The Knight Frank Rural Property and Business Update – 21 June
Our weekly dose of news, views and insight from the world of farming, food and landownership
8 minutes to read
Love it or loathe it, ESG is here to stay and, along with climate change, is going to have a profound impact on rural businesses across the UK. That’s why we decided to dedicate the 2021 edition of The Rural Report to this alphabet soup of ideas, theories, concepts and government policies. There will be challenges, but also many opportunities for landowners in the years ahead. Hopefully the report will provide some thought-provoking ideas and insights that will help your business prosper during these times of profound change.
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
Stop press: Boris Johnson is being urged to abandon elements of the planning reforms after MPs blamed them on the Tory party’s shock Chesham and Amersham by-election defeat.
In this week’s update:
• Commodity markets – Wheat weakens as speculators offload
• The Rural Report – Knight Frank releases 2021 edition
• Trade – Australian FTA signed
• Tenancy reform – new successor rights coming into force
• Sustainable farming – Brush up for Groundswell
• Planning reform – Government planning plans criticised
• The Rural Report – Sign up to watch our ground-breaking video
• Overseas news – Irish farmers protest
Commodity markets – Wheat weakens as speculators offload
Feed wheat was the biggest mover on our commodity update this week, albeit in the wrong direction. The following note from trader Frontier explains the drop: “London wheat futures have lost more than £10/t from their highs early last week. The fall has been driven by the US agriculture market, particularly by US corn, which has lost over 12% of its value this week. A host of bearish features have combined to galvanise the aggressive speculative fund sell off. A change in weather prospects is one of the main drivers for lower US corn and wheat markets with cooler and wetter conditions now arriving and expected to benefit spring drilled crops. US markets were also pressured by speculation that the Biden Administration might allow a reduced blending of corn ethanol into fossil fuels as blenders come under severe financial pressure to meet their mandates. Traders expect the USDA to up its US corn drilled area estimate at the end of the month in line with other analysts. This change would have the potential to add up to 20 million tonnes to USDA production estimates.
The Rural Report – Knight Frank releases 2021 edition
The latest edition of The Rural Report, Knight Frank’s unique annual publication that explores the issues that matter to estate owners and rural businesses, is available to download now.
This issue has an ESG theme and includes articles, interviews and case studies focusing on all aspects of this increasingly important topic.
Ross Murray, of our Rural Asset Management team, shares his key takeaways from the report here.
Trade – Australian FTA signed
Boris Johnson signed the UK’s first proper post-Brexit free trade agreement with his Australian counterpart Scott Morrison last week. Many of the details are still to be thrashed out, but farmers are already upset because they fear it will lead to a flood of cheaper Australian beef and lamb heading to the UK. They also claim it sets a worrying precedent for future, more sizeable deals with the likes of the US.
Tariffs on beef and sheep meat will remain for 10 years, but annual duty-free quotas for imports – currently set at 35,000 tonnes for beef and 25,000 tonnes for lamb – will be introduced with immediate effect. These will gradually rise to 170,000 tonnes and 125,000 tonnes, respectively. A 20% tariff will be applied to imports over these thresholds.
ESG – Survey highlights attitudes of rural property owners
The results of our latest Rural Sentiment Survey, contained within the 2021 edition of The Rural Report, reveal that most farms, estates and businesses seem to recognise the importance of ESG.
According to the results of the poll, 34% of the respondents believe adopting ESG measures is something we need to do for the sake of the planet, 31% reckon it is an opportunity to develop new income streams, while 25% think it offers a useful framework to make their businesses more sustainable. However, 6% claim it is a greenwashing fad.
For lots more insights and case studies on what ESG means for rural landowners and businesses checkout out The Rural Report.
Tenancy reform – new successor rights coming into force
The recent passing of new regulations in relation to the Agricultural Holdings Act 1986 - The Agricultural Holdings (Requests for Landlord's Consent or Variation of Terms and the Suitability Test) (England) Regulations 2021/619 - mean that farm tenants now have the power to override restrictions in their tenancies relating to claiming subsidies or fulfilling statutory obligations.
The powers, which come into force on 21 June 2021, allow tenants to refer to arbitration or third party determination when landlord’s consent has been withheld. In addition, the new regulations confirm a change to the AHA succession rules from 1st September 2024.
These changes will see the abolition of the commercial unit test and the creation of a new suitability and business competency test. The new regulations only apply to England and it remains to be seen if the Welsh Government will follow suit in the near future.
“The Agriculture Act 2020 was passed into law in November 2020 and we are now beginning to see the detail of the various mechanisms that will implement change in the agricultural tenanted sector,” points out Edward Holloway of our Rural Asset Management team.
“As always, there are wider implications brought about by the changes that property owners need to be alive to. The ability for tenants to override restrictions in their written tenancy agreements will allow access new, environmentally focused, support schemes but may also lead to changes of use and other variations that landlords may not desire.
“The simplifications to the succession rules mean successor tenants will find it easier to be successful in their applications and provide the option for tenants to retire earlier, with a greater deal of comfort that their successor will be successful.
"This potentially reduces the strength of the landlord’s position, particularly if they had plans to obtain vacant possession on the death or retirement of the current tenant, meaning strategies may need to be reconsidered in the run up to the regulations coming into force."
Sustainable farming – Brush up for Groundswell
This week sees the return of the Groundswell event, a mecca for farmers interested in regenerative agriculture. For those planning to attend, this article on redressing the balance between farming and nature, by my colleague Tom Heathcote is well worth a read.
Planning reform – Government planning plans criticised
The government’s controversial proposals that would see local areas divided (through Local Plans) into three parts: growth, renewal and protected, with different planning rules applying in each, have been criticised in a newly released report from the Housing, Communities and Local Government Select Committee.
It states that the committee is unpersuaded that the move, part of last year’s planning white paper, will produce a cheaper, quicker and more democratic planning system.
It urges the government to reconsider and is also unhappy with proposals to shift public engagement from individual planning applications to the Local Plan stage.
“We found that far more people engage with individual planning proposals and fear that the proposed change will reduce public involvement in the planning process.”
Roland Brass, of Knight Frank’s Planning team, comments: “Many of the suggestions and recommendations are not surprising, so ultimately it is business as usual.
"LPAs are still under pressure to bring plans forward – as they can provide certainty for landowners, and communities. Therefore, in terms of the rural community, we would continue to recommend now is a great time to review estates’ land holdings so as to be on the front foot in terms of plan-making."
Colleague Tom Stanley, who is writing a new paper on rural planning opportunities to be published soon, adds: “It could also be possible for the government to refresh agricultural permitted development rights later this year to assist better in delivering development to support the growth of rural enterprise and communities.”
The Rural Report – Sign up to watch our ground-breaking video
This year’s edition of The Rural Report, our unique publication for rural landowners and their advisors, launched last week. If you missed it, you can sign up to watch on demand at your leisure. It was a lot of fun making it and includes a thought provoking interview on diversity, with Wilfred Emmanuel-Jones AKA The Black Farmer. I think you’ll find it both entertaining and informative.
Sign up to watch The Rural Report launch video
Overseas news – Irish farmers protest
Farmers in Ireland have hit the streets to protest against planned reform of the Common Agricultural Policy and climate change regulation.
Irish Farmers’ Association Tim Cullinan warns that if discussions around reform and the environment between the EU Parliament, Commission and Council continue in the current vein “farming in Ireland will cease to exist as we know it”.
He also said that any drop in Irish food production would see increases in countries with higher carbon footprints.