Rules Need Clarifying

Confusion reigns as to whether farmers can continue claiming Single Payments where they graze sheep under solar panels and in my view the Rural Payments Agency should be called to clarify the rules urgently.

At present the advice contained in the 2013 Single Payment Scheme Handbook is not entirely clear. It states that, “the area taken up by the solar panels is ineligible, unless the area under it is capable of being grazed. If the primary purpose of the land parcel is for agriculture, the rest of the land parcel will be eligible. If the primary purpose of the land parcel is for operating solar panels, the whole land parcel is ineligible.”

The problem here is that in very many large scale solar parks, the land underneath the panels will be planted to grass which may well be capable of being grazed by sheep for example and so on the face of it, this land may be eligible for claiming single payments. However, in my view it is questionable whether it can be argued the primary purpose of the land parcel is for agriculture.

Accordingly my advice to farmers is not to claim the land under solar panels as being eligible for claiming single payments. This is because I believe it is hard to claim that the “primary” use of the land is for agricultural purposes, otherwise why would a farmer or developer have gone through the expense and hassle of obtaining planning consent for the solar panels and then spent millions of pounds erecting them on the land in order to generate electricity, the value of which will eclipse the value of the grazing which may be available for a few sheep.

If my thinking proves correct, this will result in many thousands of acres of farmland becoming ineligible to claim single payments which will result in a matching number of single payment entitlements coming on the market to be sold. The significance of this is that we are currently moving towards the trading deadline of 2nd April for entitlements to be sold and claimed on in 2014. If a significant number of “solar panel entitlements” now hit the market it is likely the price will plummet because there will effectively be more entitlements available than there is eligible land to claim them against.

If of course my interpretation of the rules is incorrect we will have the peculiar situation of farmers being paid a subsidy to graze the land under solar panels which in themselves are also receiving significant support payments to produce renewable energy. This does not seem appropriate and so I think it is important that the rules relating to this issue are clarified as soon as possible.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

Difficulties with the weather

This is the time to reflect on the events of the last year and although the weather proved much less of a talking point this year than last, it was the aftermath of last year’s wet weather that has been one on the most significant factors affecting this year’s profits in the arable sector in particular.

 

The terrible weather in 2012, which continued in to early 2013 meant that many farmers were unable to plant winter crops last autumn. As a consequence they were forced to plant crops this spring, many of which struggled to grow as wet weather gave way of cold northerly winds well in to April. Such spring sown crops generally yield significantly less than their autumn sown equivalent, hence the impact on profits.

 

The weather did eventually warm up and we experienced hot dry conditions during June and July which impacted on the yields of some crops but in general the weather for harvest and the establishment of crops for harvest in 2014 was good. However, the writing was already on the wall for the yields for the 2013 harvest and the double whammy came in the form of falling world commodity prices. For example feed wheat and barley are trading at around £159/t and £134/t respectively today as compared to £206/t and £194/t a year ago. Accordingly with lower yields and lower prices it is not difficult to do the maths for arable farming profits in 2013.

 

As far as the livestock sector is concerned, 2013 has in general proved rather more positive than for arable farmers. This is in part because the falling arable commodity prices has reflected in falling feed prices which is particularly important for dairy farmers and more intensive beef producers. However, the margins in beef production still remain incredibly tight, despite 2013 seeing historically high beef prices peaking at over £4/kg.

 

This however causes problems to those beef farmers who fatten young beef animals bred by other farmers. The price of these so called “store” cattle has been incredibly strong which has meant beef fattening units now have frighteningly large amounts of capital tied up in livestock from which they are earning a very low margin and many of these businesses are still heavily reliant on EU support payments to make a profit.

 

In contrast to the beef industry, the lamb price was low early in the year and with wet followed by cold weather in to late spring, lambing was not easy. Further the lamb trade is heavily dependent on exports and with the EU economy suffering, demand from France in particular has been weaker which has not helped prices. Accordingly it has been a generally difficult year for many sheep farmers.

 

As far as the dairy sector is concerned the prospects look reasonably positive, provided you are not affected by the ongoing problem of TB which can have a devastating impact on dairy farms in particular. The improved weather in 2013 allowed dairy farmers to repair grass swards which were damaged by last year’s weather and to refill their empty silage pits and barns with good quality forage stocks. Further, falling arable prices will reduce feed costs over the winter and coupled with a significant increase in milk price over the last year as world demand outstripped supply, dairy farmers should see better returns in 2013, although it has to be said they did come from a very low base in 2012.

 

So, all in all the weather was so much better in 2013 than 2012 and that alone gave farmers a feeling of optimism, but the reality is that the “hangover” from last year’s weather is probably going to be felt in this year’s profit and loss accounts. But with most winter crops safely in the ground and beef and milk prices remaining firm, there is hope for most that 2014 will prove a more profitable year than 2013.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

Positive growth in the farmhouse and country cottage markets

Two reports have recently been published by Carter Jonas’ research department on the farmhouse and country cottage markets. Both reports indicate there has been positive growth in these two markets in the six months to September 2013 which reflects the improving economic sentiment in the wider economy.

However, although the brighter economic prospects may be driving demand, it is probably the lack of supply of quality property coming on the market which is as an equally important factor pushing prices up. Carter Jonas reports the average notional price of a farmhouse now stands at £1.49 million and in the south west prices have risen by 3.9% since the spring with Somerset being highlighted as a notable “hot spot”.

But the key to achieving a successful sale is getting the price right at the outset according to Kit Harding, head of Carter Jonas’ South West Farm Agency team based in Wells.

Kit commented, “We have had a successful year selling farms and farmland throughout the South West, including here in Mid Somerset but in every instance realistic pricing remains a key factor when bringing a property to the market. Properties which achieve the best prices are those being released to the market with accurate guide prices which encourage competitive bidding which often leads to best and final closed bids from multiple parties, thereby maximising value to the vendor.”

As far as the country cottage market is concerned, although there has been growth nationally, prices in this area have remained stable. It is speculated that this is largely as a result of the stamp duty threshold at £500,000 which continues to hinder price growth for properties valued just under this level although once this threshold is breached values may well move upwards.

It is also interesting to note that the rate of growth in the prime Central London residential market has slowed in 2013, in part because of the potential threat of the introduction of a “Mansion Tax”. It is speculated that this slowdown may encourage the traditional migration of young families from London to the country, especially if they see the value of rural properties beginning to rise after a long period of stagnation. Consequently values in the farmhouse market in particular are forecast to rise by 7-10% in 2014 in areas such as mid-Somerset.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk