The new CAP regime is encouraging landlords to demand higher rents when farm incomes may fall, according to land agent Philip Meade.
Farmers might want to rent extra land for greening measures and this demand would put upward pressure on rents, said Mr Meade of Davis Meade Property Consultants.
The biggest effect was likely to be on FBT rents, while those for AHA tenancies, based on the farm’s profitability and comparable rents, should fall if farm incomes decline.
See also: Truth about farm rent figures
Mr Meade said Welsh farmers would be hit particularly hard, with a 15% modulation rate from Pillar 1 to Pillar 2 and a move from historic- to area-based payments also lowering their farm income.
“Farming families in Wales are facing a double whammy,” he said. “Not only are they facing a drop in CAP payments but they are likely to have to pay more for the land they need to farm.”
Farmers should take advice on fair levels of rent and, to avoid the need for arbitration, should not leave rent negotiations until the last minute, Mr Meade said.
A significant proportion of the rent reviews he had dealt with on traditional tenancies in the past year saw a landlord seeking a 40-60% increase, but most had ended up settling at about 10-15%.
“When it comes to the short term, tenancy rents are based on open markets,” he said. “The market is under so much pressure at the moment for crops for anaerobic digestion and greening.
“For example, a 200-acre farm growing crops on a rotation may choose to rent additional acreage to meet greening requirements.
“This will increase the competition for land which will push up rents.
“CAP does not just pay to produce food but to steward the land.”