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Arable land rental rates

Last post Fri, Apr 15 2011 9:37 by glasshouse. 28 replies.
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  • Tue, Mar 29 2011 9:44

    Arable land rental rates

     anyone got an idea of the general price per acre for renting land to grow barley on at the moment? im over in wales

    cheers

  • Tue, Mar 29 2011 10:40 In reply to

    Re: Arable land rental rates

    Some went near us lately for £85/ acre without the straw (Scotland) generally reckoned to be a little expensive.

  • Tue, Mar 29 2011 13:27 In reply to

    Re: Arable land rental rates

    some clown has allegedly paid £150/ acre near edinburgh recently.

  • Tue, Mar 29 2011 13:44 In reply to

    Re: Arable land rental rates

     £150 ouch! Hard to make much return on that!

  • Wed, Mar 30 2011 11:30 In reply to

    Re: Arable land rental rates

    So somewhere around the £80-£100 mark? What do people think? Any suggestions or ideas most appreciated!

  • Wed, Mar 30 2011 12:03 In reply to

    Re: Arable land rental rates

    £80
  • Wed, Mar 30 2011 22:35 In reply to

    • old mcdonald
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    • Near Castelo Branco, Portugal

    Re: Arable land rental rates

    And the value of the land at £80 an acre annual rent is?

    www.oldmcdonaldsolives.com
  • Wed, Mar 30 2011 23:05 In reply to

    Re: Arable land rental rates

    £80 plus the straw, whatever value you want to call that. Funnily enough the land renting locally at £85 has just changed hands so its value is established but I dont know what it was. I would guess £3500/acre. More relevant is your production costs, if it is costing you £240? an acre to grow with a malting contract at £180/tonne would you want to be paying any more?
  • Thu, Mar 31 2011 1:11 In reply to

    • bovril
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    Re: Arable land rental rates

    old mcdonald:

    And the value of the land at £80 an acre annual rent is?

    The rent rate bears no relationship to the value of the land. The investment value for a purchaser (which sets the price of land and farms) is in the stability and the anticipated rise in value, plus of course the tax advantages.
  • Thu, Mar 31 2011 6:47 In reply to

    Re: Arable land rental rates

    bovril:
    old mcdonald:

    And the value of the land at £80 an acre annual rent is?

    The rent rate bears no relationship to the value of the land. The investment value for a purchaser (which sets the price of land and farms) is in the stability and the anticipated rise in value, plus of course the tax advantages.
    Then maybe you should clarify your question
  • Thu, Mar 31 2011 20:58 In reply to

    • old mcdonald
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    Re: Arable land rental rates

    OK, what I meant was, what is the value of the land on the open market - without a tenant.

    I acknowledge bovril's point, I was just trying to get a "feel" for the economics. I am not currently in the UK.

    www.oldmcdonaldsolives.com
  • Tue, Apr 5 2011 2:47 In reply to

    Re: Arable land rental rates

    Typically I use a multimplication factor of 15 between rents and sale price, a 6.667% return on capital employed. That puts a rent of GBP80/acre at around GBP1200 an acre!!!!

    From a pure, free-market economics theory, something is wrong if people are factoring in tax advantages to land prices. This and the point about price-rise speculation suggests that not enough has been learnt about the causes of the ecomomic crisis of the last three years. Land is real estate and is little different from housing. Is land stable and secure as an investment, well I guess that depends on what you pay for it and whether you believe markets do not go down as well as up.

  • Tue, Apr 5 2011 12:30 In reply to

    Re: Arable land rental rates

    you are dead right there is something wrong, but uk land has always been a speculators paradise and tax dodgers haven. it has zip to do with farming returns.

  • Tue, Apr 5 2011 20:02 In reply to

    Re: Arable land rental rates

    Historically English land values have risen and fallen with money supply - ie they are inflation proof. On top of this they pay a historic 1 to 1.5% return. So take the rent and muliply by something between 60 and 100 for land value. Land rent has nothing to do with farming returns because letting land is not farming.

    Nothing is wrong, per se. Well, not historically. Most land has been owned by wealthy individual entrepreneurs, the church, historic family or private institutions since the year dot. Nowerdays more likely to be dot com / oil barons or pensions funds than millers, brewers and vicars though. Like all businesses in commodity production, the large have expanded and the small have moved into niche areas. What is wrong is what is wrong with the whole of modern life, not just farming. It is a sign of the times that less people will work the same land, and has been the case since farming began - more from the same utilising less. Frees the labour to be doctors; policemen; shopkeepers; *ahem* bank managers. Not a great list but you get my meaning.

    Land rental values reflect a) supply and b) demand. Nothing else. Lump everything into one or the other category. No need to complicate the basics.

