Farmland Index Q1 2018: Year starts on a positive note

The average value of bare agricultural land in England and Wales rose 0.4% in the first quarter of 2018, according to the Knight Frank Farmland Index. The upturn means prices dropped by just 3% overall during the past 12 months and now average £7,226/acre.

However, it would be wrong to say this is necessarily the beginning of a sustained rally. As I mentioned in my last update, it appears that we are in for a prolonged period of limited market activity with an erratic succession of small quarterly dips, plateaus and rises likely until the market finds a new level.

In terms of the factors lending support to current pricing levels, an ongoing lack of supply is probably the most significant. The amount of land advertised in Farmers Weekly, for example, was down by 20% year-on-year at the end of April.

Commodity prices, particularly wheat, have also remained largely stable over the past 12 months, which helps to keep farmers in a more positive frame of mind.

Non-farming factors such as the significant number of potential buyers with rollover funds to spend continue to bolster demand for the limited number of farms that are put up for sale.

But it would be wrong to be unrealistically bullish; farming, after all, is about to undergo the biggest change since the UK joined the then European Economic Community in 1973. The uncertainty of what this will involve, be it less advantageous trade links with the rest of the EU, or a new environmentally based system of farm support, will certainly influence decision making.

Things, however, are slowly becoming clearer. We know a bit more about Michael Gove’s vision for farming, in England at least, following the publication of Defra’s Health & Harmony consultation paper.

The signs, once you take away the political posturing, also suggest that both Westminster and Brussels recognise the importance of agreeing a trade deal.

With no immediate subsidy cliff edge imminent, and the potential for Mr Gove’s proposed “public goods” for “public money” system of farm support to benefit more marginal farming areas, the sector still has time to adapt.

This article appears in 2018's The Rural Report - a unique guide to the issues that matter to landowners.