making sense of it all
My increasing view is that the
rural sector is every bit as complicated and challenging an
environment for businesses to operate in (if not more so in some
respects) as other commercial sectors; whilst farmers and
longstanding landowners are becoming enured to this state of
affairs, new entrants and investors from non-farming backgrounds
(and indeed foreign nationals with farming experience, looking to
invest in this country) often, not surprisingly, find it difficult
'to see the wood for the trees'.
Just when things seem to be on the up
(wheat prices), there seems to be another potential challenge to
face (and one can only hope that by the time this edition is
circulated, the outbreaks of foot and mouth and blue tongue will
have been contained).
Whilst the strength of wheat prices is
undoubtedly good news for cereal farmers, I suspect this may not
feed through to the bottom line on a number of farms until next
year (if prices remain strong) because of sales forward, and
reduced yields this harvest.
The transaction level in farm sales
and purchases for the last 18 months to two years has been high.
However, as we go to print on this edition, the feedback I get from
fellow professionals in the rural sector is that there is
relatively little coming to the market at the moment and the
transaction rate is lower than in previous months. Bare land prices
appear to remain strong, and farms and estates with good quality
houses in our experience are still commanding premiums. Whether the
ripples from the problems of the American sub-prime lending market
and the Northern Rock situation will be felt in the rural land
market remains to be seen - personally I doubt it when one takes
into account, amongst other things, that we have limited supply,
the availability of Agricultural Property Relief (APR), and bare
land prices still less than those in some other European
countries.
The extensive reporting of the
disqualification of (farm)houses, in particular (and probably
commonly encountered) circumstances, for the purposes of APR will
have prompted many landowners to revisit their estate (tax)
planning strategy; notwithstanding that APR on the house may be
vulnerable, the value of APR 'at stake on' the remainder of the
farm or estate may be considerable. Accordingly we would encourage
those owners who have not reviewed their estate planning recently
to do so - the 'devil is in the detail' and, for example, a
seemingly small amendment to a Contract Farming Agreement may pay
dividends at a later date.
In this edition we have tried to
highlight some of the perhaps less obvious areas where issues may
arise. I hope you find the articles interesting and
informative.
Mark Charter
partner and head of the Agricultural,
Equine and Rural Affairs group
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