Farm rents fall on back of low commodity prices

Farm rents appear to be falling in reaction to the crisis in commodities, according to figures collected by the Tenant Farmers Association (TFA).

Across all farm types, rents agreed at review were on average 16% lower (at £89/acre) in the year 30 April 2016 for Farm Business Tenancies (FBTs) and 10.5% lower (at 63/acre) for Agricultural Holdings Act (AHA) tenancies, compared to those reviewed the year before.

Livestock farmers on FBTs whose rents were reviewed in that period saw the biggest fall in rates compared to those whose rents were reviewed the year before, falling from £93/acre to £43/acre on average –  a drop of 54%.

For AHA tenancies, dairy farmers whose rents were reviewed saw a 21% drop in rates to £65/acre compared with those whose rents were reviewed the previous year when rates averaged £82/acre.

AHA rents agreed at review (Source: TFA)

  Three years ago Year to 30 April ’15 Year to 30 April ’16
Arable 86 80 84
Dairy 65 82 65
Livestock 48 63 52
Mixed 65 72
All 66 75 68

FBT rents agreed at review (Source: TFA)

  Three years ago Year to 30 April ’15 Year to 30 April ’16
Arable 141 112 121
Dairy 86 138 104
Livestock 40 93 43
Mixed   82
All 89 106 89

However, rents had fallen much less when comparing those reviewed in the last year to when they were last reviewed three years ago. Across all sector types, AHA rents had fallen just 3%, while there had been no change FBT rents.

FBT tenants on dairy holdings saw their rents fall nearly 21% when reviewed in the last year compared with three years ago. 

Katy Fox, adviser at the TFA, said the organisation was aware of a number of reviews on dairy farms that yet to be settled and where the reductions that tenants were pressing for were “clearly justified”, given the huge fall in milk prices.

“There has been strong resistance from landlords to any rent reductions and the cost of going to arbitration has also had a dampening effect on rent review activities originating from tenants.

“However where tenants are arguing their case, reductions are being achieved and there is no reason if current market conditions prevail, that these reductions should not become more frequent and deeper,” said Ms Fox.