Opinion: Farm rents way out of kilter with commodity prices

My late father was never very interested in renting land and regularly used to wag his finger at me and say: “Better to farm one acre that you own, than farm one hundred as a tenant”. Like a good, loyal farming son, I went out and hired lots of land. 

But at various times in my farming career, his words have come back to haunt me and now is definitely one of those times.

Over the past six months, farmgate commodity prices have dropped so quickly that, like any other arable, sheep or beef farmer, it is extremely difficult for me to pay rent and leave myself in profit.

The trouble is, of course, that thanks to a weak pound, for the past three years farm commodity prices and subsidy payments have been high enough for long enough for me to agree an increase in rents with most of my landlords.

But the “pendulum” for farm rents is famous for swinging behind the reality of declining farm profits, so now that farmgate commodity prices have dropped, it will take years for my rents to fully reflect this change.  

I have both 1986 AHA lifetime tenancies and 1995 farm business tenancies (FBTs) on my farm, but it is not easy to get a reduction of the rent on either.

With the lifetime tenancies, the terms for reviewing the rent are famously farmer-friendly, but it is still difficult to get the rent down quickly when my income drops. Rents on these agreements are generally only reviewed every three years and, even then, I have to give notice a full year in advance if I wish to have a review. 

On those parts of my farm subject to FBTs, the prospect of getting my rents down is even more remote. Nationally, rents tend to be much higher for FBTs than on land covered by lifetime tenancies (the former are now, on average, a record £100/ha higher) because “market comparables” are crucial in deciding their level.

It only requires some so-called farmer enriched, say, by a giant biodigestor renewable energy subsidy to decide to go and burn some surplus cash by bidding for an FBT and it can create financial havoc for every other FBT tenant for miles around.

Gleeful landlords’ agents (sometimes only rewarded for their work if they can achieve a rent increase) can then wave such bids at me as evidence of the “market”. Having no security of tenure, the reality is – although no one is ever blunt enough to say so – that I can then either pay up or get out.

I renewed one FBT back in March this year with a rent increase that now looks expensive, but what alternative was there? There is still no let-up in the demand for rented land.

If national land agents are to be believed, bids of more than £500/ha a year for good arable land in the eastern counties are still being tendered by farmers.

The rented part of my farm is therefore currently a worry, but I am trying to look on the bright side – it could have been much worse. Two years ago I tendered unsuccessfully for a 485ha farm that was being let on a five-year FBT. Then, of course, wheat was priced at £200/t, my fat cattle were selling at £4.50/kg and a weak pound was delivering me a healthy SFP. And now?  Wheat is £120/t, fat cattle make barely £3.50/kg and the value of my SFP is in freefall. Now I drive past that farm and break out into a sweat at the thought that I might have been farming it.

Damn it, Dad, you were right again.

Stephen Carr runs an 800ha sheep, arable and beef farm on the South Downs near Eastbourne in partnership with his wife Fizz. Part is converted to organic status and subject to a Higher Level Stewardship agreement.