UK rural: the right tree in the right place

Opinion

It wasn’t just the mercury that was sizzling at the inaugural Agroforestry Show held on organic food doyen Helen Browning’s Wiltshire sun-baked farm last week. The potential of trees to provide multiple benefits to arable and livestock farming systems really got my brain cells fired up and it was great to see trees being discussed outside the usual carbon credit/net zero paradigm. Shelter belts, the creation of wooded field alleyways and boosting animal welfare were just some of the thought-provoking topics being discussed. Woodland creation doesn’t have to involve planting huge blocks of trees that, as discussed below, can too often lead to the wrong tree in the wrong place. Agroforestry appears to offer significant potential for the right tree in the right place without compromising our food security. Government needs to ensure it puts the right incentives in place AS

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 – Oil and milk price woes
• Renewables – On-shore solar and wind still challenged
• Regen ag – Research sheds light on long-term impact
• Politics – Parties shuffle their decks
• Out and about 1 – The Agroforestry Show
• Out and about 2 – Sabbatical forestry thoughts
• Countryside Stewardship – Defra confirms 2024 return
• Scottish policy – Farming priorities
• Oil boiler ban – Government rural planning help
• Australia – Tasmanian coastal opportunity
• Development land – market tumbles
• The Rural Report – Watch the videos
• Countryhouses – Prices weaken
• Land values – Price growth slows

Commodity markets

Oil and milk price woes

Blame me. Last week I reported that red diesel prices were heading in the right direction. This week they’ve taken a nasty 8% jump upwards as crude oil nudged a year high of US$90/barrel at one point. Cuts in output by Opec and Russia, exacerbated by a rise in the value of the US dollar are to blame. If China’s economy wasn’t in the doldrums the situation would be even worse. The rise comes at a bad time for arable producers establishing their autumn crops, but any rise in input costs is also unwelcome news for dairy farmers who are currently being paid up to 10p/litre less than their costs of production. As reported in Farmers Weekly, the actual milk price equivalent index (AMPE) hit a three-year low of 28.6p/litre in August AS

Talking points

Renewables – On-shore solar and wind still challenged

The government has been warned that the additional plans to restrict larger solar arrays through the Energy Bill could cost households a collective £3-5 billion – about £180 per year per home. The Energy and Climate Intelligence Unit (ECIU) says that the bill will mean solar will only be developed on rooftops and brownfield sites. Currently, solar development is banned on grade 1 and 2 agricultural land, and this would be extended to grade 3a land under proposals. However, most solar developments in the past decade have occurred on grade 3b ground. Solar arrays currently cover 0.1% of the UK's farmland and if all projects in the pipeline went ahead, this share would be 0.4%, according to Solar UK.

Meanwhile, Michael Gove plans to relax restrictions on building onshore wind turbines. A rule that requires new turbines on pre-designated land only will be rewritten in the Levelling Up Bill as 'suitable' areas. Views of communities on planning applications for onshore turbines will still need to be considered going forward, but the influence of one individual or small groups of objectors would be less likely to halt applications. The current situation has meant only 20 turbines have been approved since 2014, according to The Guardian. Trade body RenewableUK said: "Previously, the government said that suitable areas had to be identified in a local development plan. Today, they have announced new ways of identifying suitable areas, as it can take some time for local development plans to be published. But other forms of energy and electricity generation do not have that requirement to only be in 'suitable areas'. As a result, we don't think that it's going to make a change to increase investment at a level we need to cut bills and increase energy security." The plans also stipulate that those who live near the wind turbines will get discounts on their energy bills.

In a blow (excuse the pun) for offshore wind power generation, the latest government auction for awarding contracts for 15 years at a set price received no bids last week. Offshore wind development companies warned that the auction price was set too low compared to the rising costs the sector now faces MT

Regen ag – Research sheds light on long-term impact

Advocates of regenerative agriculture maintain that the approach is always about running a marathon rather than a sprint. And now, long-term experiments are looking into the impact of 24 different regenerative farming approaches. From sites established in 2017/18, Rothamsted has just released some initial results. The research institute found that: "In the short-term, reduced tillage has resulted in lower wheat yields, but the effect varied with crop rotation, previous crop and site. Plots with added organic matter significantly increased spring barley yield by 8% on average, though the effect again varied with site."

