According to experts, farmers are trying to get rid of a series of negativities at a time when the value of their land is reaching its peak.
Confidence in the agricultural sector has taken a hit as farmers struggle to contain the effects of one of the wettest winters on record.
To add to its problems, commodity prices have fallen and the Basic Payment Scheme (BPS), which has hitherto helped keep many in the dark, is ending.
Land agents admit they are facing a tough year ahead with dwindling farm subsidy amounts to keep them afloat despite the ups and downs of weather and prices.
Oliver Holloway of Clarke and Simpson said weather was still a big issue.
“It is no surprise that one of the wettest winters on record, combined with falling commodity prices and the phasing out of the Basic Payment, has shaken the confidence of even the most optimistic farmers,” he said.
“It was unheard of – until this year – for a farmer to start planting sugar beets before the previous crop had been harvested.”
He added that the introduction of a number of new legislation regarding sustainability and the environment and the upcoming elections mean more change on the horizon.
“The phasing out of the Basic Payments Scheme (BPS) is now well underway, with 2024 being the first year of unlinked payments,” he said.
BPS payments, now disconnected, will decrease until they are abolished completely in 2017 when the Department for Environment, Food and Rural Affairs (DEFRA) begins offering increased payment rates through the Sustainable Farming Incentive (SFI) and Countryside Stewardship (CS). He stated that he would close the funding gap.
“Farmers are a resilient bunch, and history shows that short-term fluctuations in weather conditions, commodity prices and politics generally have little impact on land values,” he said.
“But it looks like we may have seen the farmland market at its peak, and I expect 2024 to be a period of consolidation as supply and demand become more balanced.”
Strutt and Parker’s Giles Allen predicted that the trials faced by farmers over the past few months would further increase the variability in profitability that has emerged in recent years.
“While most agro-farmers in East Anglia made reasonable profits in 2021 and 2022, they fell in 2023 and the outlook for 2024 is for profits to fall further,” he said.
“Wet conditions have both reduced the yield potential of winter crops and increased the acreage of spring crops, so growers are facing a low production year at a time when base payments are also falling further.”
He said growers are now focusing on finding ways to reduce risk by using one or more of the grant programs offered, such as SFI and the Agricultural Equipment and Technology Fund, as part of their strategy.
“Some are looking to reduce debt in light of higher interest rates, which is encouraging some land sales, but in our experience retirement and profit-making remain the most common reasons for selling at this time.”
He added that although the supply of farmland reaching the market in the east of England had increased significantly, this was largely due to the establishment of a few large farms and estates rather than an increase in the total number of farms available.
“We expect supply to continue to increase over the summer months, but things may slow down again ahead of the general election.”
He said demand had softened but there was still an “active pool of buyers”. As farmer buyers moved away and were replaced by environmental buyers, city-based investors and development transfer buyers, they were coming from a broader base.
“There can be sharp differences in the strength of demand depending on location,” he added.
“The greater caution shown by farmer buyers is likely due to higher interest rates for anyone needing a mortgage rather than weather conditions.”
He said the terrible weather had not yet affected supply, demand or price.
“There has been no noticeable impact on fixed values over the past 12 months; average arable land values across England were around £11,000 per acre, although average values in the East tended to be slightly lower.
Brown & Co’s Louise Grant said recent floods had had a “significant” impact on farmers’ morale.
“The constant challenges and disruptions caused by floods have led to increased stress and frustration among farmers,” he said.
“Damage to farmland, crops and infrastructure has caused financial hardship and uncertainty for many farmers.
“Continuous flooding has disrupted agricultural activities, leading to delays in planting, harvesting and other important activities.
“Farmers had to deal with crop losses, which not only affected their income but also their long-term planning and investment decisions.”
Some may be looking for ways to mitigate future flood events, including improving drainage systems or adjusting planting and harvest schedules, he said.
“However, these strategies require additional resources and may not be feasible for all farmers, especially those with limited financial means.”
He suggested that floods could also have an impact on farmland coming to market, with farmers who suffered severe damage being reluctant to sell their land until they recover or receive adequate compensation.
“In the long term, the general perception that agricultural land is a stable and reliable investment may be affected,” he said.
“Potential buyers and investors may be more cautious and consider the flood risk associated with certain areas before making a purchasing decision.
“This could lead to reduced demand for farmland in flood-prone areas and potentially impact the overall farmland market.”
Oliver Carr, associate director of Savills’ rural representation team covering West Suffolk, admitted it had been a tough start to the year for farmers.
“The reduction in the basic payment schedule was exacerbated by lower margins due to rising costs and falling commodity prices,” he said.
“This was not helped by exceptionally wet weather which delayed much of the harvest preparations.”
Some, he said, are starting to consider their options and changing the way they farm and manage their land.
“Many of our teams are busy helping our clients explore additional income streams through the likes of Sustainable Agriculture Promotion and stewardship programmes, where peatland rewetting, flood mitigation, nutrient neutrality, rewilding, biodiversity net gain and more active watermeadow management are driving up the agenda and potential It offers a financial alternative.”
Others, he said, have made the difficult decision to leave the industry. They had already seen more farmland coming to market in the first three months of this year compared to the same period last year, and they expected this to continue.
“Higher supply offers buyers the opportunity to be more selective and focus on best-in-class properties.
“For example, the quality of a farm’s infrastructure strongly influences values. Farms with quality buildings suitable for modern agriculture tend to attract more interest and competition.”
The flood also caused buyers to look more carefully at drainage, he said.
“Unless yields are severely affected by drier weather, free-draining land is generally preferred.
“Where efficiency is linked to inadequate drainage, records and the quality of that system become more important and will be reflected in bids when considering the cost of investment in new systems.
“Similarly, the safety of water supplies for irrigation of specialty crops during the summer months is also subject to increased scrutiny.”