7 June 2002

Affordable France has pitfalls too…

Falling incomes and

increasing bureaucracy are

tempting many UK farmers

to take a look at pastures

new, even as far afield as

New Zealand. In this

special focus, edited by

Andrew Shirley, we

examine the international

land market.

Catherine Paice kicks off

our global tour with a look

at France

PRICES for French arable and pastureland have risen by almost 30% over the last six years, according to SCAFR, a division of SAFER, the government agency which monitors all land transactions. The national average is now k3979/ha (£1014/acre).

But, despite this apparently sharp rise, values today are no higher than the peaks achieved in 1954 and 1989, reckons David Wilson of Farming Projects, which helps UK producers move across the Channel. In real terms, he says farmland values rose by a relatively modest 5.9% during 2001, compared with previous years when prices increased by as much as 14%.

Many factors are helping to fuel the increase, says Mr Wilson, despite average net farm incomes increasing by only 1% during 2001. He reckons the two main drivers were the 1999 drop in stamp duty, cut from 16% to 4.89%, and a 30% slide in interest rates over the past decade.

At the same time less land is becoming available due to the stocking rate ceilings for extensification payments introduced by Agenda 2000 of the Common Agricultural policy, he notes. "To a certain extent prices here are still in a state of catch up after they dropped 20% as a result of farmer scepticism following CAP changes in 1992."

Reduced farm profitability since 1999 after the heady increases between 1994 and 1996 have not yet filtered through to land prices, he adds, but is expected to do so from this year, exacerbated by the effects of BSE and foot-and-mouth.

Bank lending policy in France is based upon potential returns per ha and a farms ability to earn sufficient income to pay annuities, a reasonable margin and enough for the farmers family to have a decent standard of living.

"Loans are not made against other property or investments, though other sources of income are taken into account. This explains why the land price for each farming activity is an important indicator," says Mr Wilson (see box).

SCAFR statistics suggest that the average payback time per ha purchased is less than 10 years, although Mr Wilson cautions potential emigrants against reading too much into these figures. "There is a huge range in land values in different regions and farming here is not a panacea."

Dairy farming is currently the strongest sector with milk prices around 23p/litre and little prospect of downward pressure in the short term. Sheep production has also been exceptionally good because of F&M in Britain. However, the resumption of UK exports to the Continent is expected to have a negative impact on French lamb prices.

Some of Mr Wilsons clients have been getting the equivalent of £74.50 a lamb. "There are still good prospects ahead as the French consumer prefers to buy home-grown produce," he says.

One of the main reasons British farmers cast an envious eye across the English channel is the perceived extra government support received by their Gallic colleagues.

Much is made of the cheap, EU/state-funded loans available in France (full details in Business July 6, 2001) but the lengthy administrative requirements can be a stumbling block, warns Mr Wilson. "Rigorous controls are in place to prevent fraud, and prevent the banks investing in people whose farm plans are unworkable, unrealistic and unprofitable."

For young farmer installation loans, Mr Wilson says that up to four months should be allowed for the administrative procedure. Purchasing the farmland itself is also not always a straightforward process, he adds. For farm purchases, two months has to be allowed between signing the exchange document ("Compromis de Vente") and completion ("Acte Notariale"), to enable the SAFER to search for other suitable candidates.

"SAFERs role is to prioritise young farmers and to present their claim to the local commission," says Mr Wilson. "Every young farmer thinking of moving to France should not forget that they could have competition from other young farmers, French or British." &#42

Box

Box

&#8226 IACS-registered land in predominantly arable areas k4510

lMixed farming areas k3770

lMilk producing areas k3520

lStock farming areas k2730

Exchange rate k1 = £0.63

Source: SCAFR/Farming Projects

Land values in France are lower but buying land is not always easy.

What your money will buy

A 470-acre arable IACS-registered unit in the Champagne Berrichonne region. Farmhouse needing extensive renovation. k1.04m (£655,000).

A 125-acre dairy farm in Brittany. Modern farmhouse and 12:12 parlour with 405,000 litres quota. k1.1m (£693,000) including machinery and Holstein herd. A further 135 acres for rent.

A 450-acre ring-fenced beef unit in the central region. Traditional manor house. k762,000 (£480,200).

Further details from david-wilson@wanadoo.fr