The Knight Frank Rural Property and Business Update – 3 May

We tend to get excited when cereal prices hit new highs, but often forget that this is bad news for many livestock and milk producers. Extracting cost increases from the food chain is particularly hard for dairy farmers who have been voting with their feet and exiting the industry in droves for years. Despite this, improved efficiencies mean milk production has continued to hold up. The post-Brexit removal of support payments may change this dynamic with farmers less able and willing to produce food at a loss. Government and retailers show few signs of planning for this.

Please do get in touch with me or my colleagues mentioned below if you’d like to discuss any of the issues covered. We’d love to hear from you

Andrew Shirley, Head of Rural Research

In this week’s update:

• Commodity markets – Milk producers suffer as cereals surge
• Country house prices – Covid impact confirmed
• Development land – Supply low as prices firm
• Animal cruelty – Maximum jail sentence hiked
• Peatland – Climate change grant scheme opens
• Overseas news – Australian cattle station up for grabs

Commodity markets – Milk producers suffer as cereals surge

Although average milk prices have remained steady year-on-year at around 30p/litre, the sharp increase in cereal prices – feed wheat is almost back to over £200/t - has hit profitability levels hard. Feed costs have risen by up to 2p/litre compared with 2020, reports Farmers Weekly. Mike Houghton, a dairy specialist at consultant Andersons says supermarkets, which control 80% to 85% of the liquid milk market, are “not prepared to pay what the milk is worth because they are under pressure to keep food price inflation as low as possible”. According to an AHDB survey, 340 dairy farmers called it a day across Britain last year, a drop of 4%.

Country house prices – Covid impact confirmed

Much has been written about the “escape-to-the-country” trend during the pandemic, but the latest results from the soon-to-be-released Knight Frank Country House Index, which tracks values in England and Wales, are set to confirm the extent of its influence.

Strong demand for prime property outside London and rural living in general, coupled with tightening supply, saw average prices increase strongly in the first quarter of 2021. Larger country homes are expected to see the strongest rate of growth.

For more information on the index contact my research colleague Chris Druce

Development land – Supply low as prices firm

The value of greenfield development land rose by almost 1% in the first quarter of 2021, but dropped by almost 5% over a 12-month period, according to the latest results from our Residential Development Land Index, compiled by my colleague Anna Ward.

Further growth is expected, with 55% of the developers questioned as part of our Development Land Index Survey expecting to pay more for land during the rest of 2021.

A lack of suitable land coming to market and delays in the planning system are the biggest hurdles to building more homes, the survey reveals.

Read the full report for more facts and figures

If you have potential development land you would like advice on, please contact Charlie Dugdale, who specialises in long-term stewardship developments for rural property owners

Animal cruelty – Maximum jail sentence hiked

Tougher prison sentences for animal cruelty will come into force this summer after the Animal Welfare (Sentencing) Bill received Royal Assent last week. This means that the maximum prison sentence for animal cruelty will be raised from six months to five years from 29 June 2021.

The new maximum penalty will enable courts to take a firmer approach to cases such as dog fighting, abuse of puppies and kittens, illegally cropping a dog’s ears and gross neglect of farm animals. As well as a prison sentence, offenders can also receive an unlimited fine.

Peatland – Climate change grant scheme opens

Landowners in England can now apply for grants under the Nature for Climate Peatland Grant scheme, which aims to:

• Reduce emissions from peat by nine megatonnes of carbon dioxide equivalents cumulatively by 2050
• Establish the process of restoring 35,000 hectares of degraded peat in England by March 2025
• Provide wider benefits such as improved ecosystems and biodiversity, better water quality, natural flood management, protection of historic environment features, and connecting people with nature

Natural England is looking for landscape scale applications that work to restore the whole hydrological unit of a peatland. This is likely to involve a number of sites and landowners, so applications from partnerships are encouraged.

Overseas news – Australian cattle station up for grabs

As noted earlier in this update, people are leaving London in search of more space to breathe. But if the British countryside doesn’t offer quite enough room for you, it might be worth considering heading down under.

Knight Frank Australia’s Agri team is selling Croydon Station, a scenic 150,000-acre central Queensland cattle unit with lots of water near the regional city of Rockhampton.

It’s for sale by tender with a closing date of 28 June.

Photo by Monika Kubala on Unsplash