Strutt & Parker's Rural Land Briefing - 7 February 2019

Q1 2019

Preparing for the challenges and opportunities that face UK agriculture will require lateral – and in some cases radical – thinking from farms and rural estates, according to Strutt & Parker.

Speaking at the 2019 Strutt & Parker Rural Land Briefing, George Chichester, a director in the farming department, said agriculture was still dealing with a large number of‘ unknowns’ about the future, with the UK’s scheduled exit from the European Union just weeks away.

Although the government has published its Agriculture Bill, which sets out how the Basic Payment Scheme will be replaced by a new Environmental Land Management scheme delivering public money for public goods’, it is not yet clear how much money will be available to fund this work, Mr Chichester told attendees.

Meanwhile, the outlook for commodity prices remained uncertain while question marks surround the UK’s future trading relationship with Europe, he said.

“To echo a comment by a former US Secretary of Defence, Donald Rumsfeld, we are dealing with known-knowns, known-unknowns and unknown unknowns. In this context, new approaches are called for.”

Mr Chichester said UK farmers had traditionally been reluctant to share machinery and labour, but there was strong logic to the approach, as a way of reducing costs.

Farms and estates should also decide whether there was potential to diversify to use their assets differently.

“Rather than investing in a grain storage upgrade, would some land owners be better to send their crops off to store elsewhere and invest capital in building conversions instead in order to obtain a rental stream?” he said.

“Should they be positively promoting opportunities to store flood water with their local water authority,or more actively promoting land for solar farm use?”

Alternative crops were another option worth exploring.

“We do not know what trade deals we will end up with, but if we go down the government’s intended route of more free trade with countries other than EU member states, then we need to think beyond staple world commodities such as feed wheat.

“We should be thinking about growing crops which carry a premium or supply a niche market. Some of these might be conventional crops such as spring barley or milling oats. Others might be newer to us, such as quinoa or soya.”

Edward Mansel Lewis, head of Strutt & Parker’s viticulture group, explained there has already been significant growth in the number of people planting vine yards in the UK, particularly in the south of England.

“Climate change means that southern England is the ideal temperature for growing cool climate grape varieties and the region shares the same cretaceous soil as the Champagne region of France.

“Investment by champagne houses Taittinger in Kent and Pommery in Hampshire has added credibility to the UK as a wine-producing region,” he added.

Mr Mansel Lewis said by 2040 it is estimated the UK could be producing 40m bottles of wine a year with a retail value of £1bn.

Farmland market:

Mark McAndrew, head of the national estate and farm agency department, said overall farmland prices had proved remarkably resilient in 2018, with values being supported by strong interest from non-farming buyers.

According to the Strutt & Parker Farmland Database, the average price of arable land in England rose by 2% in 2018 to £9,400/acre, although there was a wide range of values achieved which are not immediately apparent from average prices.

The price of arable land in England during 2018 ranged from a low of £4,575/acre to a high of £15,000/acre, with sold prices highly dependent on local demand.

Mr McAndrew said in the short- to medium-term his expectation was for a widening in the range of values achieved.

“Bare land in areas where there is little interest from non-farming buyers is where there is greatest downside risk, but it is likely to be a different story for land with strong appeal to non-farmers, or for land with strategic development potential. Overall, we expect that in 2019 and 2020 we could see a decrease in average farmland prices, but that growth will return from 2021 onwards.”

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About Strutt & Parker

Strutt & Parker is one of the largest and most successful property consultancies in the UK with a network of 60 offices across the country, 10 of those in prime central London. Established in 1885, the business provides professional support on all matters relating to residential and rural land and property including investment, development and planning, estate agency and professional consultancy. With a dedicated, forward thinking team offering expert knowledge and sound, professional advice, we can ensure that businesses,farmers, land owners, house-buyers and international investors can make their assets perform to their best ability.

In 2017 Strutt & Parker was acquired by BNP Paribas Real Estate, one of the leading international real estate providers, who offers its clients a comprehensive range of services that span the entire real estate life cycle: property development, transaction, consulting, valuation, property management and investment management. With 5,100 employees, BNP Paribas Real Estate supports owners, lease holders, investors and communities in their projects thanks to its local expertise across 36 countries (15 through its facilities and 21 through its Alliance network) in Europe, the Middle-East and Asia. BNP Paribas Real Estate generated €811 m revenues in 2017. BNP Paribas Real Estate is part of the BNP Paribas Group.