Project lead Professor Storkey said: "Inevitably, trade-offs will need to be made between maximising crop yield and protecting the environment, but these experiments will help us better understand the system behaviour and ultimately identify the optimal balance for multiple systems and approaches." It is clear that regen ag is not a short-term fix for food production systems and is very much a long-term commitment. However, although many farmers on the regen ag journey report a dip in crop yields, they say margins are largely maintained due to lower input (see this week’s commodity update) and overhead costs. Knight Frank clients at Nonington Farms in Kent found that, overall, they did not suffer from a drop in yield and managed to reduce nitrogen inputs by 50%. Find out more in my interview with farmers Emma and James Loder-Symonds MT

Politics – Parties shuffle their decks

Labour and the Tories both made changes to their cabinet line ups last week that could influence policies affecting rural property owners. Rishi Sunak has injected some fresh blood into his cabinet with the appointment of party newbie Claire Coutinho to head up Energy following the departure of Grant Shapps to Defence. Coutinho, a Brexiteer, is known to have green leanings. This may indicate a shift away from the current policy of playing down environmental commitments, which pollsters say is not resonating with the wider public. As discussed above she already has a full in-tray to get stuck into.

Meanwhile Kier Starmer has picked Croydon North MP Steve Reed to shadow Thérèse Coffey at Defra. Reed has limited agricultural experience and some political owls have expressed surprise the brief wasn’t handed to the generally well-regarded shadow farming minister Daniel Zeichner AS

Out and about 1 – The Agroforestry Show

Last week saw Andrew and me attend the UK's first event dedicated to Agroforestry with our Agri-consultancy colleague Melissa Walker. Writing on Linked In Melissa says: "Agroforestry is a no-brainer for livestock systems and a game-changer for arable farming! Incorporating trees into livestock systems offers shade, forage, and enhances animal welfare. For arable farming, agroforestry enriches the soil, prevents erosion, and diversifies yields, all while reducing synthetic inputs." Look out for my more in-depth learnings from the show soon MT

Out and about 2 – Sabbatical forestry thoughts

Anybody spending time in large parts of Sweden can’t help but notice the trees, miles and miles of them. It would be tempting to think they’ve always been there sucking up carbon and helping to mitigate climate change. But on a ramble during my recent sabbatical I came across a hiking route through one of the forests complete with regular information boards highlighting points of interest. It turns out until the middle of the last century much of the land was actually peat bogs that were home to grouse and all manner of other wildlife, not to mention small farmsteads with cherry orchards. It would be wrong to say the existing forest is devoid of nature, but as we now know peat is a far bigger carbon sink than woodland. When it’s time to harvest the trees perhaps it might be better to reinstate the peat bog than replant the forest AS

Need to know

Countryside Stewardship – Defra confirms 2024 return

Defra held a webinar about funding for farmers last week. The event included an update on the Sustainable Farming Incentive (SFI), Animal Health and Welfare Review schemes and The Farming Investment Fund. As common with these types of events, the Q&A session provided the most useful information.

The Defra presenter confirmed that Countryside Stewardship (CS) is to continue in 2024. But Defra is looking closely at the SFI and CS relationship. Defra also explained why when the SFI window opens, it will only be a controlled rollout via an expression of interest. It said that the expression of interest for SFI is to allow the controlled testing of the application system. From the initial expressions of interest, Defra will then invite a certain number of farmers to apply for SFI. The farmers will then be asked for feedback to help improve the process further. It will then repeat the controlled rollout until it is happy with how the SFI application system operates before opening it out to everyone to freely apply.

Interestingly, Defra also mentioned that CS Plus will be available next year – Its current thinking is this will be based on combinations of actions that will attract a premium payment on top of the individual action payments.

And just as interestingly, the Defra spokesman said that SFI eligibility will be expanded next year. There were no details provided on the webinar. A case of wait-and-see MT

Scottish policy – Farming priorities

Publishing an Agricultural Bill to establish a framework for future rural support is one of the 14 objectives in the “programme for government” announced by Scotland’s First Minister Humza Yousaf last week. Mr Yousaf also sent a letter to rural affairs minister Mairi Gougeon setting out his wide-ranging food, farming, fishing, landownership and environmental priorities. These include:

• Restore 10,700 hectares of degraded peatland in 23/24
• Deliver at least 12,000 hectares of trees planted from approved schemes in 2023/24
• Pass the Wildlife Management and Muirburn (Scotland) Bill and commence implementation of its measures
• Consult on a draft Good Food Nation plan and take the first steps to establish a Scottish Food Commission
• Introduce the land reform bill, including measures to reform agricultural holdings AS

Oil boiler ban – Government planning help for rural homes

As reported in the Rural Update last month, following pressure by Conservative MPs, who highlighted the potential financial strain on rural communities, the government is reconsidering its plan to ban the installation of new oil boilers by 2026. Approximately 1.3 million homes in Great Britain rely on conventional kerosene boilers, and the proposed ban could have placed them in a situation reminiscent of London's ULEZ (Ultra Low Emission Zone).

