For traditional farmers engaged in livestock or arable farming many of us can feel that we are missing out. The hype about forestry and natural capital risks creating a divide between those who are keen to explore new opportunities and those who feel traditional farming and food production is being devalued. But amongst all the chatter there is the underlying reality – land values are rising and landowners are still in control.
Whilst environmental measures to mitigate climate change have to be embraced, we must balance this alongside food production. Great care is required to prevent our national herd and flock from diminishing so greatly that the numbers no longer support the vital infrastructure and services required to get our produce from farm to plate i.e. auction marts, abattoirs and packhouses. Closure of such facilities will undoubtedly increase food miles and the carbon footprint of the food chain which in my view is counterproductive.
It is clear that the potential for creating forestry for carbon sequestration and acquiring land for its natural capital is a factor in the land market currently. Interest from investors has been a factor in driving growth in land values over the last 18 months. Largely driven by carbon and anticipated future performance of tax efficient income. Prime arable land in some parts of Scotland has risen in value to record levels in some cases while marginal land has seen significant rises where afforestation is possible – far higher than its value even as recently as two years ago.
Farmers of all types of land will ultimately benefit from the huge range of options available to them, whether continuing with their current strategy, diversifying into a new sector or spreading the risk by using different parts of the landholding for different activities.
My advice would be to understand your asset values fully as this is essential for future planning. If you have not had a full farm valuation in recent years it is worth undertaking that exercise now to ensure you have all the facts at your disposal allowing you to make informed business decisions.
Any investment in the business – whether it is a diversification project, the acquisition of land, or investment in capital equipment – all depends on having access to suitable finance, something that is completely reliant on having assets available to put down as security against any loan.
With regard to funding through the Agricultural Mortgage Corporation Plc (AMC), or any other bank, the value of your farm is a major factor in determining the amount you may be able borrow due to the loan to value ratio. Having an idea of what your farm might be worth is a key first step in this process. It is of course essential that we highlight that not all land is suitable for tree planting or Natural Capital purposes and only a detailed assessment will determine whether the market trends above will impact your property.
There may be market buzz around natural capital and carbon initiatives at the moment, but we can all benefit from rising land values no matter which side of the debate you sit on.
We must not lose sight of food security and agricultural productivity.
Up to date information on the value of your landholding also enables you to make an informed decision if you are considering a sale of all or part of your farm, or if you are thinking of the next generation and succession planning. For more information, please give me a call on 07500 794201.