Food production must pay

Viewpoint

Speaking to delegates at the Oxford Farming Conference, Defra Minister Steve Reed reemphasised his commitment to food production and security. At the same time, however, he promised to make it easier for farmers to diversify and generate new revenue streams from things like renewable energy. But, if you strip out Basic Payment Scheme (BPS) income from farm accounts, the reality is that diversification has been the only thing keeping some businesses afloat for many years. The danger that Mr Reed faces is that once BPS is scrapped completely and the realities of farm profitability, or lack of it, are laid bare, some farmers may well decide it just doesn’t make sense to continue using their other businesses to subsidise food production.

James Farrell, Knight Frank's Head of Rural Consultancy, adds: With his government at the mercy of the markets after the disastrous Autumn Budget, does anyone believe that Steve Reed will fix farming’s problems? So far, he’s done a pretty good job of creating more problems. From the man who says he wants to listen and learn, there’s no sign of change to any of the damaging measures introduced in the budget. Can he not hear the pain?

"With cheap food a political imperative, the chances of him delivering his vision for a profitable farming sector are slim to none. We’ve seen how closely DEFRA works with the Treasury, so good luck in persuading Rachel Reeves that a rise in food prices is a good thing; and the idea that the supermarkets will step in to help is equally unlikely. Sadly, Mr Reed’s message of hope and opportunity doesn’t stand up to scrutiny."

In this week's update

·????? Oil prices surge

·????? Lamb demand continues

·????? Reed refuses IHT review

·????? IHT battle continues

·????? Wind overtakes gas

·????? National Trust nature plan

·????? Tractor sales drop

·????? Plant “milk” depression link challenged

·????? Foot and mouth hits Germany

·????? Border controls queried

·????? Shell rice paddy credits nixed

·????? BlackRock dials down eco-commitment

·????? Property of the week

·????? Farmland Q4 2024 – Prices resilient

·????? Country houses Q3 – Market waits

·????? Development land Q3 – Greenfield sites up

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Commodity markets?

Oil prices surge

Crude oil prices have hit three-month highs, with the US reportedly set to ramp up the pressure on Russia’s oil industry. The move will target the “dark” fleet of around 180 ageing tankers that bypass the EU and US sanctions imposed on Russian oil following the invasion of Ukraine by exporting directly to India and China. Washington is also imposing sanctions on two of Russia’s biggest oil companies, Gazprom Neft and Surgutneftegaz, as well as the insurers Ingosstrakh and Alfastrakhovanie that cover most of the ships supplying Russian oil to India.?

Lamb demand continues

The price of lamb has already pushed past ￡7/kg so far this year, well over ￡1/kg more than this time last year. According to a report from AHDB, demand remains strong despite the extra cost as consumers place more emphasis on quality, ease of cooking and UK provenance. With an average shelf price of ￡10.88/kg, lamb is a significantly more expensive source of protein than beef (￡8.80/kg), pork (￡7.28/kg) and chicken (￡6.14/kg).

The headline

Reed refuses IHT review at OFC

Defra Minister Steve Reed’s attempt to reset Labour’s reputation with the farming community at last week’s Oxford Farming Conference received mixed reviews. In his speech, Reed announced a series of initiatives that he said would deliver a profitable farming sector and unlock rural growth, including a “cast-iron” commitment to food security.

For the first time, he said the government would monitor where food currently procured by the public sector is bought from. This, he claimed, would make it easier for farmers to win a share of the ￡5 billion spent each year on public-sector catering contracts.?

Planning reforms would help farmers boost food production by making it easier to build the required buildings and infrastructure. Accelerating connections to the national grid would also help them generate additional revenue from solar and wind energy that would support them during difficult harvests and supply shocks.??

Supply chain reforms, such as imminent new rules for the pig sector followed by regulations for the egg and fresh produce sectors, would also boost profitability, said Reed.

The minister apologised for the controversial Inheritance Tax reforms announced in the Autumn Budget but insisted they would go ahead despite the threat of continued farmer action.

The CLA said the speech contained “many positive elements”, while musician and farmer Andy Cato said it was “great” to hear Reed state that “restoring nature is vital to food production not in competition with it.”

However, author and commentator James Rebanks said asking farmers to diversify to subsidise food production was “tone deaf” and an admission that “you haven’t the courage or vision to fix any of the real issues”.

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News in brief

IHT battle continues

Despite Defra Minister Steve Reed’s refusal to back down on the government’s unpopular Inheritance Tax (IHT) reforms (see main story), the farming sector has vowed to fight on. The NFU has announced it will stage a ‘National Day of Unity’ on January 25. A statement said: “It will show MPs and ministers clearly that agriculture across the whole of the UK is united in rejecting this awful policy – a policy we were promised would never happen.” Meanwhile, the CAAV has calculated that frozen reliefs and inflation will mean 89,500 farming businesses will become liable for IHT over the next 10 years.

Knight Frank sponsors Oxygen podcast

Knight Frank has partnered with Oxygen Conservation to sponsor the organisation's thought-provoking Shoot Room Sessions podcast. James Farrell, Head of Rural Consultancy at Knight Frank, said: “I love what Oxygen Conservation is doing. They’re pioneers and disruptors, moving the dial on important issues in ways that are truly inspiring. Supporting this podcast is about amplifying their bold approach to conservation and connecting it with Knight Frank’s experience to drive even greater impact.

