Back To Normal?
I have been asked to write this month’s Ponderings. I wish I could claim that is due to my eloquent writing style. In truth, I’m the only member of the Agricultural Team in the office at the time of writing, as the others are out and about busy assisting clients. In fairness, I’ve not long returned from a holiday, so my ‘body battery’ should be fully charged.
As I flew back into Gatwick on 20th August, there was still a fair amount of Wheat standing and not much ground turned over. In speaking with farming clients over the past couple of weeks, I think it’s fair to say that this year’s harvest has been ‘catchy’, what with the continual showers and variable yields………..perhaps a return to normal?! The good news of course is that there’s been ample grass for grazing and mowing, albeit the quality of grass isn’t the best, especially now that we’re technically in meteorological autumn. I say technically because Sunday (3rd) was an absolutely scorcher and the week ahead looks much the same.
Now that we are into September, Michaelmas (29th September or 11th October, depending on where you are in the Country) is not far away. Michaelmas together with Lady Day (25th March or 5th April depending on where you are) are important dates in the agricultural calendar. Michaelmas traditionally marks the ‘start’ of the arable farming year; and Lady Day the ‘start’ of the livestock farming year. Typically, agricultural tenancies either commence on Michaelmas or Lady Day, and either run from year-to-year or for a fixed term. Depending on the terms of the tenancy, this Michaelmas may present an opportunity to serve Notice to either bring about a rent review or terminate a tenancy. You may wish to terminate a tenancy to provide a stronger negotiating position, depending of course on how bullish or bearish you are feeling. The Notice period is usually 12 months. Therefore, if you wish to review the rent or terminate a tenancy with effect from 29th September 2024 (or 11th October 2024), you may need to serve Notice prior to the 29th September (or 11th October) this year. You should dust off your tenancy agreement(s) to see if there is an opportunity to be doing something. If there is, you then need to consider whether there is scope to better your position i.e. increase/decrease then rent, depending of course on whether you’re a Landlord or Tenant.
What is happening to rents? As ever, the answer depends on the type of tenancy you have. If it’s a ‘full’ agricultural tenancy i.e. protected by the Agricultural Holdings Act 1986, then I haven’t seen or heard much evidence of rents being reviewed (up or down), largely because rents are linked to the farming profits; FBTs are not linked to farming profits and are subject to open market forces, like scarcity of tenancy opportunities – hence the often significant gap between rents for a ’full’ tenancy and an FBT. Many predicted that FBT rents would come down as Basic Payment Scheme payments reduced. Next year, BPS payments (soon to be ‘Delinked’ payments) will be approximately 50% of the payment you received in 2020, assuming your acreage remained the same. However, there is no current evidence of FBT rents reducing significantly, though there is evidence of open market tendered rents having softened slightly from previous years. With variable yields, reduced commodity prices and a further reduced Basic Payment Scheme payment, perhaps Tenants will be more bearish for opportunities going forward, which could see rents reduce across the board. Only time will tell.
If you’re negotiating new tenancies, as well as the usual key terms, consideration should also be given to new schemes, such as the Environmental Land Management Schemes (ELMs) including SFI, and emerging markets for the provision of Eco-System Services, such as Biodiversity Net Gain, Carbon Sequestration, Afforestation, specifically who has the benefit and burden of such schemes.
Despite the challenging residential market, largely due to rising interest rates and the consequential impact on mortgage repayments, the agricultural land market remains strong……for the right property. Colleagues have recently invited Best and Final offers on Rectory Farm, Tibberton, Worcestershire, and Oakhurst Farm, Eye, Peterborough, which have both produced pleasing results with solicitors now instructed. Now that harvest is more or less finished for the arable farmers, we shall shortly be inviting offers in respect of the land at Lower Farm, Barnwell, Northamptonshire, which comprises approximately 198 acres of bare arable land. New to the market, we have:
We also have retained clients looking to purchase agricultural property, either bare land or equipped holdings, in Northamptonshire, North Buckinghamshire, North Bedfordshire, and North Leicestershire.
I am conscious that we have talked about the Sustainable Farming Incentive (SFI) a lot recently, but I would like to highlight that farmers are now being invited to register their interest in the Sustainable Farming Incentive. Once the requisite form has been completed, the RPA will contact you with details of how to apply and they expect this will be within 4 weeks of receiving the form. Therefore, if you are interested in the SFI then please register your interest with the Rural Payments Agency to do so.
Finally, On Saturday (2nd), I attended the Moreton-in-Marsh Agricultural & Horse Show, which is a fantastic agricultural show in the Cotswolds. It was pleasing to see plenty of livestock entered into a plethora of competitive classes, and we’re proud to support and sponsor the show. Going forward, we may look to have a physical presence at the Show to continue to grow our presence in the West Midlands. At the end of this month, we shall be at the Gransden Show, which takes place on Saturday 30th September at the Show Field, Caxton Road, Great Gransden, Cambridgeshire. Please call in to say ‘hello’.
As ever, the Team are here to help and therefore please do not hesitate to contact us.
Wishing you a kind Autumn.
Christopher Templar - Partner
