Farm rents continue to rise
Despite rising input costs, arable farming fortunes have improved following significant increases in commodity prices and farm rents.
In recent months feed wheat has risen to nearly £200 a ton from £80 a ton a year ago and Oil Seed Rape has risen from £240 per ton to about £400. The profitability of arable farming looks much improved through to at least the 2012 harvest. In sharp contrast, cattle and sheep are at similar values to last year and pigs considerably less. The increasing cost of feed is affecting profitability of all livestock enterprises.
Farm rents have increased more in the three years up to 2011 than they have for several decades before. However, the difference between Agricultural Holdings Act (AHA) rents and Farm Business Tenancy (FBT) rents is marked and becoming even more so. The RICS report that the average AHA rent for arable land is £65 per acre, whereas the same land let on an FBT would be around £100 per acre. The average rent for pasture land in the East Midlands is £53 per acre on an AHA or £70 on an FBT.
There is huge variation within these figures and particularly so between tendered rents for FBT land and rents negotiated on review. In the last year Fisher German have seen tendered rents for Grade III arable land in excess of £180 per acre and these variations are not easily explained.
Richard Scriven comments "Some argue ’key money’ to secure the tenancy, however this seems unlikely as most FBT lettings are relatively short term, usually three to five years. There are relatively few AHA rents to be settled this year, as few notices were served twelve months ago.
"However, 2012 is likely to be busier with landlords serving notices for review next year. Average AHA rents for arable land are likely to increase but as the livestock sector looks as though it will continue to struggle in the short term the low margins from these enterprises could actually push down grassland rents, particularly in the East Midlands with its relatively limited numbers of livestock".
