Rental values will hold own
Rental values will hold own
SHORT-TERM rental values are unlikely to fall much below current levels despite the sharp downturn in farm profitability.
The reason, says Jeremy Proctor of Cambridge-based consultant Bidwells, is that set-aside, now retained in the revamped Agenda 2000 package, is likely to put a bottom in the market.
Arable farm business tenancy rents, mainly bare land let up to five years, kicked off at an average of £235/ha (£95/acre) in 1995. A year later the average rose to £310/ha (£125/acre), but peak rents reached £400/ha £162/acre), he notes.
This year, such agreements are likely to average £220/ha (£89/acre). But anyone hoping for a further fall is likely to be disappointed, he believes. "Set-aside is now set to continue at a default rate of 10%, with the option of additional voluntary set-aside up to an as yet unspecified maximum of eligible area."
Payment rate is expected to equate to area payments, giving set-aside a value of £260/ha (£105/acre). After deducting typical management and administration charges, net payment falls to £223/ha (£90/acre).
"Landowners supplying land will take into account the alternative income available from farming the land themselves," says Mr Proctor.
"Farmers will have to consider the minimum that can be earned from the land, and this may be the equivalent to the net set-aside payment. However, they may well have to pay much more due to demand. For blocks of arable land this remains unabated in many areas as farmers seek to expand operations and overall returns," he says. *