Suffolk farmland market 'still buoyant' despite challenges

Despite a hugely challenging start to the growing season, falls in commodity prices and the phasing out of government support via the Basic Payment Scheme (BPS), farmland is retaining its value, according to regional land agents. 

With an election year now well under way, farmers have been more preoccupied with floods and falling wheat prices than the shape of the next government.

However, the adverse conditions have brought concerns about the profitability of food production to the fore.

Oliver Holloway of Clarke and Simpson said while general elections have tended to put the residential sales market on hold, the factors currently dominating the farming industry historically have little impact on the farmland market.

“Not a day goes past without a farming client talking to me about the weather and it’s no surprise that one of the wettest winters on record, combined with falling commodity prices and the phasing out of the Basic Payment has knocked the confidence of many a farmer," he said.

“Land values across East Anglia rose by approximately 25% over the past five years, but without doubt, we started to see signs of the market levelling off during the second half of last year as increased interest rates started to bite, he said. 

But demand remains strong - especially given the backdrop of political and economic uncertainty - as investors looked for safe havens for their capital.

"In turbulent times, it is often assets such as farmland and woodland that come into their own," he said.

"If a farmer has the opportunity to purchase a block of adjoining land, the person standing outside No 10 Downing Street will have very little impact in their decision-making."

Robert Fairey of Brown and Co said the end of BPS and the implementation of new farming subsidies meant farmers faced a period of significant change and uncertainty.

"The shift towards a more sustainable and environmentally friendly approach to agriculture may present both challenges and opportunities for those in the sector," he added.

"Farmers will need to adapt their practices to align with the new subsidy schemes, which may emphasise biodiversity, conservation, and climate change mitigation.

"This could involve implementing new technologies and diversifying their production strategies."

Extreme weather events, such as flooding and droughts, meant farmers needed to build resilience such as introducing crop varieties and cropping strategies which cope better with changing climate conditions, he said. Collaboration will be crucial, he added.

"Overall, the prospects for farmers and rural landowners will depend on their ability to adapt to the changing landscape of agricultural policies and practices.

"Those who can embrace sustainability, innovation and resilience are likely to thrive in this new environment, while others may struggle to navigate the challenges posed by extreme weather events and the transition to new subsidy schemes."

Graham Ford of Lacy Scott & Knight said farmers were frustrated with post-Brexit rural subsidy payments schemes "as ministers' long-awaited replacement for the EU’s agricultural support scheme does not appear to be fair and balanced".

"It is a far less incentivised payment-based scheme than those in the past. It is more complicated to enter with very brief regulation or guidance in comparison to the previous EU schemes," he said.

"Landowners with less favourable land or that have been poorly managed in the past will have various options that can be utilised at a higher reward than their previous farming methods."

Conversely, those who managed their land well in the past seemed to get little reward, he said.

"There appears to be very little thought into how we support UK farmers who provide crops for food production and is more in line with making the country ‘green’," he said.

William Hargreaves, who leads the rural team at Savills in Suffolk, said the continued phasing out of BPS is likely to encourage more farmers to reassess their options – either restructuring their business model or, where no clear succession plan is in place, deciding to leave the industry completely.

He predicted more farmland would come to the market this year as a result.

“Encouragingly, demand remains high – particularly among those seeking business asset roll over relief or an environmental investment," he said.

"But with more farmland available it’s possible that we’ll see more modest growth in values over the next 12 to 18 months.

"However, in a historic context, it remains a strong market. Values in the East remain in line with the national average and at the end of last year they were still higher than at any year end since 2015.”

For those who continue to farm it will be important to find innovative and creative ways to plug the gaps left by BPS, h added.

Farmers would need to embrace technology and streamline their processes to improve efficiency and cut their costs, he said.

“Using shared farming or Contract Farming Agreements could also be an option. Others might look at higher value markets by processing or packaging products differently, or exploring new business lines such as niche local markets.

"We’re also seeing more people looking at the likes of agritourism, farm shops, specialist crops or educational programmes to create additional income."

He saw scope for grants which fund improvements and business resilience and in joining Sustainable Farming Incentive and Countryside Stewardship schemes. Private finance could also be an option - such as selling Biodiversity Net Gain units to developers to mitigate environmental impact

"Countryside Stewardship Capital Grants can be claimed for works including fencing, hedging, metalled tracks and spray washdown areas, while the Farming Investment Fund offers grants for everything from water management and slurry infrastructure to improving productivity and innovation," he said.

Giles Allen of Strutt and Parker said 2024 is the year when farmers will really start to feel the loss of the financial safety net of BPS.

"Payments are falling to at least half of what they have been used to be at a time when they are also dealing with terrible weather, high input costs and higher interest rates," he said.

"It’s a perfect storm of factors which could prove extremely challenging, particularly for poorer-performing businesses.

"As a result, many farming businesses will be looking at how to optimise the use of machinery, equipment and labour to raise efficiency, while managing their exposure to risk in terms of cropping and land use decisions.

"The introduction of the latest version of the Sustainable Farming Incentive (SFI) – which offers higher payment rates and will include new options from the summer – is certainly attracting quite significant levels of interest as part of this strategy to reduce risk.

"Many are looking at how they can incorporate SFI options into their rotations, instead of more traditional break crops, to deliver a fixed income, largely irrespective of the weather, with a much lower working capital requirement."

Farmers could also look at adopting alternative business structures and new opportunities to add value.

"What is striking is that despite the challenges facing the farming industry, the farmland market in the East of England continues to be very resilient and the outlook positive," he said.

However, it is still unclear whether the supply of land would increase in the coming months, he said.

"While the downward pressure on farm profitability will clearly be a factor, selling a farm is a significant decision and not one that people rush into. For now, demand continues to outstrip supply and arable values remain around £10,000/acre."