Patrick Playfair on the pressures on prices – as featured in the Farmers Guardian on the 31st December 2020.
Following the publication of DEFRA’s Agricultural Transition Plan in November, I was asked how this would affect land values.
An interesting (remote) debate followed which made me think more around this subject. With the BPS system remaining in place until 2028, we now know what the reductions in those payments will be to 2024 (at least 50%) with no more after 2027. The money taken out of BPS in the years to 2024 is to be re-cycled within agriculture mainly through various grant schemes, particularly the much-vaunted ELMS.
Because we do not have any detail on these ‘replacements’, we do not know how easy it will be to apply, to implement them, or the amount of money we can expect to receive in return for those public goods produced. The chances are businesses will be able to replace most of the income lost from BPS over the next few years.
Overall, this does not seem to me to be something that will have a major effect on land values for a few years at least.
There are going to be other, more significant pressures on farmland values over this period of time. The prospect of significant changes to the tax regime, particularly Capital Gains Tax and Inheritance Tax, in 2021 are highlighted by some as potentially creating downward pressure on the market as, for example, retired farmers no longer have as much incentive to retain their land.
I write this as we approach the end of 2020 with no deal in place on the future trade arrangements with the EU as yet (note* the EU-UK Trade and Cooperation Agreement was agreed upon on the 24th December 2020).
It is not just the EU trade deal but those with other countries as well. How long will they take to be agreed and implemented, and how will our agricultural products and those of the agreement countries be treated within those deals?
All these questions remain, but the answers could have a significant effect on values. Of course, if a larger part of the UK public understood the high standard of most UK produce, and were prepared to pay on a value-for-money/health/environment basis, the deals would be less important, and Covid has provided an opportunity.
Traditional factors will continue to play their part, for example we remain an island with only limited space, farmland will continue to be developed, generating rollover money and further reducing the agricultural land area.
I chastise my colleagues writing articles for not including monetary figures because that is what is of most interest but, on this occasion, the immediate future is so uncertain that I feel your prediction is as informed as mine.
There will undoubtedly be opportunities for most agricultural businesses though; it is a case of recognising and acting on them.
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