Farming Talk: Tenant farmers facing big rise in rent demand

With the price of grain hitting the roof last year and beef and sheep prices buoyed by high exports, many tenant farmers in the region are facing demands for an increase in their rents this year.

Many landlords have already served rent notices to their tenants and with Lady's Day (March 25, the traditional rent day for farmers) round the corner many farmers in the region will see a letter from the landlord's agent dropping on the doormat.

Demands for rent increases so far have been as high as I have ever known with a significant number asking for 40 to 50 per cent increases and some landlords are seeking to double the rent. These extreme cases could be the start of a negotiating position but nevertheless such demands are the worst I have seen.

Although we are not absolutely inundated with rent demands, the ones that are coming in are significant, especially bearing in mind these rent agreements will stand for three years – well beyond the CAP reforms in 2014 when support arrangements could significantly change, likely to the detriment of farm incomes.

Many of the really high demands are for arable land, and we are urging tenants to seek advice from their agents to negotiate for a more acceptable settlement.

We have been negotiating rent notices sent out last March which have to be agreed by March 2012. A few reviews have been settled already, at a 10 to 15 per cent increase compared to original demands for 30 to 40 per cent.

Such extreme rent demands made on the back of higher grain prices don't take into consideration the higher costs of production.

An arable farmer may have gone from making a loss when grain prices were at a £70 per tonne low a couple of years ago to a profit-making position at the £180 per tonne mark, but it's not all profit because costs have gone up and landlords should look at the bottom line. Fuel, fertiliser and energy costs have soared.

Tenant farmers must be cautious. There's a lot of uncertainty with CAP reforms, milk prices are fluctuating and the prospect of the eurozone crumbling could have a huge impact on agriculture.

The imminent CAP reforms are also having an effect on Farm Business Tenancies (FBTs). If 2014 becomes the reference year as is suggested, the demand (and price) for FBTs can only increase.

Many landlords will want to claim the single payment themselves and, hence, take their land out of the FBT pot, so with supply short there will be a mad scramble for land that is left available.

Philip Meade is from Davis Meade Property Consultants