Since the introduction of farm business tenancies (FBT) in 1995, the market in let land has become more opportunistic. The average length of an FBT has remained doggedly at less than four years. And there has been more land let on this short-term basis, as 1986 Agricultural Holdings Act tenancies are increasingly surrendered or brought to an end.H3>
By letting short term, landlords can use their position to full advantage when, for example, there are major fluctuations in commodity prices. This opportunism is fuelled by the fact there are many more people looking for additional land than is available. Even when farming times are hard, landlords’ agents know that there are individuals who will bid over the odds to get a foothold on land and to exclude others. As commodity prices increase, the expectations of landlords and their agents reach unsustainable levels.
Over recent years, the stripping away of coupled support payments, export subsidies and intervention has left farmers more exposed to world markets than they have been for generations. Volatility creates highs and lows in both input and output prices at unpredictable intervals. We only need to look back at what has happened over recent years to understand that. While we are constantly told that feeding 9bn people will provide opportunities and higher prices for producers, past experience would indicate that it will not be that simple.
This analysis is important in the context of the tenanted sector, because to deal with this volatility farmers need to plan for the long term. Profitability is something which will have to be averaged over the good and the bad years, which will in turn require longer-term occupation of land at more sustainable rent levels than we see bid in the open market. However, for as long as there are individuals willing to pay over the odds to get access to short-term land there will be landlords offering to provide it. It seems that there is real market failure, which needs to be corrected.
Landlords should be encouraged to let long term through changes in the inheritance or capital tax regimes for land and in ensuring that only active farmers are able to access both CAP direct payments and agri-environment income. In that way, longer arrangements will have to be put in place between landowners and active farmers so that the maximum economic benefit can be gained from the land.
Get your tenancy questions answered on FWi
Tenancy issues can be critical for farm businesses. Rebecca Marshall, national adviser for the TFA, will be regularly dropping by FW’s website forums for two weeks from Monday, 24 January to answer your questions.
Whether your query is about getting a tenancy, succession, the single payment scheme – or any other tenancy-related topic – just add it to the forum thread and Rebecca will respond to a selection.
Opportunism is also an increasing feature, even in 1986 Act tenancies, where there is long-term security of tenure. There has been many a landlord’s agent who has deliberately targeted the farmhouse as an excuse for an increased rent when the farming economics would not justify it. Such action is without proper consideration either of the law surrounding the way rents are to be reviewed, or the significant differences between the standard residential market and the letting of farmhouses with agricultural units.
The shared agenda for landlords and tenants must be to ensure long-term sustainability for tenanted farm businesses within a framework which provides a proper return to landlords.
DELIVERING PUBLIC GOODS
We are constantly told that the market should be allowed to drive the way in which land is used. But this seems to ignore the arguments of ensuring a continuing source of safe, nutritious, local food produced in an environmentally-friendly way. This ensures the social fabric of rural areas is maintained – the so-called “public good” that farmers provide.
From that perspective, the market should not be allowed to run riot and needs to be regulated. The job at hand now is to understand exactly what is required for the public good and to ensure that appropriate policies are put in place to achieve that.
George Dunn is chief executive of the Tenant Farmers Association.