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Farm rents: are they sustainable?

With agricultural land prices having been steadily increasing over recent years, one could be forgiven for thinking that farm rents have increased proportionately. Land values are not intrinsically linked to agricultural commodity prices as there are a broad range of issues that might affect someones desire to buy land. Land rental values are much more reflective of the state of the agricultural sector. 


A few years ago, grain prices were enjoying their “boom” period and accordingly rents shot up as farmers were bidding high prices to get their hands on as much land as possible to reap the rewards of a high global grain price. Now with political unrest in Russia and the eastern bloc, variable outputs in North America and more volatile weather patterns, commodity prices have dropped as risk and uncertainty all play their invisible hands in setting global prices.
Consequently, British agriculture is suffering a slump with little to be positive about in terms of prices. This is starting to emerge by much more conservative rents being agreed with tenants who are being wary of tying themselves in at rent levels that aren’t sustainable over a three year period.