The North of England saw among the highest growth in farm rents in during the year to October 31, 2014, according to newly published research from rural property advisers Smiths Gore.
According to the company’s most recent Agricultural Rent Survey for England and Wales, rents rose by 20% in the region across all types of farms, compared to 24% in the East Midlands and Yorkshire, 18% in Western England and Wales, and 17% in Eastern England.
Detailed analysis showed Northern arable farms experienced a 22% rise in rents, dairy a 24% rise, livestock an 18% rise and mixed farms a 24% rise.
When England and Wales were considered as a whole, rents for all tenancy types increased by an average of 24% for reviews and new lettings. A year previously, the figure was 30%.
Rents for existing tenancies rose by 20% at review, compared with 26% for reviews concluded in the year ended October 31, 2013.
Farm Business Tenancies (FBTs) continued to show the greatest rises, with rents increasing by 21% compared to 19% for Agricultural Holding Act (AHA) tenancies.
FBT rents also remain 20% or more above AHA rents due to rent review clauses that allow them to be revised to current open market levels.
Smiths Gore said in the report: “We let over 12,3000 acres on new FBTs in the year to October 31, 2014, and advertised more land to let in the key national farming publications and property portals during 2014 than any other agent.
“The average letting size was 129 acres. The arable lettings averaged 144 acres, whilst livestock lettings averaged 67 acres, and mixed lettings 143 acres.
“Twenty four per cent of the lettings were over 200 acres and there were 24 equipped farms let.
“Rents for new FBTs are 48% higher on average than they were under the previous letting of the holding.”
Smiths Gore pointed out that, with the reduction of commodity prices over several years, it was natural that headline rates of increase in farm rents should slow.
However, the situation had not been as dramatic as might be expected, since some significant farm input costs had also fallen.
Farm profitability, on which rent settlements are based, had not been affected.
The company also pointed out that income return on let land remained low, sitting in 2013 at a 1.4% return on the landlord’s capital employed.
Looking forward, head of farm management Simon Blandford said falls were expected in the arable sector this year.
In beef and sheep farming, strong demand was expected for productive units, but there would be downward pressure on rents for extensive and environmental grazing lettings.
Despite challenges in the dairy sector, there was still good demand for well-equipped holdings, with FBTs remaining strong as some farmers see expansion as the only way forward.
On pigs and poultry, Mr Blandford added: “The fall in grain prices has reduced feeding costs for most producers.
“Demand for UK produced pigs and poultry has remained strong and alleviated some of the strong export competition.
“This needs to continue, especially from supermarkets, if UK producers are to keep their market share in the face of strong export competition.
“Reviews and tenders will need to be considered on a case-by-case basis.”