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Arable land Rent and the SFP

Last post Wed, Jan 19 2005 12:31 by anonymous. 32 replies.
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  • Wed, Jan 19 2005 12:31

    Arable land Rent and the SFP

    What is the realistic going rent on arable land with the sfp,and the landlord keeps the historic. And with no historic and no sfp (the landlord keeps both) on a year to year contract. Thanks, AL
  • Wed, Jan 19 2005 13:25

    Arable land Rent and the SFP

    in many cases the cost of production is more than receipts , unless you have magnificent yields or high value crops- ie there is nothing left for rent. 3.5 tones wheat x £65 tonne= 227.50 (+straw) seed, fert, spray = £90ac machinery costs = £80ac other fixed costs (drying storage insurance power etc) =£40ac(?) hmmm, not too much left for rent
  • Wed, Jan 19 2005 19:34

    Arable land Rent and the SFP

    Was speaking to a man who was offered 200 acres of middling land 2.2t barley 3.5t wheat to rent in Aberdeenshire reckoned he'd have to be payed £40/ acre to make it half worthwhile. The bloke who offered it wasn't best pleased at that prospect. Me I'm going to suck it and see where the market goes next year.
  • Wed, Jan 19 2005 20:34 In reply to

    Arable land Rent and the SFP

    Richard T, I agree with you but I feel your figures are just a little bit optimistic: If you are going to get yields of 3.5 tons/acre there will be a few break crops being grown (forget wheat/setaside if you are looking at wheat yields of 3.5 tons/acre and growing costs of £90/acre) I think over a four year period it would look more like: 7 tons of wheat @ £65/ton =£455 1.25 tons of OSR @ £135/ton =£168 1.5 tons of beans @ £80/ton =£120 Average sales =£185/acre Less av. growing costs of £ 70 Margin for rotation of £115/acre Less machinery and other costs of 80+40 £120 LOSS £ 15/acre In the past we used to base our rents on 33% of the gross margin plus area aid in this case you would be looking at £115 plus the single farm payment of £85 (?) total £ 200 giving a rent figure of £66/acre. So the land-owner ought to be paying you £19/acre to farm his land... Doing nothing to the land is not going to be an option for land-owners and I suspect that to comply with cross compliance and perhaps the entry level scheme a figure of £15 to £20/acre will not be too far out. If the land-owner is going to retain the single farm payment (or its equivelant - for tax purposes) then the land should at least be rent-free. I do not believe that expansion is necessarily the way forward for some farmers, if you are considering say taking on another 250 acres - you will spend at least 250 hours looking after the land and crops; would you not be better off dowsizing and spending that time on your existing holding? Its amazing how you can cut out machinery and costs if you really put your mind to it. We have done the exercise for a couple of farms and they are better off with smaller kit, doing a few more hours, reducing finance charges and so on.
  • Wed, Jan 19 2005 23:02 In reply to

    Arable land Rent and the SFP

    Fantastic at least im not going "mad" these were the figures that i had roughly worked out,but there is a twist to this post. I have been offered this land (that im already farming just come to the end of the old agreement), contract farmed(as if i were farming it myself) where as, the landlord takes the historic as well as the "new" SFP payment and still wants £30 per acre,the agent says he has already done deals on other land in the area at up to £40 per acre,and that he dosen't think it was being unfair, as before IACS rent was in the £60's. i said he would have to trim his figures up a lot before i would even consider, but if he found someone else to pay that fine sum then they could farm my ground as well, have not heard from him since. I get on well with landlord, but the agent seems to be puting figure's in to his head as to what he thinks the land rents should be.
  • Thu, Jan 20 2005 8:11 In reply to

    Arable land Rent and the SFP

    Which planet is the Land Agent living on?
  • Thu, Jan 20 2005 8:20 In reply to

    Arable land Rent and the SFP

    this 'contract farmed' arrangement is going to take a good deal of careful thought- the landlord has got to be very careful to meet his obligations under the ten month rule, plus other tax implications. I can see a few becoming unstuck if the 'sfp police' start scrutinising the detail. Granted Jim, my figures are optimistic, i was just trying to convince myself its worth carrying on!. As a tenant, the value of a rented house and buildings is actually more than the land- it is possibly worth renting the farm and operating my contracting business from it, if the profit from the land is 'neutral'.
  • Thu, Jan 20 2005 9:37

