Holding on to natural capital

Opinion

It’s interesting if not entirely unpredictable that many farmers have reacted negatively to the new Green Farms Commitment option newly announced by the Red Tractor farm assurance scheme. There is growing concern in the farming sector that the extra cost of delivering the environmental improvements demanded by policymakers and consumers will not be fairly shared along the food chain. It was also hoped that as new markets for natural capital developed farmers would be able to use them to generate new income streams to replace the post-Brexit loss of direct subsidy payments. But there are mounting worries that payments for natural capital will not be equitable. It’s worth repeating that farmers are generally price takers when it comes to the food they produce, the same must not happen for natural capital. AS

Do get in touch if we can help you navigate through these interesting times. You can sign up to receive this weekly update directly to your email here .

Andrew Shirley , Head of Rural Research; Mark Topliff , Rural Research Associate.

In this week's update:

? Commodity markets – Oils remain volatile

? Certification – Farmers slate green Red Tractor

? Greenwashing – Corporates cases rising

? Out and about 1 – A post-growth future

? Livestock – Disease halts French imports

? Grants – Slurry Infrastructure funding

? Out and about 2 – Labour party conference

? Warwickshire – Rolling arable block launch

? Country houses – Prices drop

? Farmland prices – Market at peak?

? Development land – Market tumbles

? The Rural Report – Watch the videos

Commodity markets

Oils remain volatile

It could be a bit premature to celebrate last week’s fall in red diesel prices as crude values leapt by US$3/barrel on Friday after the US tightened its sanctions programme against Russian crude exports. This has raised supply concerns in an already tight market, with global inventories forecast to decline through the fourth quarter, according to Reuters. Oilseed rape prices, well down on the week, could also be due for a bounce after the USDA cut its forecasts for US maize and soyabean production, triggering price rises in the Chicago futures markets AS

Talking points

Certification – Farmers slate green Red Tractor

X (the social media platform formerly known as Twitter) seems to be awash with farmers complaining about the latest Red Tractor initiative that will see a new environmental option added to the farm assurance scheme. From April 2024 producers will be able to join the Green Farms Commitment (GFC), developed in consultation with the British Retail Consortium. Red Tractor says it will help alleviate the need for multiple supplier audits by retail customers and food processors. Although GFC is voluntary, critics are concerned that it will eventually become mandatory and that retailers will not factor in the extra costs incurred by farmers when it comes to paying them AS

Greenwashing – Corporates cases rising

A recent analysis by data science firm RepRisk reveals that greenwashing, or the practice of making misleading claims about environmental sustainability, is a growing concern. RepRisk found that a quarter of all climate-related risks are linked to greenwashing. Last year, one in every five corporate risk incidents related to Environmental, Social and Governance issues was associated with greenwashing. This indicates a rising trend of companies falsely portraying themselves as environmentally responsible, which poses a risk to corporations.

Greenwashing is particularly increasing in the financial services sector, with a 70% rise in climate-related greenwashing incidents, including connections to fossil fuels. Additionally, companies engaged in greenwashing are more likely to distort their social sustainability efforts, with 55% having a social component, leading to a misleading impression of their social responsibility. This data highlights the need for transparent information to assess a company's true sustainability practices and mitigate greenwashing risks in portfolios and supply chains. New global rules for third-party auditors to combat greenwashing are in development to ensure reliable corporate sustainability disclosures MT

Out and about 1 – A post-growth future

Sticking with the environment, I attended an intriguing debate at the Royal Institution of Chartered Surveyors’ (RICS) HQ in London last week that discussed whether it can be “right to damage the economy to save the environment”. Smith Mordak of the UK Green Buildings Council argued that continuing to use rising GDP as a measure of national success would inevitably lead to more environmental damage. She said new thinking along the lines of Modern Monetary Policy was required to deliver a “post-growth” future. Other participants, however, thought existing economic models if practised more sustainably were best placed to be the engines of environmental change. Debate chair Lord Bichard said RICS needed to be doing much more to lead the sustainability debate AS

Rural heating – Gov urged to rule out hydrogen

A report by Citizens Advice suggests that decisions about the future of heating should be made on a regional basis, considering local network costs. The analysis considered four scenarios for heating across 12 location archetypes in the UK, finding that electrification is overwhelmingly cheaper than hydrogen heating in rural areas and industrial zones. Electrification is the preferred choice in these regions, with savings ranging from 54% in the South East of England to 84% in the North of Scotland. Citizens Advice recommends government ministers rule out hydrogen heating in rural areas and opt for electrification as the default choice where feasible. It also advises against a nationwide hydrogen-ready boiler mandate and calls for clarity in the transition to net-zero heating MT

