Water, wheat and whisky
The Knight Frank Rural Property and Business Update – Our weekly dose of news, views and insight from the world of farming, food and landownership
11 minutes to read
Opinion
Scotch whisky. It's certainly one of my and Andrew's favourite tipples, and we are not alone. According to the latest annual trade data, exports of the amber spirit have boomed again. Seeing a UK export doing well despite Brexit challenges and a cost-of-living crisis is encouraging. But as Andrew explains in his story, the 'water of life' is also becoming a valuable investment asset. However, plain old water is also an increasingly valuable and precious resource. With the pressures of climate change and a growing population, who has access to water supplies and clean waterways will become crucial. Last year I saw a local farmer irrigating his wheat field during the hot, dry weather we experienced. Normally a rare practice in Britain, but will this become more common with climate change? We may need to think and act differently with water with warnings that we are just one dry spell away from another drought. It will be essential to look after the water we use and invest in the infrastructure to secure supplies. Maybe we should draw on the advice found attached to whisky adverts – enjoy, but drink responsibly MT
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Andrew Shirley Head of Rural Research; Mark Topliff, Rural Research Associate
In this week's update:
• Commodity markets – Lamb prices spring up further, but wheat back
• Water pollution – Huge fine issued
• Water supplies – Plan now for drought
• Lynx – Scotland debate reintroduction
• Regen ag – Ribena pilot project
• Out and about – AHDB Grain Market Outlook
• Out and about – Scotch exports boom
• Capital gains tax – BPS entitlements can reduce claims
• Landlords – Renting guide updated
• Wildlife bill – Scottish call for views deadline
• Farm safety – Farmer fined for dumper accident
• Farmland Index – Prices rise in quarter 1
• The Wealth Report – 2023 edition out now
• Farmland Index – Agri-land 2022's top-performing asset
• Staff Salaries Report – Rural wages benchmarked
• On the market – Australia and Africa calling
Commodity markets
Lamb prices spring up further, but wheat back
After last week's gain, wheat prices fell back this week in line with the weaker global trend fuelled by a continued lack of demand, both domestically and in the export market. One of the key factors reported behind this decline is the influx of cheap Brazilian maize imports into the EU, which has put pressure on wheat values.
Lamb prices have continued to rise steeply towards their seasonal peak - which appears to be coming much earlier this year due to the Ramadan festival and an earlier Easter. But despite higher prices, GB lamb prices remain competitive on the EU markets helping support export demand MT
Talking points
Water pollution – Huge fine issued
The government must be reading the Rural Update. Last week I suggested that eyebrows might be raised over the prison sentence handed down to a landowner for illegally damaging a water course when water companies often seem to escape serious punishment for pollution incidents. Last week, however, South West Water was handed a fine of £2.15 million for multiple breaches over the past four years. It was the largest fine to be issued in the region and must be paid from operating profits rather than passed on to bill payers.
Water Minister Rebecca Pow, said: "As set out in our recent Plan for Water, fines handed out to water companies that pollute our rivers and seas will be re-invested into a new Water Restoration Fund, which will deliver on-the-ground improvements to our natural environment and water quality." AS
Water supplies – Plan now for drought
After the wettest March in 40 years, it seems incredible that experts from the National Drought Group (NDG) are planning the worst-case scenario of another drought this summer. Farmers and growers are urged to focus on preserving water now despite March's deluge being preceded by the driest February in 30 years. East Anglia and Cornwall remain in drought, although the rest of England is in a better situation than last year.
South West Water has also recently introduced a temporary hose pipe ban in the Roadford area in Devon.
This year technology such as eAlerts will be extended to share abstraction notices with farmers more quickly. Satellite data will also be used to assess the moisture content of crops and soil, and comparing that with any irrigation restrictions in the area, and aid the Environment Agency with compliance checks.
Take a look at Knight Frank's top three tips for reducing water usage and costs in this article MT
Lynx – Scotland debate reintroduction
The potential for reintroducing lynx has been debated in the Scottish Parliament, after a parliamentary motion by the SNP's Kenneth Gibson MSP received cross-party support. It follows a report from a group of conservation organisations proposing reintroducing lynx to Scotland, a country where the wild cats were once native but were driven to extinction 500 to 1,000 years ago. The organisations believe that lynx would benefit the environment by helping to control the population of deer, which can damage woodland. They also believe that lynx would boost tourism. However, farmers' groups are opposed to the proposal, fearing that lynx could prey on livestock. NFU Scotland says that "were the future reintroduction of any species to be considered, experience demonstrates the importance of engagement with farmers and crofters at the very early stages of any plan."
