Committed farmers are more optimistic about the future

Two figures caught my eye recently - one was that average farm rents in Scotland rose 13% last year, to about £15 an acre and the second was that the average price of land sold in Scotland was more than £4,500 an acre.

By The Newsroom
Saturday, 17th May 2014, 11:06 am

Looked at together that would suggest that anyone buying land to let to someone else could expect a return of about 0.3%. Hardly a return to tempt the buy-to-let property brigade looking for annual returns of at least 5%, except in London and Edinburgh where the sky seems to be the limit for both property prices and rents.

In farming the position is much more complicated than that, not least that many of Scotland’s landowners have owned tens of thousands of acres for centuries and didn’t pay for it in the first place. But both the present price of land and its rental value suggests yet again that professional farmers committed to the business are more optimistic about the future than they, or the National Farmers’ Unions, ever admit in public. Several land sales in Scotland last year were for more than £10,000 an acre. More significantly, about 75% of open-market land purchases were by local or neighbouring farmers trying to expand, not the “outsiders” we’ve heard so much about in recent years.

Rents also vary widely within that £15 average, up from about £13 an acre the previous year. Rent for farms in the designated Less Favoured Area – hills, upland and moorland that accounts for much of Scotland – was about £10 an acre, up 24%. Rent for non-LFA land was about £52 an acre, up only 3%. Many farmers will be paying much more than that, others much less The report on rents by the Scottish Government also indicates that long-term tenancies are declining while seasonal lets, such as those for grazing, have increased. About 24% of Scottish farmland is still on full tenancy terms, about 14% seasonal.

It seems enough farmers are confident about the future to compete with each other to buy or rent land. The layman who has followed – not easy – the cascade of doom and gloom about the looming disaster of the European Union’s common agricultural policy (CAP) subsidy changes from next year must wonder why.

The problems of acquiring land by whatever means, hanging on to it, using it to make money and how to pass it on are never far below the surface in farming. More than anything else land disputes can divide families, and those are even more likely when land prices are high as at present. As farm consultant Peter Cook said recently the fact that a modest 200 acre farm can now be worth £1million and more can make decisions about its future more contentious.

He said: “Non-farming siblings who were often quite happy in the past for their farming sibling to inherit the farm, and the overdraft, are now looking for their share because of the value of the land.”