plan a sale carefully, particularly when contemplating potentially complex management issues such as agri-environment schemes and permanent pasture. Never has it been more essential to consult professionals such as Strutt & Parker's Farm Agency and Farm Management Departments which are best able to provide the coordinated advice required."