Weekly rural property and business update

Written By:

Andrew Shirley, Knight Frank

12 Jul 2020

4 minutes to read

Categories: Property Sector Agriculture Rural Report advice-for-landowners Issues and insights rural misc rural-property-markets

Commodity prices

As combines start on winter barley and oilseed rape, commodity prices remain generally firm - in most cases trading above 2019 levels. New forecasts from AHDB predict a 25% drop in the area of winter wheat set to be harvested this year across Britain – up to a third in some regions.

The oilseed rape harvest is set to be the lowest since 2000, however, increased spring barley plantings due to the wet autumn in 2018 mean a bumper barley crop is on the cards.

Trade and food standards – supermarkets gang up on chlorinated chicken

Following the recent announcement by Waitrose that it will never stock imported chlorinated chicken from the US, Aldi, the Co-op and M&S have also said the birds won’t be appearing on their shelves.

I would reiterate my own view that the fresh-produce aisles of mainstream supermarkets won’t be the battleground where the nation’s resolve is tested over food standards, it will be in ready meals, takeaways and other outlets where source and provenance are less scrutinised, or even cared about.

Last week a number of farmers, part of the Save British Farming campaign group, drove their tractors to Westminster to protest about the perceived lack of protection given to UK farmers by the Agriculture Bill.

Twitter followers, meanwhile, may have noticed that MPs and even some ministers have ramped up their defence of the bill – much maligned for not including assurances that food produced to lower standards than those demanded of UK producers will be barred from entering the UK - as it wends its way through the House of Lords.

Defra’s Lord Goldsmith joined the fray by dismissing allegations that the bill will allow lower quality food into the UK and put farmers here at a disadvantage as “flat wrong”.

I mentioned in a previous instalment of this update that the UK looks unlikely to implement full border controls at the UK’s ports until at least July, six months after the ending of the Brexit transition period.

But Trade Minister Liz Truss has ruffled feathers by claiming, in a leaked letter to other ministers, that among other things this could lead to the risk of increased smuggling and potential challenges from the WTO.

For those wondering what the fuss regarding a trade deal with the EU is all about, the following quote from the latest ABC Professional Update bulletin caught my eye.

“While pursuing trade deals around the world is a crucial aspect of the UK’s independent trade policy, one must not lose sight of the fact that exports to the EU account for 43% of total UK exports……..Therefore, securing a comprehensive FTA with the EU should be the priority.”

Arable profits – 2020 underlines dangers of subsidy reliance

One statistic that always seems to resonate whenever I do a presentation or webinar on the outlook for agriculture is the reliance of farm profits in the UK on support payments. In 2019, for example, over 60% of total income from farming (around £5 billion) was accounted for by the Basic Payment and other subsidies.

The latest arable forecasts from consultant Andersons, therefore, make for uncomfortable reading. According to its model Loam Farm, a drop in output means the margin from production this harvest will fall into the red by £27/hectare without the Basic Payment, even after a significant dip in variable costs.

As the BPS is gradually eliminated post Brexit, farm businesses will need to think hard about how they will maintain profitability. If you need some ideas Tom Heathcote our head of Agri-Consultancy would love to talk to you.

Tree planting – top of the agenda for rural property owners

According to the results of our Rural Sentiment Survey 2020 almost half of rural property owners are planning to plant more trees over the next few years.

In the recently launched edition of The Rural Report we asked key woodland stakeholders, including Minister for Forests Lord Goldsmith, to outline the opportunities and challenges that lie ahead. Click here to find out what they had to say.

Rural businesses – welcome break for accommodation and hospitality diversification

Another of the findings from our Rural Sentiment Survey was that those farms and estates which had diversified into the leisure and hospitality sector had been, unsurprisingly, hardest hit by Covid-19.

After much lobbying, the CLA, welcomed the announcement last week by Chancellor Rishi Sunak, to slash the VAT levied on hospitality, accommodation and attractions from 20% top 5%.

The cut, which was part of Mr Sunak’s package to help rebuild the economy, kicks in from 15 July and runs to 12 January 2021.

Other aspects of the package included a temporary holiday on stamp duty payments for the proportion of residential property purchases in England under £500,000 (The Scottish Parliament has followed suit) and incentives to improve the energy efficiency of homes.