The Rural Update: Confidence is key
Your weekly dose of news, views and insight from Knight Frank on the world of farming, food and landownership.
7 minutes to read
Viewpoint
Is the honeymoon coming to an end? As mentioned in previous updates the new Defra team has been making all the right noises to allay the worries of farmers afraid that a Labour administration might not have their best interests at heart – one minister even has “food security” in his job title. It’s far too early to say those efforts aren’t sincere, but a few small cracks are starting to appear. Making it harder to challenge the controversial post-Brexit free-trade agreement with Australia that, after all, was struck by the previous government seems a bit of an own goal, but failing to make the flagship Sustainable Farming Initiative as producer-friendly as initially promised could really start to erode confidence.
In this week's update:
• Pork under pressure
• UK wheat disappoints
• Environmental scheme review
• SFI frustration
• Minister gets new job title
• Moorlands missing out
• Greenwashing rules
• Oz trade deal review “blocked”
• Country houses - Dipping but outlook brighter
• Farmland - Values hold firm
• Development land - Market stays flat
• Northumberland opportunity
Commodity markets
Pork under pressure
Pig producers remain just about profitable, but their margins are coming down as costs rise and prices fall. Deadweight values have fallen by 6% over the past 12 months to around 211p/kg while costs have nudged up to 195p/kg in the second quarter of the year, according to AHDB figures. This makes the margin per pig around £15.
UK wheat disappoints
Around 20% of the UK’s wheat crop was in the barn at the end of last week, but yields have been variable and disappointing for most, according to trader Frontier. Protein levels for milling wheat are often failing to meet the 13% required to attract breadmaking premiums and extensive black-grass contamination has also been an issue.
Headlines
Environmental scheme review
It’s a pretty technical read, but a newly released Natural England review of the impact of agri-environmental schemes contains some interesting nuggets. One of the findings concerns the wider effect of schemes on mobile species beyond land specifically under environmental management. While there was a recorded increase in the abundance, richness and/or diversity of certain butterfly, moth and bat species there was less evidence of landscape impacts on birds or bees.
Modelling also highlights a strong trade-off between food production and climate change mitigation, breeding bird habitat provision and south-north habitat connectivity. The scenarios with the best outcomes for climate change, bird populations and south-north habitat connectivity cause the biggest drop in food production. No scenario delivered strong reductions in greenhouse gas emissions or large increases in potential bird populations without also seeing a large reduction in food supply.
At the UK scale, under the most ambitious climate change mitigation scenario, food
production is expected to decline by up to 25%, notes the report. But it also says ambitious combinations of measures including reducing food waste, using arable land to grow crops for direct human consumption rather than livestock feed (implying a dietary change), and increasing productivity on remaining farmland, could fully mitigate expected reductions in food production.
In brief
SFI frustration
Defra promises that the Sustainable Farming Incentive (SFI) would become more user-friendly and flexible are at risk of falling by the wayside, says our grant’s guru Henry Clemons. “The cancellation of annual increases to the scheme is ridiculous and will discourage many as farmers have already said they want fewer agreements not more. The confusion around rotational options like legume mix is simply not helpful and the exciting options like species-rich grassland will simply not happen under the current system. For help navigating your way through SFI please contact Henry.
Minister gets new job title
In a nod to those concerned about the level of UK food imports, Daniel Zeichner, the second in command to Defra head honcho Steve Reed, has been given a fancy new title: Minister of State for Food Security and Rural Affairs. Thankfully, farming still appears at the top of his list of responsibilities.
Moorlands missing out
English moorland owners and upland graziers are failing to claim millions of pounds of grant funding, according to the Foundation for Common Land. One of the options under the Sustainable Farming Incentive (SFI) pays those farming non-common land just over £4/acre to undertake a non-onerous vegetation and soil survey, while those on common land get around £7/acre. The foundation says the funding has only been claimed on about a quarter of the 2 million acres of eligible land. For more information on peatland restoration please contact Zoe Coulson.
Greenwashing rules
The Labour government has just announced it will continue with legislation proposed by the Conservative administration to create a code of conduct for ratings agencies that assess the ESG credentials of businesses. To help combat growing greenwashing claims regarding so-called sustainable investments, the agencies will need to show what metrics and data they use in their calculations. It is hoped the new rules will be in place by the end of next year.
Oz trade deal review “blocked”
Feedback, an environmental and food campaign group, is claiming that the UK government wants to scupper a judicial review of the post-Brexit free trade agreement struck with Australia. The agreement has been slated by farmers for putting them at a competitive disadvantage by potentially undercutting the UK’s animal welfare and environmental standards. When granting the review the High Court also ruled it met an international convention ensuring litigation for cases seeking environmental justice is not ‘prohibitively expensive’. Feedback, however, says the government has appealed against the ruling, arguing that the law does not apply to the case and that the campaign group should not benefit from the cost cap, which it claims could make pursuing the case prohibitively expensive.
Research
Country houses - Dipping but outlook brighter
The average value of country houses nudged down by a further 0.6% in the second quarter of the year taking the 12-month fall to 3%, according to the latest results from the Knight Frank Prime Country House Index. Homes priced between £1 million and £2 million recorded the biggest annual fall of almost 4%, while those worth between £4 million and £5 million dipped by just 0.4% - potential buyers at this level are less dependent on mortgage funding, points out Head of UK Residential Research Tom Bill. He predicts a total average price slide of 2% this year, with values bouncing back by 3% in 2025 as interest rate cuts boost market confidence.
Farmland - Values hold firm
The farmland market in England and Wales shrugged off the potential impact of the recent general election to register another quarterly price increase, according to the latest results from the Knight Frank Farmland Index. Average values nudged up by almost 1% in the second quarter of the year to hit £9,335/acre. For more insight and data please download the full report.
Development land - Market stays flat
The value of greenfield development sites remained static in the second quarter of the year, according to the latest results of the Knight Frank Residential Development Land Index. Over the past 12 months, the index is down 2%. According to Anna Ward, who compiles the index, developers have welcomed Labour’s commitment to reinstate local housing targets and recruit more planning officers. But with interest rates failing to shift and build costs increasing, homebuilders still face significant headwinds, she adds. Download the full report for more insight and data.
Property of the week
Northumberland opportunity
It’s back to the north of England this week for another look at a fantastic 2,010-acre Northumberland farming, sporting and environmental opportunity at Eglingham, near Alnwick, being offered in two lots. West Ditchburn Farm is a productive livestock unit that comes with a Grade II listed farmhouse in need of modernisation, modern farm building and 1,094 acres of grass and woodland. The guide price is £9.5 million. Hagdon Farm, by contrast, offers a wilder experience. It includes a farmhouse surrounded by 815 acres of scenic moorland and 100 acres of grazing. The price is £2.5 million. Please contact Claire Whitfield for more information.