    Arable land Rent and the SFP

    As I've said before - most of us used to give our IACS to our landlords, so in the future if I give my sps to my landlords i'm in the same position. - nothing has changed ! This means that most landlords will be taking a cut in "rent" as an estimate of £85/ac vs the £95 iacs seems to be common. I've sent a letter out to all my landlords (22 of them!) telling them that I will pay them as much rent as I can claim on their individual parcel of land - this will vary from parcel to parcel depending on if it has any historical entitlment or is eligible for national reserve cash etc. On any land where I was lucky enough to be paying below IACS levls of rent as the land is not the most productive, I have asked for £20/ac of any sps on this land to maintain the our current position (rent was £20 below iacs in the past) If the landlords don't like it then I will give up the land and bugger of with the historical and stack it on my own land ! - don't think they are in much of a bargining position really. And as for some of our contract farming deals the same economic principles count and if someone else is prepared to do it for less, good luck to them ! Is SPS a bad thing - it certainly seems to have taken power away from landlords and given it back to the farmer IMO.
  • Thu, Jan 20 2005 10:55 In reply to

    Arable land Rent and the SFP

    Clive, Can the clause in the old FBTs about the tenant delivering up the land at the end of the agreement, and relinquishing the entitlement to EC payments at the same time, prevent the "buggering off manoevre"?
  • Thu, Jan 20 2005 10:58 In reply to

    Arable land Rent and the SFP

    "Doing nothing with the land is not going to be an option..." The problem is that doing nothing (other than topping every five years) is an option, not only that but doing nothing will almost certainly give the points needed for ELS. The rules have put the ball firmly at Landlords' feet. But there is a bigger issue. If farmers take land for nothing or pay a rent for it with the Landlord keeping the SFP, then that land is effectively being farmed without subsidy. The SFP is just a present from the taxpayer to the Landowner for him being kind enough to own the land! How long before government points to these agreements as proof that we don't need subsidies? Of course we all know that land can only be taken under these conditions on the back of the infrastructure provided by the home farm, but we really are making a rod for our own backs!
  • Thu, Jan 20 2005 11:54 In reply to

    Arable land Rent and the SFP

    Doing nothing with the land but top it is not an option for any landlord who does not have entitilment to any historical sps - if he does nothing he will get nothing more than the regional payment on his land and the farmer can "stack" the historicl that came from that land on his own land ! Hope it doesn't come to it with anyone but I do think walking away from land where the landlord won't talk sensible rent is an option. Strictly speaking you are bound by the FBT agreement but for any landlord to pursue you through the courts etc to make you pay agreed rent for the remainder of the term is IMO unlikely ! IACS has always been "just a present from the taxpayer to the landlord for him being kind enough to own the land" - SPS is NO different (apart from being about £10/ac less!)it just depends how you look at it !
  • Thu, Jan 20 2005 13:39 In reply to

    Arable land Rent and the SFP

    Yes of course you are right where the tenant has the entitlements, but I think we are talking at cross-purposes here. This thread was started by AJR and from his (or hers) two postings it is clear that he is talking about a contract farming situation where all the financial transactions have gone through the Landlord's No. 2 account. The entitlements in that situation are the Landlord's, and since they are no longer related to cropping he is under no obligation to continue to put the income in the No. 2 account. If he can then get a contractor to do the farming and cross-compliance for nothing he is indeed only getting the sub for the honour of owning the land. Alternatively he can leave the land idle collect the money (and even perhaps pick up extra for organic conversion!). That is what those on management contracts are up against. IACS payments have long been conditional on cropping at least 50% of the land so can be seen as a subsidy on food production. Landlords needed someone to do the "inhand" farming, now they do not and don't they know it!
  • Thu, Jan 20 2005 15:01 In reply to

    Arable land Rent and the SFP

    Ok so assuming this is the contract farming situation (we have 2 similar situations) Land owner has his historical entitlements so as you say can collect his £85/ac without needing anyone to grow a crop on it. However he will have to cross comply and if this is just topping it etc I reckon it's going to cost him at least £10/ac /year to get this done. Therefore his land will return him £ 75/ac /year. If he lets AJR farm it in exchange for sorting the cross compliance then his land will return him the full £85/ac/year. He's £10/ac better off that way and he gets to look out his window at AJR's lovely tidy wheat fields instead of a big lawn !! AJR gets to produce food at a sustainable level of profitability - everyones a winner ! If AJR (or anyone else) starts paying above the sps (or in the past iacs) level then he is on an unsustainable road to going broke !
  • Fri, Jan 21 2005 17:58 In reply to

