21 June 2002

Rents are key target in battle for survival

By Andrew Blake

LANDLORDS must take a more realistic stance on rents and share some of the industrys pain, insist a host of Cereals 2002 commentators.

A common sentiment is that rents have lost any realistic relationship with crop prices. "The last time wheat was £50/t, in 1977, our rent was £27/acre," says Lincs tenant farmer Mark Green. "It is now £50/acre."

Velcourts James Townshend echoes his view. "There has to be a sustainable relationship bet-ween the cost of land to a farming business and the income that can be earned from it.

"The time has come for a mature approach to the allocation of any trading surplus between landowner and land operator." That should reflect the respective risks of both sides, he says.

Many Farm Business Tenan-cies were arranged on excessive expectations, adds Andy Wells of ADAS. "If growers are on high FBT rents or have high borrowing costs these must be brought back into line."

Cereals 1991 host farmer John Errington blames land agents for encouraging growers in the mid-1990s to take on more land at unrealistic rents to spread costs, a policy which diluted overall profits. "Agents are partly to blame for where we are now."

The Tenant Farmers Assoc-iation says rents have fallen. But its arbitration insurance scheme, launched about a year ago, has become popular, says regional secretary Harriet Woodrow. &#42

Rental levels must be brought much more in line with crop prices, say the Tenant Farmers Associations Harriet Woodrow and Mark Green.

Plan, know your production costs, determine and fix a price that keeps you in the black, and be prepared to make harsh decisions about men and machinery. In the face of continued low grain prices that was the widespread expert advice at Cereals 2002. Offerings included:

Low price reaction aplenty

&#8226 Have a selling plan and know your market. Growers without such a strategy missed the opportunity to lock into a £70-75/t wheat price for November 2002, which was available as far back as March 2001

Paul Biscoe, HGCA

&#8226 Synchronise cropping and marketing plans to ease crucial cash flows

David Neale, Masstock

&#8226 Dont pay more than the price of a tonne of wheat as rent

Peter Corbett, Dalgety

&#8226 Consider informal parish farming agreements with other growers to achieve economies of scale

David Wright, J &#42 Walter

&#8226 Beware of drifting from sound rotations

Mike Carver, ARC

&#8226 Take advice, but make sure it is independent

Roger Adshead,

Framlingham Farmers

&#8226 Diversify with caution. Successful diversification usually comes only from a position of financial strength

Robert Hurst, FPDSavills

&#8226 Divorce business and emotional decisions. Too many growers, like chairmen of football clubs, are too emotionally involved with their farms

Paul White, Brown & Co

&#8226 Seven in 10 growers do not understand machinery depreciation, which costs them £1.2bn/year. "Thats £50/acre for every single acre. Theres a lot of unnecessary horsepower kicking around."

John Pelham, Andersons

&#8226 End users, particularly millers, could pay more to help struggling growers.

John Errington,

Cereals 91 host