Returns from farming are subject to a degree of volatility not seen for a generation, but the average price of quality farmland in Scotland last year increased by 6 per cent, with the outlook for the current year still appearing positive, according to Charles Dudgeon, head of the Scottish rural division of leading estate agents Savills.
Speaking yesterday in Edinburgh Dudgeon said: "Values in the first half of last year rose by almost 9 per cent, but there was a slackening of the market in the autumn months. However, the outlook remains decidedly positive for at least the next five years. The farmland market is being driven by global grain prices and with world stocks pretty tight, it is fair to assume that land will remain in demand."
Only 37,000 acres of farmland were sold in Scotland last year: that has been the pattern in recent years and remains well below the peak of almost 120,000 acres that changed hands in 2000. But there are some signs that more land will come to the market over the next few months with farmers close to retirement choosing to cash in on a strong market.
The best Scottish arable land is now worth upwards of 3,500 an acre, but there have been a few exceptional instances when prices have been well above this level. One notable feature of the market is that while in England 70 per cent of buyers of farms and agricultural land have been non-farmers, in Scotland commercial operators are the leading players in the market.
There has been a general assumption that agriculture is immune from the credit crunch because of its strong asset base. But Dudgeon reckons that this is not always borne out in practical terms.
He said: "There is a lack of credit available from the banks, even for well-established businesses. But there are still a lot of potential buyers with no problems. Some are individuals who sold up non-farming businesses before times got tough and are looking for a sound investment. Many think land is a safe haven."
Over the past 30 years every time the general economy has suffered problems, land has outperformed equities and other investments.
In 1980 when interest rates were at 15 per cent and higher, land values held up. Again in 1990 during the first Gulf War and a savings and loan crisis in the US, the price of land dipped, but nowhere near to the same degree as the financial markets. The same scenario holds true in the current era.
However, interest in Scottish acres from Irish buyers has declined markedly over the past year on the back of the fact that land values in the Ireland have taken a severe hit since their peak in 2007. But the weakness of sterling has been a factor in still making land in Scotland and throughout the rest of the UK an attractive proposition to cash-rich overseas buyers.
Savills, in recent months, has sold substantial chunks of land to US and Danish buyers intent on enjoying the lifestyle of Scotland.
Sporting estates remain a great attraction for those with cash. The capital value of a deer forest, which was as high as 40,000 for every stag shot, may slip in value, but not to any appreciable extent. Each brace of grouse in the bag on the well-managed moors could still be worth 3,000, with the best salmon beats valued at more than 5,000 per fish.
If there is to be any downturn in land values Dudgeon reckons it will be for the less productive acres. He said: "This type of farm can grow crops, but unless there is an upturn in grain prices, the economics are questionable."