    Arable land Rent and the SFP

    No, it seems the rule is he only has to top once in five years. I suspect that before five years are up someone will have offered an attractive rent for the land that has effectively been uncropped for two or three years and ripe for wheat. But that's no consolation for the guy who has been managing the land previously. I do agree that the saving grace is that respectable landowners won't want to see their land standing derelict, nevertheless it is a bargaining tool for them.
  • Sat, Jan 22 2005 20:14

    Arable land Rent and the SFP

    Having read all opinions so far on this I would have to say Clive is speaking exactly how I feel. Even though we do not have as many agreements as Clive, we are taking the same steps as he is. If we cant agree then we wont farm full stop and pull out and as Clive says it is very unlikely that the landlord will bother with the hassle and cost of taking us to court for not cropping. Even though we want to stay farming we will not do it to loose money just because thats what we have always done.
  • Sun, Jan 23 2005 22:08 In reply to

    Arable land Rent and the SFP

    So the days of the big contract farmers are numbered?. They are all going to walk away from their agreements and the smaller, probably mixed farming enterprises, can once again have the chance to bid for land in a local, maybe grass park type, annual auction. Roll on SFP!!
  • Mon, Jan 24 2005 17:29 In reply to

    Arable land Rent and the SFP

    Don't think so - think most landlords will see that if they want their income to remain sustainable they need to keep the big contract farmers in buisiness - without them the btm will fall out of the land rental market totally ! If you were a landlord who would you trust most to protect your sps re cross compliance ? a big profesionally well run contract farming co with modern kit, good admin and training or the local mixed farming guy who's fag packet record keeping might just get him in trouble one day soon ?
  • Mon, Jan 24 2005 18:33 In reply to

    Arable land Rent and the SFP

    Clive I am interested in your comments re: big farming companies. I spent several weeks (in the late 90's)looking at the structure of farms in the US. When the slump came in US farming during the late 80's/early 90's it was the big farming companies that were first out. (They had done the figures and knew what was coming!). Also they had another layer of admin that had to be paid. Not to mention that every task on the farm from sweeping the yard through to driving the combine was paid labour. It is my experience that a lot of US land is now farmed by the 'Local' guy. (He will have a lap-top in his cab - and be able to use as he will be using auto-steer - not a fag packet to be seen)and will be doing a very professional job. Mentioning no names but the actions (during the 70's and 80's) of some of these big farming companies in this country are the reason why we are now having all this environmental crap thrown at us...
  • Mon, Jan 24 2005 21:50

    Arable land Rent and the SFP

    I have spoken to the landlord (farmer) today and will have a meeting with him in the next two weeks, having told him the rents he expects will not be acceptable, unless it is token rent of £1 acre or less, we will not be farming his land next year. The agent will be present at the meeting, thats if he returns the messages i have left him. The thing is i'm looking forward to do a bit less already!! regards AL
  • Mon, Jan 24 2005 21:57 In reply to

    Arable land Rent and the SFP

    Clive, Sorry to read your idea of the stereotype UK farmer.Have a look at the "meet a farmer" sections of Guy Smiths booklet that is being handed out free. IT is really meant for schools and to educate the masses but I think you may be enlightened.
  • Tue, Jan 25 2005 9:05 In reply to

    Arable land Rent and the SFP

    Jim - don't you think that any extra layers of admin and management in a big farming company are more than cancelled out by the advantage of ecomomies of scale and low fixed cost structures through specialisation in one area of agriculture ? On any farm eveyone should be paid - even for sweeping the yard, even family labour has an opertunity cost ie. what they could earn flipping burgers instead of sweeping. AJR - will be interestung to hear your landlords attitude, I suspect it may be the agent you have more trouble with ! - these guys are making a fortune over all this sps stuff AQQ - I know plenty of small local farmers that do an excellent job and who I would be more than happy to let my own land to. However I also know a few (as i think we prob all do) who really do still operate the back of fag packet approach and god alone knows how these farms pass ACCS never mind cros compliance. My point was that if I were a landlord looking for a contract farmer for my land - My first question would be "can this guy fulfill the cross compliance rules and safegaurd my sps" not "how much can I screw out of him in rent ? "
  • Wed, Jan 26 2005 17:58 In reply to

