Are commodity prices impacting the land market?
The past six months have seen more market volatility than many farmers have seen in their lifetime.
All sectors have seen the value of outputs fluctuate with November 2022 wheat starting the year at £185/t, then rising to approximately £350/t and, at the time of writing, being £270/t.
Inputs are equally affected with Ammonium Nitrate starting the year at £650/t, peaking at £1,000/t in the spring, and current new season prices at £880/t.
But have these price increases had an impact on the land market? It’s unlikely that these factors have single-handedly impacted it, but they will certainly have been a contributing factor.
In general, land sales in 2022 started the year in a similar vein to 2021. However, once the spring and early summer land sales started, it was evident that demand had increased and there was a widening gap with supply. The land with highest potential productivity, good access and location remains the most sought after.
The mix of those purchasing land has, interestingly, not altered significantly, with a mix of farmers and investors both remaining in the marketplace.
This may alter going forward with more investors seeing land acquisition as a safe investment, having tax benefits and, potentially, as a means of protection against increasing inflation.
The land rental market has also seen a shift in the latter part of the summer. Good quality arable land is seeing unprecedented interest.
An old adage was that arable rent per acre should equal that of a tonne of wheat. Whilst this may have been true in the past, it may be difficult to put into practice when wheat prices have varied by £165/t this year.
It has also been apparent that good quality land which normally only generates interest from the arable and vegetable sectors, are now being matched and, in some instances exceeded, by the dairy sector. Whether this is a permanent change, or a temporary shift, only time will tell.
Whether you are selling or purchasing, a landlord or tenant, it is important to make sure you are making an informed decision with the most up-to-date information.
Daniel Bowden is a partner at Barbers Rural