A study conducted last year to assess the social feasibility of reintroducing lynx to Scotland found that 52% of people favoured the proposal and 19% opposed. The study also found that there was very little concern that lynx posed any danger to people MT
Regen ag – Ribena pilot project
Ribena's owners, Suntory Group, have ambitions around regenerative agriculture supporting crop resilience and reducing greenhouse gas emissions from its blackcurrant supply chain. The aim is to reduce Scope 3 emissions – supplier activity emissions – but also improve soil health to support plant resilience and increase the amount of carbon it can sequester. The group are setting up a regenerative agriculture pilot on 60 hectares of blackcurrant production at Gorgate Hall Farm in Norfolk, which has supplied Ribena since the 1950s. The farm's Rosie Begg said that "challenging climatic and economic conditions over the past few growing seasons have inspired me to investigate and start to adopt regenerative farming practices that will allow us to grow sustainably as well as reduce greenhouse gas emissions." MT
Out and about – AHDB Grain Market Outlook
I made a virtual visit this week, where I tuned into an AHDB webinar discussing the outlook for the grain and oilseed markets. AHDB analysts forecast that the omens weigh more on the bearish side than bullish for 2023/24. Higher carrying stocks, good production levels, and generally encouraging growing conditions are adding to the weight of available supply, which could keep pressure on grain and oilseed prices. This may be countered if there is a rebound in demand and the situation in Ukraine restricts exports MT
Out and about – Scotch exports boom
Scotch whisky is the UK's largest food and drink export, and global sales broke the £6 billion barrier for the first time in 2022 off the back of an annual 37% rise in exports by value, according to new figures released by the Scotch Whisky Association. The number of 70cl bottles exported also grew by 21% to the equivalent of 1.67 billion. Growing demand has also coincided with the emergence of whisky as an investment asset. Over the past decade, the value of the Knight Frank Rare Whisky Index, which I compile, has risen by 370%, so I was delighted to be asked to talk about this trend by CNN last week. Sadly the interview was early in the morning, so no drams were partaken of AS
Need to know
Capital gains tax – BPS entitlements can reduce claims
If you have bought, were given or inherited Basic Payment Scheme (BPS) entitlements, you might be able to offset their value against any capital gains. 2023 is the final year of BPS as we know it. After 15 May, BPS entitlements will have no value and hence no longer be tradeable. "The entitlements will have a purchase price or value at the time of the transaction, including agent and legal fees connected with the transaction that could be used in a claim against capital gains, saving tax," explains Will Playne in Knight Frank's Rural Consultancy. Will adds that, "however, the best approach to make the most of BPS negligible value will depend on individual circumstances and this is where Knight Frank can advise." MT
Landlords – Renting guide updated
Are you a landlord of residential properties rented out under assured shorthold tenancies? The government has recently updated its 'How to rent’ guide for tenants. The checklist provides private renters with information on their rights and responsibilities. A landlord or the letting agent should give the tenant the current version of the guide when a new assured shorthold tenancy starts. They do not have to provide the document again if the tenancy is renewed unless the document has been updated MT
Wildlife bill – Scottish call for views deadline
The Scottish government has proposed a Wildlife Management and Muirburn (Scotland) Bill to change the law around the use of wildlife traps, licences for killing certain birds, extend inspector powers and licence muirburns. Before Members of the Scottish Parliament debate the bill, the Rural Affairs and Islands Committee has requested public views. Anyone wishing to give their responses on the proposed bill should do so by the 5 May deadline. Click here for the link to call for views MT
Farm safety – Farmer fined for dumper accident
The Health and Safety Executive (HSE) reported a case where a farmer was fined £8,000 and ordered to pay over £15,000 in costs for a dumper accident involving a teenage worker. The worker suffered severe head injuries when a six-tonne dumper overturned when moving material at a farm. The farmer apparently failed to check the age of either worker or what training or experience they had. Additionally, the dumper that rolled had a seat belt, but the seat was covered with a fertiliser bag, meaning the seatbelt could not be worn. HSE said that “young and inexperienced workers should not be allowed to operate work equipment that they cannot use safely. A dumper should only ever be operated by a trained driver, and the seat belt should always be worn.” MT
Knight Frank Research
Farmland Index – Prices rise in quarter 1
Agricultural land proved resilient in the first three months of 2023. While residential property values weakened, the average price of bare farmland rose by 2%, edging closer to £9,000/acre, according to the Knight Frank Farmland Index. The hike takes the annual rise to 11%, reinforcing farmland’s reputation as a good hedge against inflation. Read the full report for more data and insight
You can also listen to the latest edition of our Intelligence Talks podcast where I discuss biodiversity net gain and nutrient neutrality schemes with my Rural Consultancy colleague Isabel Swift AS
The Wealth Report – 2023 edition is out now
Knight Frank’s leading piece of thought leadership on property and wealth trends was launched last week and includes an interview by me with one of Scotland’s pioneering rewilders, as well as some thoughts on why farmland could be one of this year’s most in-demand property investments. Download your copy to find out more AS
Estate Staff Salaries Survey – Rural wages benchmarked
Just a reminder that the latest edition of the Knight Frank Estate Staff Salary Survey is available to download.
The report reveals the average salaries paid for a wide range of rural estate and farming roles and level of wage increases being offered by rural businesses. Also highlighted are the key employment issues facing the rural economy. Download your copy here or get in touch with Chris Terrett for more details AS
On the market
A sweet New Zealand ESG investment opportunity
Ownership restrictions can often prevent overseas purchasers buying agricultural land in New Zealand, but Makopua Station, on the market with our associate Bayleys, could be an exception, according to the firm’s Head of Rural Nick Hawken. “It is likely foreign investment is possible given it is already a planted established forest. The 1,657-hectare property has been planted with four million Mānuka trees that will eventually yield 60,000kg of the sought-after honey. There are also significant carbon-farming opportunities, says Nick. Tenders close on Friday 26 May AS
Image by Scott Warburton from Pixabay