To address the issue, the government is now proposing to compel energy suppliers to expand the availability of renewable liquid heating fuels. This move aims to enable households to convert their oil boilers to run on these eco-friendly alternatives. The government's ultimate goal is to achieve net-zero carbon emissions by 2050, and the ban on oil boilers is part of this larger initiative. Claire Coutinho, the newly appointed energy secretary (see above), has introduced an amendment to the Energy Bill, granting ministers the authority to mandate liquid fuel providers to offer renewable products.

Under the revised government plan, homes not connected to mains gas will still be prohibited from purchasing replacement oil boilers after 2026, but they won't be forced into the expensive heat pump route. Heat pumps are significantly pricier than oil boilers and may not be suitable for many older homes. Instead, the government is exploring the conversion of kerosene boilers to operate on renewable liquid fuels, such as hydrotreated vegetable oil, which could slash carbon emissions by up to 87% MT

On the market

Australia – Tasty Tasmanian coastal opportunity 

My Tasmanian colleague Rob Dixon is selling an exciting grazing and agri-tourism opportunity in north-east Tasmania. Musselroe Bay extends to 1,400 hectares including 900 hectares of arable land that has been leased previously for the running of a breeding cattle herd. “This presents the ultimate blank canvas for the purchaser to develop a new paddock plan for the farm and undertake development,” says Rob. The farm has extensive water rights, an all-weather airstrip and planning consent for an 18-hole golf course and accommodation. Contact Rob by September 12th with expressions of interest. Current market reaction suggests a price of around Au$5,000/ha AS

Our Latest Property Research

Development land – market tumbles

The outlook for the UK economy weighed on the residential development land market in the second quarter of this year, leading to a slowdown in activity and a decline in land prices across the board, according to the latest instalment of Knight Frank’s Residential Development Land Index.

My research colleague Oliver Knight says: “We’ve noted previously how the economics of developing new homes in England is challenging. A slower sales market, issues related to nutrient neutrality, biodiversity net gain, higher build costs and local plan failures have all forced housebuilders to rein in construction expectations. The result? Downward pressure on land values.”

Average greenfield land prices fell by 6% on the quarter, taking the annual decline to almost 15%. Prices for brownfield land showed a similar trajectory, dropping 6% on a quarterly basis and 18% annually AS

The Rural Report – Watch the videos!

You’ve read the book, now watch the videos! To complement the thought-provoking articles contained within this year’s edition of The Rural Report our whizzy Marketing team has also created a series of videos featuring many of the report’s contributors. Head to our very own YouTube channel to discover more about biodiversity net gain and regenerative farming; find out how we are helping Guy Ritchie’s Ashcombe Estate on its diversification journey; and read about the travails of an entrepreneurial Zimbabwean searching for a farm for his family. Plus lots more AS

Country houses – Prices weaken

Country house prices came under pressure in the second quarter of the year, as the ‘escape to the country’ trend reset, and buyers re-calculated their budgets due to higher borrowing costs.

The average price of a property fell 2.6% in the second quarter, according to the Knight Frank Prime Country House Index (PCHI), compiled by my colleague Chris Druce. It was the largest quarterly fall since the global financial crisis in Q2 2008. It follows a decline of 0.5% in Q1.

It left country house prices down 4.2% since their peak in June 2022, although the average property is still worth 15% more than before the pandemic, which supported a surge in prices as people upgraded their homes and took advantage of a period of stamp duty savings.

Download the full report or contact Chris for more information AS

Farmland values – Price growth slows

According to the latest instalment of the Knight Frank Farmland Index, the average value of bare agricultural land in England and Wales rose during the second quarter of the year at the slowest rate since March 2021. Prices increased by just over 1% to £8,845/acre. Annual growth at 8% also slipped into single figures for the first time since the final three months of 2021.

Farmland, however, has outperformed the FTSE 100 equities index, gold, prime central London houses and mainstream house prices over three and 12-month periods. Over five years, only gold has seen stronger capital appreciation.

For more data and insight, please read the full report AS