The Rural Update: Farming must be profitable
Your weekly dose of news, views and insight from Knight Frank on the world of farming, food and landownership
8 minutes to read
Viewpoint
At this time of year, bucolic images of harvesting often appear in the agricultural press, sometimes the workers are even enjoying a scrumptious harvest tea in the fields. But look at all the kit involved and there could easily be over a million pounds worth of machinery in action in those images.
Make no mistake this is an expensive business, although one which is often glibly described as the “roll of a dice” due to weather and commodity prices. Few industries take such risks with no guarantee of a decent profit.
Perhaps we need to re-examine the narrative surrounding agriculture. While the romance of harvest and the sight of combines at work evokes a sense of beauty and tradition, government support for farming, as discussed below, is not guaranteed forever and we must confront the realities of the agricultural business model with greater honesty.
It is time to shift our focus from an idealised portrayal of farming or internet memes that revere toil as a “way of life” to a pragmatic understanding of the economic and environmental challenges faced by farmers today. By doing so, we can foster a more sustainable agricultural sector that not only feeds our populations but also nurtures our planet for future generations.
In this week's update:
• Oil slides further
• Canada wheat down
• SFI – Use it or lose it?
• Thinktank’s nature recommendations
• EU climate targets sued
• Funding for meat alternatives
• New poultry registration rules
• But egg labelling relaxed
• Brian May badger complaint
• Defra ends badger cull
• Bluetongue restrictions applied
• Country houses - Dipping but outlook brighter
• Farmland - Values hold firm
• Development land - Market stays flat
• Island opportunity
Commodity markets
Oil slides further
Sluggish demand from Asia and a potential increase in Opec production continue to pull down fuel prices. Unleaded had dropped well below 140p/litre at some forecourts by the end of last week.
Canada wheat down
Wheat market sentiment remains relatively bearish as Russia continues to export at pace and demand for EU wheat remains limited. Harvest estimates for Canada, which is the world's third-largest wheat exporter, are coming in below expectations helping to provide a bit of market support, but total output is still set to be above last season’s 33 million tonnes so any benefits will likely be limited.
SFI – Use it or lose it?
Things will get worse before they get better. That’s the stark message the new Prime Minister Keir Starmer is sending out in advance of his party’s first Budget in October. What this means for Defra spending is hard to predict, but we should probably be braced for bad news as the government has notably refused to guarantee current spending levels on things like the Sustainable Farming Incentive (SFI) over the longer term. As a result, our grants guru Henry Clemons is urging those still undecided about joining the SFI not to wait too long before making up their minds. “There is no guarantee that better options are in the pipeline so if you can find some elements of the scheme that work for you my advice would be to sign up now. I would also advise businesses to focus on delivering sustainable profits without having to rely on external support payments.”
News in brief
Thinktank’s nature recommendations
The Institute of Public Policy Research has just published a new report, Driving “Natural” Renewal – The Progressive Case for Restoring the Natural Environment, which contains six recommendations for the government. The thinktank calls for: A robust delivery plan for meeting environmental targets; additional investment in a fairer, more sustainable farming sector; a planning system which shapes targeted nature restoration, including a national spatial strategy; stronger targets for tackling pollution and nature degradation; expanded rights of responsible access to the English countryside; and incentives for public and community ownership of land that drive nature’s recovery. Much of the report makes sense but given the government says it has no money there is little detail on how it could all be paid for.
EU climate targets sued
Meanwhile, across the English Channel, the European Commission is facing legal action from a number of campaign groups claiming that the EU's climate targets fall well short of meeting the 1.5C Paris Agreement goal. The move is yet another example of lawsuits being used to change government policy.
Funding for meat alternatives
Livestock are often blamed for their contribution to climate change with a number of reports saying we must eat less meat. To encourage the development of alternative protein sources, such as microbes, insects and algae, UK Research and Innovation has announced a £15 million investment to help develop a National Alternative Protein Innovation Centre. One estimate suggests the market for alternative proteins in the UK could be worth as much as £6.8 billion each year.
New poultry registration rules
Anybody keeping chickens, ducks or geese in Scotland must now register their flocks even if they have just one bird. Previously only those with flocks of more than 50 birds needed to register, but the rules have been tightened to help contain the spread of avian flu outbreaks. The registration site opened on 1st September and all flocks and their locations must be registered by the beginning of December. Similar rule changes will hit England and Wales from 1st October.
Egg-labelling relaxed
If, however, there is another outbreak of avian flu it has just been announced that free-range egg producers and packers will no longer need to change how eggs are labelled during mandatory housing measures. Defra says the move will reduce cost pressures on egg producers and packers and boost supply chains.
Brian May badger complaint
The most talked about farming topic on social media recently has been the BBC documentary on badgers and bovine TB featuring musician Sir Brian May. Farmers were upset at what they perceived as the one-sided nature of the documentary, pointing out that the Queen guitarist has long campaigned against the government’s badger cull and admitted on the programme that he wouldn’t advocate a cull even if it was proved badgers helped spread TB. Levy board the AHDB has filed an official complaint.
Defra ends badger cull
Whatever your views on the badger cull, it won’t last much too much longer. Defra has just announced a new strategy that it says will “mark a significant step-change in approach to tackle this devastating disease, driving down TB rates and saving farmers’ livelihoods and businesses. It will use a data-led and scientific approach to end the badger cull by the end of this parliament.”
Bluetongue restrictions applied
Bovine TB is just one of the diseases that livestock farmers have to deal with. To help combat an outbreak of Bluetongue virus Defra has just announced movement restrictions across Suffolk and Norfolk. As of 30th August all keepers of cattle, sheep, other ruminants and camelids in these hotspots have to follow strict restrictions on animal movements. Stop press: Essex was added to the list on 3rd September.
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
Island opportunity
This week we’re taking a short ferry ride to a rare opportunity on the Isle of Wight. It’s not often large blocks of land come up for sale on the island, but Great Park and Thorley Farm stretch to almost 1,500 acres. The farms’ owners have placed a significant emphasis on environmental enhancement and re-establishing a wood pasture landscape. A Grade II listed farmhouse with six bedrooms has incredible views over the surrounding farmland and woodland. The guide price for both farms is £17 million. Please contact George Veale for more information.