4 December 1998

£1500/acre bottom forecast

FARMLAND prices are expected to fall to £1500/acre during the next two years in central southern England after the £1000/acre decline seen recently.

"Prices depending on quality, location and fixed equipment on the farm now have stabilised at between £2000 and £2500/acre from a £3000/acre high over a year ago," says David Sherborn Hoare, of surveyors Butler Sherborn.

But returns from contract farming now are higher on a per acreage basis than those for farm business tenancies for bare land in the area.

"Farm incomes have fallen by 75% over the past two years and one way to survive is to spread the financial costs over a bigger acreage," he said.

He says farmers on traditional tenancies are paying between £45 and £50/acre for cereal and mixed farms with a house, but bare land without the house is commanding rents of £55-60/acre. Effectively, the farmhouse is being thrown in for free.

While good farmers still can make £150/acre, poorer farmers with a much smaller acreage now could be losing £150/acre.

"In a worked example a better farmer benefiting from area aid made a total income of £380/acre against expenditure of about £260/acre. The same unit farmed less efficiently generated a projected income of £270/acre and an expenditure of £330/acre, a deficit of £60/acre," he said.