Uncertainty sees ag let sector at a virtual standstill
© Anne Coatesy/Adobe Stock The stifling effect of area-based entitlements and subsidies is continuing to limit the growth of the let sector.
This is according to the latest Central Association of Agricultural Valuers’ (CAAV) agricultural land occupation survey, which covers 1 November 2020 to 31 October 2021.
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Jeremy Moody, CAAV secretary and adviser, said: “The 2021 survey results show that the virtual standstill in the area of land changing hands continues.
“The pattern of lower activity and limited change has been consistent since 2006, when explicit area payments began.
“It could be that the let land market has reached an equilibrium in current circumstances between supply and demand – though anecdotal evidence of the level of rents offered for new farm business tenancies (FBTs) suggests that changed circumstances could see the let sector grow.”
Turnover is most limited in Scotland, with just 21 new tenancies being created in 2021, compared with 637 in England and Wales.
FBT agreement lengths
In England and Wales, the tenanted area covers 78,220 acres, including 45,847 subject to new FBT agreements during the year included in the report.
FBT lengths reported ranged from four months to 40 years. In 19 cases, the letting was for less than one year and there were 15 periodic tenancies running from year to year.
This returns to the pattern seen before the high (71) reported in 2020.
For many years, the agreement length across all types of letting – from short-term seasonal grazing and cropping of bare land to whole farm tenancies – has averaged between 3.5 and 4 years.
However, in 2021, the average was just 3.03 years, down from 3.42 in 2020, and down on the 10-year average of 3.63.
Excluding lettings of less than a year, the average increases to 4.67 years (2020: 4.83), and jumps to 9.6 years for lettings of fully equipped farms, with a house and buildings (2020: 9.84 years).
Lettings of more than 200 acres averaged 6.4 years, down from 7.87 the previous year.
Over the past decade, the shortest average terms were recorded in 2018 (2.9 years) and 2013 (3.17), closely followed by 2019 (3.21).
The longest average terms were seen in 2016 (4.48), 2012 (4.12) and 2017 (3.97).
Mr Moody said: “Over the years, these surveys have shown that periods of policy uncertainty see the average length of letting shorten.
“Most recently this is shown for 2013, with the prospect of the change to the Basic Payment potentially with a fresh allocation of area-based entitlements and 2018 as post-Brexit policies were first discussed.”
New lettings
When FBTs end, the land is re-let in 92% of cases. However, when Agricultural Holdings Act tenancies end, the land is re-let in only 52% of cases.
In 2021, new entrants took 28% of the lettings to a new occupier (2020: 21%), and 31% of lettings to new entrants were for more than five years (2020: 39%).
In comparison, just 11% of other tenants received lettings of more than five years.
Private owners remain the main source of lettings, rather than institutions or public sector bodies.
In 2021, land farmed under new contract agreements was reported as covering 10,096 acres, with an average unit size of 177 acres (2020: 224 acres).
This is a return to the range seen before the high of 2020 (15,442 acres). The average term of agreements remains less than two years.
The let sector in Scotland
The survey of the let sector in Scotland covers 13,501 acres across 84 units.
During 2021, 21 new tenancies were created (2020: 32), totalling 4,121 acres.
Of the 21 new lettings, eight were modern limited-duration tenancies and the average size was 196 acres.
Emphasising a theme of recent years that bare land lettings are now predominant in Scotland, only two of the new lettings included a house.
The average length of a new tenancy was 7.24 years – up from 6.5 the previous year.
Across the 21 holdings, 14 were let by private owners and seven by a combination of traditional institutions and government bodies, and two went to a new entrant.
Mr Moody said: “2021 again saw a very low level of activity, with a let sector that only appears to be sustained by the incentive that the Basic Payment gives for claimants to stay in place, doing little for the vibrancy or economic health of farming.
“That is all the more concerning with the need for agriculture to rise to the challenge of productivity and competitiveness made more urgent by Brexit.”