Future farm subsidies will target the environment

Date: 07 Jul 2016

Citywealth

David Merton MRICS, partner and head of rural consultancy at chartered surveyors firm Fisher German, say that Brexit offers an opportunity to promote British food security and to align farming subsidies with environmental issues.

What change will Brexit bring about to UK agriculture?

In the short term the UK agricultural sector with a weakened pound and the benefit of exchange rate differences will see increased subsidy and commodity or agricultural product prices. We don’t know how the UK Government will view UK agriculture post Brexit but if the UK stop paying into Common Agricultural Policy, it gives the Government an immediate opportunity for savings. It is likely that subsidies, if they do remain, will continue to focus more on environmental benefits.

Do you see any advantages of Brexit for UK agriculture?

Changes offer massive opportunities to the UK agricultural markets for improved efficiency, a more favourable export market and rationalisation. We cannot continue to see farming as only a way of life; it must be a commercial business carefully costed and every angle considered. I see a big future with fewer operators farming larger areas through a mixture of both owned, rented and contract farmed opportunities.

Who are the big investors in agricultural land?

Wellcome Trust is the most high profile because of their purchase of the CO-OP Group’s farm business in 2014. It had two hundred and fifty farming employees and a substantial property residential and property portfolio which included fifteen farms. However, there are many others on a smaller scale throughout the country buying both as an investment and because they have a genuine passion for farming. A number of institutions and charities remain committed to the market and are taking a long term view and adding to their existing portfolios. Over the long term, land has proved to be a good investment for these types of investors.

Who are the big sellers of land?

Many PLC companies with large surplus land portfolios which are secondary to their core business such as developers, house builders, mineral and land fill companies have been selling down to improve their balance sheets. This has allowed them to raise capital but keep some reserve where necessary for their future benefit through arrangements such as sale and leasebacks. There will be family owners who still sell particularly on the death of a key member of the family where the assets are to be split.

What trends do you see in agriculture?

Agriculture is a world market and not a UK market, we cannot hide from macro economics. The UK market for land is seen as attractive for many reasons. They include our political stability, capital protection and the UK weather climate. UK land values have predominantly risen upwards over the last seventy years. However, the world population is growing, Asian demand for meat will continue to drive international markets and the need for food security. Markets will become saturated at times and there will be a short term levelling of price but market trends are expected to continue to remain positive. In general, the extremes in price movement due to oversupply followed by contraction is expected to continue.

This article was published in Citywealth Weekly, our mid-week roundup of topical news and exclusive expert comments.Sign up here to start receiving the Weekly in your inbox.

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