    Arable land Rent and the SFP

    Fair answers Clive, but re your previous post 5:30 yesterday. re 'Big guys are keeping the bottom from falling out of the land rental market' while at the same time ' the figures don't stack, landlords have no option but to take it or leave it.' Just who in the hell do you think you were competing against when you won your contracts?? Is it not possible that the small / back of fag packet farmer got his risk analysis spot on when you got yours wrong??. A contract is a contract. The first time wheat prices were in the low 60's Peter Kendall made just the same assumptions you are now, when FW gave him a Talking Point page to explain that having entered into rental contracts at well north of £100 acre the maths did not stack. As a piece, and coming from a man with a degree in Agricultural Economics, it was a shocker. ( I happen to have a lot of time for PK - from local to county YFC, and then from local to national NFU he has always given his time and efforts most generously - but thats not the point here.) You could have had two good years just gone (marketing dependant)- did the landlord get any extra rent to reflect the feed wheat you sold for £100/t, and well over budget, last season? (I hope not- a contract is a contract) re 'Landlords need large organised farmers to protect their SFP' More misguided tosh i'm afraid. Cross compliance is NOT difficult - it does require some effort -and there is a cost involved, acre per acre. But the idea that a small farmer might not cope is offensive to small farmers that 'do it right', because, and this may be news to you, not all big farmers do it right. Two examples. 1) I farm almost next to a huge farmer whose definition of efficiency is to hang an 8m powerharrow on the back of a Quadtrac....while aggressivly acquiring any land he can get his hands on. 2) and much more seriously. On the far side of my county last autumn the HSE threw the book at a sprayer operator. (If it did not go to court it should have done.) 24m self propelled sprayer spraying Crystal next to the M1 motorway in such conditions that drift crossed ditch, 6 motorway lanes, and was inhaled by two lads strimming verges on far side of road. Kept in hospital a day with inflamed respiratory system. How many small/ fag packet farmers do you know operate a 24M SP sprayer? (Yes it could have been a contractor.) Life is not so black and white
  • Wed, Jan 26 2005 18:16 In reply to

    Arable land Rent and the SFP

    I think Clive is referring to the farmers out there that are still abusing rules and regulations rather than all smaller units in general. There are these rogues still out there and I am sure we all know one or two of them. The guys that dont pay seed roylaties, use chemicals that are no longer allowed. Dont bother with Lerap etc etc.
  • Wed, Jan 26 2005 21:53 In reply to

    Arable land Rent and the SFP

    Reading it all again , yes I am being harsh, and certainly Clive does not go as far as to say he will break any binding contracts in existance. Sorry Clive. I have to say btw that i dont directly know any idiot farmers left in the business,( but yes, that said, some local crop margins by ditches are suprisingly clean of difficult grass weeds.) It is prehaps the case that small farmers dont fully understand the cost/business structures of large farmers and vice versa. i.e. I would not like to tell my supposedly retired father of 70+ that he has an opportunity value of £6/hr in the local veg packhouse, any more than i would like to tell him he cannot spend a glorious september day ploughing on account of a)its the job i am payed to do (b) i have plenty of time to do it! (In our household if you want a days ploughing you better be gone by 5:00am otherwise its breakfast duty for you!) etc. He is happy combining all day too, esp it its standing & half decent. And if this free labour seems an unfair advantage, I am sorry but thats how it is.
  • Thu, Jan 27 2005 9:45 In reply to

    Arable land Rent and the SFP

    This thread should not degenerate into a big farmer vs small farmer battle - we are all generally speaking in the same boat so surely it's best if we all padel in the same direction ? Some big farms are a joke - as you say hanging powerharrows off Quadtracs etc and thinking how efficent they are ! and yes some have been quilty of paying far too much rent way in excess of IACS payments. Now if I stand accused of generalising about the profesionalism of smaller farmers don't make the same generalisation about larger units - There are good profesional farmer and bad cowboy rule breakers of all sizes. In our case we have never payed more than an IACS level of rent for combinable crop land or in the case of contract farming agreement the rent equilv has been equal to IACS. My original point is that sps should not change this at all and if as predicted sps comes out at £10/ac ish less, then rents or equilvalents should fall £10 accordingly. If all of a sudden you are farming a parcel of land with no historical then the rent should again be reflected by whatever you can claim in regional or national reserve payments - would you have ever payed £95/ac for none IACS registered land to grow wheat on in the past ? I hope not, so why should you pay anything like taht for land with no historical ? I have now had reaction from some of the landlords that have recieved the letter I sent out explaining our position re the sps - 100% that have so far replied say they understand fully and want a sustainable agreement and don't expect anyone to farm it at a loss - They have so far been quite happy to reduce rents to the level of sps on their land parcel once we know what it is. Still a few to hear from yet though so it may not be all plain sailing ! I would suggest that all farmer that rent or contract farm land sent out a similar letter
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