Agricultural Rent Survey

Agricultural Rent Survey
 
The Outlook

28 December 2015, words by Andrew Teanby

Dairy and livestock are still under pressure but there are glimmers of hope.

 

Arable

Many budgets for the 2015 harvest will only be achieved due to the exceptional yield making up for very lacklustre prices. Some respite has come from lower fuel and fertiliser prices which have helped offset the lower price expectations. Demand remains strong for quality land and equipped holdings, especially from farmers looking to spread their costs over local blocks. Bidders for FBT land are being more realistic, and paying much more attention to budgeted costings than perhaps previously.

Dairy

Falling prices across the world and weakening demand internationally continue to hit the UK dairy sector. There has been some modest price stabilisation but many non-aligned liquid contract holders will be selling milk well below cost of production. The glimmers of hope in the world market are unlikely to manifest in higher farmgate milk prices until well into 2016. We are still seeing a number of producers take the decision to cease production especially if facilities require investment. There is still good demand for well-equipped holdings; rents for FBT holdings remain strong as some farmers see expansion as the only way forward.

Beef and sheep

Farmgate beef prices remain under significant pressure from oversupply and competition from abroad due to the strength of sterling. Plentiful stocks of quality forage should ease winter ration costs but this is unlikely to make up for the anticipated reductions in support payments through BPS and the possible loss of ELS. Lamb prices continue to be hit by the strength of sterling and weak export demand. We expect reasonable demand for productive lowland units but there will be inevitable downward pressure on rents linked to extensive/ environmental grazing lettings.

Pigs and poultry

The fall in grain prices has helped to reduce feed costs for most producers. Demand for UK produced pigs and poultry has remained relatively strong and alleviated some of the strong export competition. This needs to continue, especially from supermarkets, if UK producers are to keep their market share in the face of strong export competition. Reviews and tenders will need to be considered on a case-by- case basis.

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Key Contacts

Ian Bailey

Ian Bailey

Director
Rural Research

Savills Margaret Street

+44 (0) 207 299 3099

 

Andrew Teanby

Andrew Teanby

Associate
Rural Research

Savills Lincoln

+44 (0) 1522 507 312

 

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