Rural property and business update – 19 October

Commodity markets

The wheat market held firm this week, but further volatility could lie ahead as speculative investors pile into a market that is being driven by climatic, economic and political uncertainty, according to grain trader Frontier.

“On Thursday world futures markets posted significant rallies with many hitting new contract highs. Speculative funds were again assertive buyers of Chicago Board of Trade (CBOT) wheat and corn contracts as they continue to build significant long positions. 

“Their stake in the markets is similar to those they held back in 2010 and 2012 when adverse weather severely cut wheat and corn output for many of the world's primary producers.”

The USDA has increased its world production estimate to 773 million tonnes this season - almost 115 million tonnes more than was produced in the 2012/13 season, but dry soils in Russia that could affect germination ahead of falling winter temperatures continue to be a concern. 

Source: Farmers Weekly

Trade part 1 – Agriculture Bill amendments voted down by the “ill informed” 

As predicted in last week’s Rural Update, the House of Commons threw out the amendments to the Agriculture Bill suggested by the Lords. 

These included a provision to ensure food imports do not fall below the animal welfare and environmental standards applied to British farmers, plus a stronger role for the Trade and Agriculture Commission.

Commenting on the impassioned debate, which saw 14 Conservatives rebel including former Defra minister Theresa Villiers against the government, my colleague Tom Heathcote, Head of our Agri-Consultancy team, said those who rebelled made “very strong” speeches.

By comparison, some of those speaking against the amendments appeared “very ill informed”.

The bill will now go back and forth between the Lords and Commons to see if a compromise can be reached, but this seems unlikely.

To find out why communication is so important for rural businesses read Tom’s article in The Rural Report on the Five Cs that should drive long-term strategic estate planning.

Trade part 2 – Prepare for no-deal Brexit, says Boris

As if the above wasn’t enough for food producers to digest in one week, Prime Minister Boris Johnson told them to get ready for a no-deal Brexit, which would include tariffs of 40% or more on beef and lamb exports, after talks with the EU over a Brexit free trade deal floundered yet again.

I have always believed that some kind of trade deal with our largest trading partner would be struck at the last minute, particularly given the economic damage inflicted by Covid-19, but Mr Johnson, in a combative speech, seemed in no room to compromise, blaming EU negotiators for the impasse.

He said we should look forward to an Australian-style deal that would allow Britain to “prosper mightily as an independent free-trading nation” with “high hearts.”

As many commentators have pointed out, Australia actually has no trade deal with the EU so the UK could effectively, in under 10 weeks, be trading with its neighbours on WTO terms with all the tariffs and extra regulation that would involve. 

I’m still convinced this saga has a few more twists and turns, but regardless of the outcome farmers and landowners do need to plan ahead for a very different future. Do get in touch if we can help with your strategic planning. 

Landlord/tenant update – Permitted development ruling offers landlords mixed blessings

Some landlords had been hoping that the outcome of a court case would make it easier to regain possession of land let under traditional agricultural tenancies.

However, last week the High Court dashed that thought when it handed down its judgement in the case of Kirby & Ors v Baker & Metson Ltd [2020] EWHC 2640 (Ch).

The case is relevant to the recovery of possession of land within a secure tenancy under the Agricultural Holdings Act 1986 under which landlords can recover possession under limited grounds. 

One such ground is by serving a Case B notice to quit on the grounds the land is required for a non-agricultural use for which permission has been granted.

Previously this has been interpreted as only applying to circumstances where planning permission has been granted. On this basis, permitted development was not sufficient to recover possession under Case B.

That position remains unchanged as the judge in this case ruled in the tenants’ favour meaning that a successful application for permitted development will not lead to a successful Case B notice to quit.

However, as my rural valuation colleague George Jewell points out, one small advantage of the case to landlords (or their Executors) is that it leaves the arguments and framework surrounding Inheritance Tax and any taxable non-agricultural value unchanged. 

“Had it suddenly become easier for landlords to resume possession it may have been arguable by the taxman that hope of an alternative non-agricultural use was increased and therefore so was the non-agricultural value of the asset,” says George.

If you need valuation advice for tax planning issues please get in touch with George

Workplace diversity –  Knight Frank rural advisor shares his story

There has been much debate recently on the lack of diversity in the agricultural sector. In a compelling interview to mark national “Coming out Day” our very own Tom Heathcote shares his journey as a gay man in the world of farming.

If you’d like more information on any of the above stories or would like to share your own views on the issues raised do please get in touch. It would be great to hear from you andrew.shirley@knightfrank.com