Arable land Rent and the SFP
Started by anonymous
Viewing 15 posts - 1 through 15 (of 33 total)
Wednesday 19 January 2005 at 12:31
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.
Wednesday 19 January 2005 at 13:25
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 rent0
Wednesday 19 January 2005 at 19:34
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.
Wednesday 19 January 2005 at 20:34
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.
Wednesday 19 January 2005 at 23:02
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.
Thursday 20 January 2005 at 08:11
Which planet is the Land Agent living on?
Thursday 20 January 2005 at 08:20
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’.
Thursday 20 January 2005 at 09:37
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.
Thursday 20 January 2005 at 10:55
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"?
Thursday 20 January 2005 at 10:58
"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!
Thursday 20 January 2005 at 11:54
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 !
Thursday 20 January 2005 at 13:39
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!
Thursday 20 January 2005 at 15:01
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 !
Friday 21 January 2005 at 17:58
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.
Saturday 22 January 2005 at 20:14
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.
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