Finance squeeze keeps land prices static

FARMERS considering their options on buying or selling land have been told that prices are likely to remain static into next year with availability of finance remaining the biggest challenge for those wanting to get into the industry, according to a leading land agent.

Reviewing the agricultural property market for the year that has almost gone, CKD Galbraith partner Simon Brown said yesterday: “The two main factors influencing the farmland market are obvious, striking and are the two incessant topics of conversations – weather and banks.

“Virtually everyone in farming has some rain-sodden tale of woe and the effects of that are very real. Reduced yields across the board, low bushel weights for crops in store, lower growth rates for cattle and sheep during the grazing season, higher feed prices particularly for the beef and dairy industries...the list goes on.”

But he admitted that there was not much that could be done about the weather and it was equally unclear what could be done to break through the impasse that many farmers face regarding finance.

“Banks will point to the fact that they are prepared to lend to those farmers with a proven track record and can demonstrate profitability but the reality is they want borrowers to be able to pay out of earnings.”

Echoing a comment made recently by the chief executive of the RSABI, the main Scottish rural charity, Brown said the financial reins were being held quite tightly and while that might work for a long-established farmer, it was a greater struggle for those further down the chain.

“They are having to jump through more and more financial hoops. A glimmer of hope on the horizon is a comment from one bank that they have asked their head office to allow them to treat 2012 as an exception and if necessary disregard the year when assessing the profitability of a business and its ability to service debt.”

The problems of weather and finance, Brown said, largely explained why land prices had remained fairly static.

“A good, well-equipped arable farm will always sell and small blocks of exceptional land strategically located will continue to command a premium. With smaller units what we are seeing happening is that such land is being sought by neighbouring farmers who don’t wish to take on the farm house.”