Farmland values continue to rise

Opinion

It was barely 12 months ago that I was writing about the threat of impending starvation for millions of people in developing countries who relied on Ukrainian wheat that was unable to leave the country due to Russia’s invasion. Now, arable farmers in Ukraine’s Eastern European neighbours are complaining that they are being undercut by cheap supplies of wheat because so much is being exported across the border. On the one hand it’s obviously very good news that people are getting the food they need, but it highlights how sensitive global supply chains have become with farmers at the mercy of evermore volatile markets - ex-farm feed wheat prices in the UK are currently £122/t lower than they were 12 months ago. If anybody has a solution I’d love to hear it.

Do get in touch if we can help you navigate through these interesting times. You can sign up to receive this weekly update direct to your email here

Andrew Shirley Head of Rural Research; Mark Topliff, Rural Research Associate

In this week’s update:

• Commodity markets – Black Sea smokescreen clears and milk slides
• Farmland values – Prices rise in quarter 1
• Vineyards – KF team strikes landmark deal
• Renewables – Conflicting fortunes of wind and solar
• Decarbonising agriculture – Detailed measures unveiled
• Trade – Pacific deal under scrutiny
• International news – US dairy disaster
• Out and about – The PM pops in
• Grant funding – Rural Prosperity Fund opens
• Avian Flu – Restrictions lifted
• Energy crisis – Kerosene rebate available
• Second homes – Holiday let restrictions mooted
• The Wealth Report – 2023 edition out now
• Staff Salaries Report – Rural wages benchmarked
• On the market – Sweet NZ ESG investment opportunity

Commodity markets

Black Sea smokescreen clears and milk slides

Wheat prices continue to weaken as the market becomes more sanguine about the future of the Black Sea corridor. “The world knows the Russians have buckets of wheat they need to export,” confides one grain trading contact. Dairy farmers, meanwhile, are tightening their belts as milk prices fall. Having hit highs of around 50p/litre, values are tumbling past 40p/litre – well below the cost of production for many farmers AS

Property news

Farmland values – 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 AS

Vineyards – KF team strikes landmark deal

Knight Frank’s viticulture team has advised Chapel Down, England’s largest wine producer on a new long-term leasehold agreement for 117 plantable acres in Kent. The land near Canterbury, will be used by Chapel Down for planting future vineyards. The average size of a vineyard in the UK is only 10 acres according to Knight Frank, making the scale of the site amongst the largest in the English wine sector. The off-market search was achieved using Knight Frank’s bespoke viticulture mapping tool. Please contact Ed Mansel Lewis for more details AS

Talking points

Renewables – Conflicting fortunes of wind and solar

Two articles on renewable energy caught my eye on the same day last week. One claimed the government will fail to secure any new wind farms through a recently launched auction for contracts that guarantee a fixed price for the electricity generated by the winning bidder. Soaring costs mean turbines can now cost 30% more to build, but despite this, the maximum price on offer for offshore farms this year has been capped at £44 per megawatt-hour. The other reports predictions from the International Energy Agency that solar energy is set to become the world’s biggest source of electricity by the middle of the century. Last year solar generation jumped by almost 24%, although total output was still way below most other energy sources. AS

Decarbonising agriculture – Detailed measures unveiled

A range of measures that the government believes will help agriculture decarbonise has been published as part of its Carbon Budget Delivery Plan. The plan includes policies for all industries and details individual measures and what the government is doing to support them, their contribution to emission savings and a timescale. For agriculture, the policies are wide-ranging and detailed. Among the more interesting measures is a policy to increase milking frequency from two to three times a day and support farmers in installing robotic milkers. Another is encouraging the use of plant bio stimulants to promote growth and reduce emissions. Many of the livestock policies are broadly related to breeding and improving health to reduce emissions.

There will be various methods by which these policies will be pushed. From capital funding through existing schemes such as the Farming Investment Fund to payments from standards in the Sustainable Farming Incentive. Many of the policies have timescales that started in 2022, but measures like the use of plant bio stimulants won’t take effect until 2030. The combination of all the listed agriculture and land use change policies is estimated to reduce emissions by 2.1 MtCO2e per year between 2023 – 2027, rising to 6.9 MtCO2e per year by 2033 – 2037 MT

Trade – Pacific deal under scrutiny

The UK’s proposed membership of the snappily titled Comprehensive and Progressive Agreement for Trans-Pacific Partnership could help boost food exports, but could also open the door to imports produced to lower standards than home-grown food, according to farming organisations. Egg producers fear they could face unfair competition from the likes of Mexico where most birds are kept in conditions that would be illegal here AS

International news – US dairy disaster

A mind-blowing estimated 18,000 cows perished and a worker was critically injured during a fire at a Texan dairy farm last week. According to the Animal Welfare Institute nearly 6.5 million farm animals have been killed in US barn fires since 2013, of which about 6 million were chickens and about 7,300 were cows. “People need to understand that cheap food has a cost,” laments my colleague Stuart Cole who drew the fire to my attention AS

Out and about – The PM pops in

The Knight Frank team was out in force at the renowned Bedale Yorkshire Point-to-Point recently to help celebrate our reinvigorated presence in the north of England with the help of wealth advisor James Hambro & Partners. The local MP, who also happens to be prime minister Rishi Sunak, dropped in with his family to say hello and was happy to spend a good while chatting with racegoers including our own Tom van Straubenzee. “He was brilliantly engaged,” reports Tom AS

Need to know

Grant funding – Rural Prosperity Fund opens

All manner of rural businesses and organisations can now apply for a slice of the government’s £110-million Rural England Prosperity Fund. Eligible local authorities will receive the funding, which they can invest in initiatives such as farm diversification, projects to boost rural tourism, and community infrastructure projects including electric vehicle charging stations. The funding will also help people start up local businesses to supercharge growth and create employment opportunities for rural areas. For more information on this and other funding opportunities please contact our grants guru Henry Clemons AS

Avian Flu – Restrictions lifted

Mandatory housing measures for poultry and captive birds, which were introduced across England and Wales to help stop the spread of bird flu, will be lifted from 00:01 tomorrow (Tuesday 18 April) , the Chief Veterinary Officer has confirmed. However, poultry owners are being urged to continue implementing the strictest biosecurity measures AS

Energy crisis – Kerosene rebate available

Businesses using large amounts of kerosene heating oil have until April 28th to apply for up to £5,800 of financial support under the Non-domestic Alternative Fuels Payments Scheme. More domestic users of off-grid fuels will also have access to financial support following an announcement last week by the Department for Energy Security. Farming groups, meanwhile, are calling for the government to include more agricultural businesses in the Energy and Trade Intensive discount scheme. A survey by Farmers Weekly revealed that one third of farms were cutting food production due to higher energy costs AS

Second homes – Holiday let restrictions mooted

New rules purporting to give communities in England greater control over short-term lets in tourist hot spots, while also strengthening the tourism sector, have just been unveiled by the government. A consultation published by the Department for Levelling Up, Housing and Communities will propose introducing planning permission for an existing home to start to be used as a short term let – helping support local people in areas where high numbers of holiday lets are preventing them from finding affordable housing. It will also consider whether to give owners flexibility to let out their home for up to a specified number of nights in a calendar year without the need for planning permission. The Department for Culture Media and Sport is also launching a separate consultation on a new registration scheme for short-term lets AS

Knight Frank Research

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 has recently been published. 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

Main image: Llandeilo Abercowin in Carmarthenshire is available for £5.1 million. Contact Georgie Veale for more information.