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‘Deep-Pocketed’ UK Land Investors Hit 3-Year High
The number of large investors queuing to buy UK farmland has hit its highest in three years, but demand is focused on high-quality arable operations, whose premium over low-quality grassland continues to increase. Savills, the land consultancy, said that the number of investors with £5m-10m to spend on farmland had risen to its highest quarterly total in three years, some 13% above the average. “There has been an increase in the number of applicants who have deeper pockets for buying farmland”, said the group, which has investors with some £6bn to spend on farmland on its books. “A large proportion of these funds will still be available into next year,” given the shortage of farmland for sale, with the supply of 128,000 hectares in the first nine months “historically low”, the group said. What is in demand However, buyers were focused on high quality arable farms, particularly in the east of England – a factor reflected in price growth which has hit 8.5% in the January-to-September period, taking average values nearly to £8,300 an acre. That includes growth of 2.3% in the latest quarter. “What they want is top quality, big farms, that will give them price appreciation and a bit of yield,” Ian Bailey, Savills’ head of rural research, told Agrimoney.com. “They are looking for big blocks of arable land. It is that market which has been doing best.” Regional gap However, there were differences within the market, with investors preferring the east of England which government data last week reaffirmed as the best yielding for wheat, with an average of 7.9 tonnes per hectare. That increased its advantage over wetter western areas, which were hurt particularly by the wet spell in 2012 and in the early months of 2013, with north west yields this year averaging 5.4 tonnes per hectare. In the land market, while prime arable farms in the east of England land appreciated by 4.6% in the July-to-September quarter, the market in western areas, including Wales, stagnated. Indeed, in Wales, research “indicates no change in prime arable values since December”, leaving them at about £7,000 an acre. ‘Really sluggish’ In the market for smaller and grassland farms too, and those where residential assets make up a large proportion of the overall value, activity “is really sluggish”, Mr Bailey said. “For a stock farm of 150 acres, you are probably looking at sub-5% price growth, compared with 8-10% for the top end.” The group said it was “comfortable” with its forecast for farmland values overall rising by 8.8% this year, but acknowledged that prices of top arable operations, and “the best” dairy farms, would see stronger growth. Continue reading
Farmland Prices Hit Records
Thursday, August 22,2013 Farmland prices hit records Market may slow from higher interest rates and fewer exports BY PATRICK YEAGLE Record farmland prices continue in Sangamon County, but agriculture observers say the rise may be slowing down. The rising prices follow a nationwide trend driven by low interest rates and solid demand for crops, says John Hawkins, spokesman for the Illinois Farm Bureau. However, farmland prices may level out as interest rates rise, exports fall and profits on corn and soybeans get slimmer. Hawkins says farmland prices grew steadily for 30 years, but the past five years have seen a faster rise in prices. In central Illinois, farmland routinely goes for $10,000 per acre or more, Hawkins says. The increase likely came from strong demand for corn and soybeans from Europe and China, while ethanol drove commodity prices higher domestically. However, those markets have now slowed, Hawkins says. And the prospect of a larger total harvest means less profit for individual farmers because commodities become cheaper, he said. “We may be getting to point where we’re going to take a pause,” he said. “We’re supposed to have a good harvest this fall. If we have another good harvest next year, that could lessen farm income greatly, and that would probably throw cold water on land prices.” Allen Entwistle has farmed land in the Springfield area for about 50 years. He says he recently saw a tract of land near Edinburg, southeast of Springfield, go for $16,800 per acre. The plots with the best soil and drainage get the highest prices, Entwistle says, while low grade “class c” land goes for far less, often being used for hunting instead of farming. The high prices can be a hurdle for smaller operations or potential new farmers, Entwistle says, noting that it’s not uncommon to put more than a million dollars into a farm. That money often comes from a bank or a wealthy investor, who face big risks along with the farmer if the crop fails. Still, the risk is well worth the reward for many farmers, as the U.S. Department of Agriculture estimates that 2013 will bring $128 billion in total profit for America’s farmers – more than double the $63 billion earned in 2009. During the recession, farmland prices increased while other forms of real estate like commercial and residential tumbled, which Entwistle attributes to the land’s inherent value. “A house depreciates unless you’re constantly spending money on it,” he said. “That ground is always worth whatever you pay for it because land is limited. They’re building new houses every day, but scientists haven’t figured out how to make more land.” Contact Patrick Yeagle at pyeagle@illinoistimes.com . Continue reading
Returns On US Timberland Hit Highest Since 2008
Returns on US forestry hit their highest since the global economic crisis, and are poised for further gains, despite setbacks to hopes for housebuilding, a key destination for lumber. A timberland index compiled by National Council of Real Estate Investment Fiduciaries showed returns of 9.36% in the year to the end of June, the highest figure since autumn 2008, as the world was falling into slump. The figure, of which income accounted for 2.71 points and capital appreciation for 6.51%, came against a backdrop of disappointment for the domestic property market, slowed by rising borrowing costs. “The second quarter rise in US interest rates and the 9% drop in overall US housing starts triggered a slight downward adjustment in forecasts for housing demand for the remainder of 2013,” the council said. Shares in DR Horton and PulteGroup tumbled on Thursday after both housebuilders reported slowdowns in sales growth, fuelling fears over the impact of raised interest rates on the sector. DR Horton said that its new house orders rose 12%, year on year, in the latest quarter, below Wall Street expectations of a 28% figure, and the 34% the group achieved in the previous period. PulteGroup orders fell 12% in the quarter, compared with Wall Street forecasts of 4% growth. ‘Growth ahead’ However, Ncreif said that “expectations are still on track for housing starts to climb north of 950,000 starts for 2013, a strong improvement after 2012’s 780,000 starts. “As the economy and housing markets continue to improve, the timber fund index should continue to see positive results.” The returns from timberland are well below those of 20.0% from farmland over the past year, but unlike agricultural property is on a rising annual trend, on Ncreif data. The disappointing domestic housebuilding conditions contrast with buoyant export demand, which drove log prices in the US Pacific North West up 10% in the April-to-June period. Chicago lumber futures tumbled by 24% over the quarter. Weyerhaeuser profits rise The data came as Weyerhaeuser, the US timber giant, reported a quadrupling to $196m in underlying earnings for the April-to-June quarter, on revenues up 19.4% at $2.14bn, growth it attributed largely to the “improving housing market”. Earnings per share reached $0.35, ahead of Wall Street forecasts of a $0.29-a-share result. Weyerhaeuser shares edged 0.3% higher to $52.85 in early deals in New York. Continue reading