The 2025 series, which premiers on 16th January, features James and podcast host Rich Stockdale, founder and CEO of Oxygen Conservation. Their discussion delves into the evolving role of rural estates, natural capital markets, and balancing tradition with innovation, setting the tone for a season of unique perspectives on the future of rural areas.

Tractor sales drop

The number of new tractors registered in the UK last year was the lowest since 1998, according to new figures from the Agricultural Engineers Association. In total, 10,241 tractors over 50hp were registered in 2024. There was, however, a bit of a fillip towards the end of the year with 791 vehicles registered in December, up 14% compared with the same month in 2023.

Wind overtakes gas

Wind accounted for 30% of the UK’s electricity generation in 2024, overtaking gas (26%) for the first time, according to the National Energy System Operator (NESO). Renewable energy sources also generated 51% of the UK’s energy on average during 2024, NESO said.

National Trust nature plan

As part of its 130th birthday celebrations, the National Trust has launched a 10-year strategy to tackle climate change and support biodiversity. The strategy includes an ambition to restore 250,000 hectares of land for nature. Director-general Hilary McGrady said: “We will ramp up our work to restore nature, both on our own land and beyond our boundaries. We’ll work to end inequality of access to green space and cultural heritage. And we will inspire millions more people to take action to protect the things we all need to thrive.

Plant “milk” depression link challenged

Veganuary sceptics may have taken some satisfaction from recent media reports suggesting that those drinking plant-based “milk” are more likely to experience bouts of depression than dairy consumers. However, vegan advocates have pointed out that the “observational” study in question, conducted by researchers from the Southern Medical University in China, which analysed the data of over 350,000 people enrolled in a UK Biobank study between 2006 and 2010, didn’t actually make such explicit claims itself.

Foot and mouth hits Germany

Livestock farmers in the UK will be desperately hoping that the German authorities have reacted quickly enough to prevent foot and mouth spreading to these shores after the disease was detected in a herd of water buffalo on the outskirts of Berlin. Foot and mouth decimated the UK livestock industry in 2001 and 2002 when over six million sheep and cows were slaughtered in a bid to control an outbreak of the disease.

Border controls queried

The outbreak of foot and mouth in Germany is of particular concern given serious worries about illegal imports of meat into the UK. The BBC recently reported that the amount of illegal meat seized by Border Force officials alone doubled from almost 35,000kg in 2022/23 to more than 70,000kg in 2023/24. Meanwhile, parliament’s cross-party Environment, Food and Rural Affairs Committee (Efra) has just launched a call for evidence as part of an inquiry examining biosecurity measures for animal and plant imports to the UK.??

Shell rice paddy credits nixed

An investigation reported by Edie has revealed that millions of carbon credits used by energy giant Shell to claim its LPG shipments were carbon neutral were, in effect, worthless. The credits, purchased from credit supplier Verra, were based on a scheme that erroneously claimed it was cutting carbon emissions by changing agronomic practices used in Chinese rice paddies. Investigators discovered that the farmers growing the rice were unaware of the scheme. ?

BlackRock dials down eco-commitment

Meanwhile, BlackRock, the world’s biggest asset manager, has announced it is withdrawing from the Net Zero Asset Managers initiative (NZAMI), a coalition that requires its members to reach net-zero financed emissions by 2050 or sooner. The resignation is the latest in a series of moves by financial institutions worried about the threat of greenwashing accusations from environmental groups on the one hand and lawsuits from Republican politicians in the US on the other. ?

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Property of the week

New Year Berkshire price shave

The guide price for a predominantly arable block of Grade 3 farmland at East Garston, near Hungerford, has been lowered from ￡3 million to ￡2.75 million. The land at Cranes Farm extends to almost 217 acres, of which 187 are arable, 27 pasture, and 3.5 woodland. Please contact Georgie Veale for more information.

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Property markets

Farmland Q4 2024 – Prices resilient

The farmland market edged up slightly during 2024, according to the latest results from the Knight Frank Farmland Index, which tracks the value of bare agricultural land in England and Wales. Average values started the year at ￡9,152/acre and, heading into 2025, stood at ￡9,164/acre, a slight rise of 0.1%. Given the challenges that the farming industry has faced over the past 12 months, this shows the inherent resilience of agricultural land as a multi-functional asset class. Prices, however, did dip in Q4 after Inheritance Tax reforms on farmland were announced as part of the Autumn Budget. ?For more insight and data please download the full report.

Country houses Q3 – Market waits

Discretionary buyers held back from a new country house purchase pending Labour’s first budget on 30 October. Offers from potential buyers were down 10% in the three months to August, according to the latest results from the Knight Frank Prime Country House Index. However, the slide in average values has slowed, with prices dropping by just 1.2% in the 12 months to the end of September - the lowest annual fall since Q1 2023 - points out Head of UK Residential Research Tom Bill. He predicts a total average price slide of 2% in 2024, dependent on the outcome of the Budget.

Development land Q3 – Greenfield sites up

The average value of greenfield land values in England rose 3% in the third quarter of 2024, according to the latest instalment of Knight Frank's Residential Development Land Index. However, brownfield and prime central London prices stayed flat due to thin activity, with some market participants taking a “wait-and-see” approach ahead of the Budget, says the report’s author, Anna Ward. Housebuilders are also sceptical that it will be possible to deliver the 1.5 million new homes pledged by Labour over the next five years. Download the full report for more insight and data.