Need to Know

Livestock – Disease halts French imports

The UK has temporarily halted imports of live cattle, sheep, and goats from France due to the outbreak of Epizootic haemorrhagic disease (EHD), which can be fatal to cows. EHD, previously reported in Spain, Portugal, and southern Italy, has now emerged in southern France. The virus is typically transmitted to ruminants through infected midges. Climate change-induced warmer summers may have contributed to increased outbreaks in southern Europe. While the UK's Department for Environment, Food, and Rural Affairs (Defra) closely monitors the situation, it deems the risk of the virus reaching the UK as "negligible." EHD does not affect humans or food safety, but it poses a threat to livestock and deer populations MT

Grants – Slurry Infrastructure funding

If you are an English farmer looking to improve your slurry storage facilities, you'll be interested in round two of the Slurry Infrastructure grant opening in November. Grants ranging from ￡25,000 to ￡250,000 are available for enhancing slurry storage beyond legal requirements, promoting organic nutrient use and pollution reduction. The second round introduces changes that include increased storage options for pig farms, support for slurry separators, covering existing stores with impermeable covers, introducing in-situ cast concrete stores, and providing landlord underwriting for grant agreements. If you applied for round one and want to take advantage of these changes, the Rural Payments Agency (RPA) will offer a limited opportunity to update your application.

Interestingly, shadow Farming Minister Daniel Zeichner suggested that Labour would pay farmers more to upgrade slurry infrastructure to help tackle water pollution. Another water pollution solution was also mentioned by his colleague, Steve Reed, in a panel session at the party conference. See Out and About MT

Out and about 2 – Labour party conference

Last week, I listened to a fringe event to get the views of shadow Defra Secretary Steve Reed on issues affecting the countryside. There wasn't lots of lovely detail, as Reed is only weeks into his new role, but before the next election, he says he aims "to create a manifesto for nature." Maybe somewhat controversially, in some quarters, Reed also mentioned reinstating housing targets for particular areas and increasing public access to the countryside. He also felt that the English Environmental Land Management schemes needed to be reviewed for their financial viability for applicants to help encourage uptake. Additionally, he had strong views on what needed to be done to improve river water quality, saying that Labour would "put the water companies on special measures, which means compulsory monitoring of every water outlet, with severe and automatic fines for every illegal discharge" MT

On the market

Warwickshire – Rolling arable block launch?

Our London and Stratford upon Avon teams have just launched Kingston Farm , near Leamington Spa. Guided at ￡4.25 million, the 370-acre predominantly arable unit includes 40 acres of pasture and woodland and a four-bedroom agriculturally tied cottage with a lifetime tenant. The arable land is contract farmed. The property is available in five lot. Please contact Georgie Veale for more information AS

Yorkshire gold – Compact farm for sale

Following a series of new releases from our London-based Farms & Estates team, my Yorkshire colleagues Zoe Coulson and Claire Whitfield have got into the act with the launch of Woodlands Farm near Ripon. The 165-acre – split roughly three ways between grass, arable and woodland – unit includes an attractive modern four-bed house with an agricultural occupancy condition and a range of modern buildings. Contact Claire or Zoe for more information. The guide price is ￡2.5 million AS

Our Latest Property Research

Country houses – prices drop

The value of a home in the countryside is falling at the fastest rate since the global financial crisis, according to the latest instalment of the Knight Frank Prime Country House Index compiled by my colleague Chris Druce . In Q3 2023 average prices dropped by just over 2% taking the 12-month slide to over 8%. Despite the slump, values are still 12% higher than they were in June 2020. Chris says there is a bit of stalemate in the market as sellers cling to last year’s prices, while purchasers are angling for big discounts. Read the full report AS

Farmland prices – Market at peak?

The latest edition of The Knight Frank Farmland Index has now been published. The average value of bare agricultural land rose by 1% in the third quarter of the year to just shy of ￡9,000/acre. Annual growth was 8%, which outperformed a number of other asset classes (see chart). Our research suggests values may remain flat into 2024. Read the full report for more insight and analysis AS

Development land – Market tumbles

The outlook for the UK economy weighed on the residential development land market in the second quarter of this year, leading to a slowdown in activity and a decline in land prices across the board, according to the latest instalment of Knight Frank's Residential Development Land Index .

My research colleague Oliver Knight says: "We've noted previously how the economics of developing new homes in England is challenging. A slower sales market, issues related to nutrient neutrality, biodiversity net gain, higher build costs and local plan failures have all forced housebuilders to rein in construction expectations. The result? Downward pressure on land values."

Average greenfield land prices fell by 6% on the quarter, taking the annual decline to almost 15%. Prices for brownfield land showed a similar trajectory, dropping 6% on a quarterly basis and 18% annually AS

The Rural Report – Watch the videos!

You've read the book, now watch the videos! To complement the thought-provoking articles contained within this year's edition of The Rural Report our whizzy Marketing team has also created a series of videos featuring many of the report's contributors. Head to our very own YouTube channel to discover more about biodiversity net gain and regenerative farming; find out how we are helping Guy Ritchie's Ashcombe Estate on its diversification journey; and read about the travails of an entrepreneurial Zimbabwean searching for a farm for his family. Plus, lots more AS