    Not for print please.
  • Tue, Apr 5 2011 23:35 In reply to

    • old mcdonald
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    Re: Arable land rental rates

    Now then, do I go with Stuart or Tesla on returns? glasshouse is not allowed to read this, but someday I might decide to return to the UK, and purely not to have too close a neighbour, buy a decent house with some land and let the land. glasshouse, I did say you were not to read this. I do not know how much I will have available, and I am not telling anyhow!

    www.oldmcdonaldsolives.com
  • Wed, Apr 6 2011 22:38 In reply to

    Re: Arable land rental rates

    i have read, and i am not amused !

  • Thu, Apr 7 2011 22:33 In reply to

    • old mcdonald
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    Re: Arable land rental rates

    I knew you would not be. Can I still stand along side you when we next have to shout claidheamh mor? Or should that be mhor? I assume you are right handed. My son is cowie handed and I want him on my left.

    www.oldmcdonaldsolives.com
  • Sat, Apr 9 2011 21:55 In reply to

    Re: Arable land rental rates

    Might I add that let land is one of the best performing asset classes over the short, medium and long term? In terms of income + capital returns that is.

    Not for print please.
  • Sun, Apr 10 2011 20:11 In reply to

    • old mcdonald
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    • Near Castelo Branco, Portugal

    Re: Arable land rental rates

    Tesla, that is what I was thinking might be the case, but was not sure.

    www.oldmcdonaldsolives.com
  • Sun, Apr 10 2011 21:58 In reply to

    Re: Arable land rental rates

    It is the case, but a hell of a time to be buying right now.

    Let's just see what happens when the tides are turned - some high interest rates and low inflation will make farmland much less attractive. No point having an asset appreciating by BoE target 2%, with 1.5% income on top if Halifax Bank are paying you 8% on cash deposits.

    Either way, I would buy in Scotland, or a small hill farm in say Cumbria.

    Not for print please.
  • Sun, Apr 10 2011 22:45 In reply to

    • old mcdonald
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    Re: Arable land rental rates

    Tesla, I am not intending to retire anytime too soon, unless I win the €millions, and I am likely to be buying in Scotland - somewhere north of Pitlochry, and probably north of the Great Glen (Inverness-Fort William for the uninitiated). Northumberland is still a possibility too. My wife and I were both brought up there.

    Very interesting that you should mention cash rates. In my time as a bureaucrat I had several years of responsibility for looking after the cash flow of a department or entity. This often meant managing several millions of very short term spare cash of the local currency - just until the cheques hit the bank. The best rates available were always the overnight or 24 hours notice rates through the major banks. I once, only once, in Australia, managed 20% (p.a.) on either $A3m for 4 days, or $A4m for 3 days, I forget which, but frequently obtained 18 and 19%. Leaving the cash in the bank would have earned nothing for my employer. I know that most people who post here are of the opinion that bureaucrats do not have the intelligence to think of such things, but they are wrong.

    If I had a minimum of £1m available I would make it my business to use the Treasury departments of the mainstream banks (not Iceland or BCCI - that was their credit rating I think, not their name) to earn my income. Make the decision every morning, 11am cut-off for some, and noon for others, whether to stay put or move. An extra 1% on a million is 27.40 a day, but security comes first. It is only a few seconds of thought and calculation to make the decision whether to stay put or move elsewhere. After a while they phone you to ask whether you have spare cash for anywhere from overnight to a couple of weeks. When they need you the rates increase slightly.

    www.oldmcdonaldsolives.com
  • Sun, Apr 10 2011 22:48 In reply to

    Re: Arable land rental rates

    old mac, yes you can stand beside me.

    if you buy a farm, can i rent it? you will be a fair landlord i can tell.

  • Sun, Apr 10 2011 22:57 In reply to

    • old mcdonald
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    • Near Castelo Branco, Portugal

    Re: Arable land rental rates

    glasshouse, I had already decided, and my wife agrees (we are partners as well as H&W) that we can convince you that not all landlords are bad.

    www.oldmcdonaldsolives.com
  • Tue, Apr 12 2011 9:58 In reply to

    • alidownunder
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    • Joined on Sun, Jun 3 2007
    • Canterbury New Zealand

    Re: Arable land rental rates

    We rent (lease) about 45% of our 500ha farming operation from a Trust. It is always difficult to balance between what the market will pay and making a reasonable profit. We have used the formula of what we consider is the likely gross income less variable costs (gross margin). You then have to decide how to split the nett income, we generally work on 65% for ourselves and 45% for the owners.We pay the council rates which amount to $40 hec We are very fortunate that we have a 10 yr lease on a 68 hec block with 3yearly reviews and the other block on a similar agreement, although we get compensation for any improvements made to the property eg. irrigation ,trees and plantings for shelter. I think a lot of owners look at the short term higher income, and dont take into account that the longer the term the more likely the tenant is to take better care of the land as he is likely to get the benefit of his inputs
  • Wed, Apr 13 2011 22:00 In reply to

    Re: Arable land rental rates

    if you cant farm the land, you shouldnt own it, its quite simple.

    some countries already operate this law, like denmark. as food shortages really start to bite, more will follow their lead.

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