Farming News - TFA warns arable rent reviews must be realistic
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TFA warns arable rent reviews must be realistic
14 June 2011
The Tenant Farmers Association is using its presence at this year's Cereals Event to highlight the need for realism in this year's farm rent reviews.
TFA National Chairman Jeremy Walker said "With rising commodity prices, particularly for arable crops, landlords have taken the opportunity of serving notices for rent review on their tenants. Many of those notices come to fruition this autumn. We are just beginning to see the first proposals by landlords and in some cases they leave us with cause for concern".
"There is no getting away from the fact that cereal prices are higher than of late, particularly on the spot market and that some producers will be seeing the benefit of those improved prices. However, looking back over the past three years since these rents were last reviewed, prices have been anything but stable. Looking forward, there is no guarantee that prices will continue at current levels. It is not long ago that wheat prices were hovering at or below £100/tonne. Costs have also increased markedly and margins are not significantly better than in 2008,” said Mr Walker.
“With the impact of the recent dry weather likely to contract yields we can expect output to be lower. Many producers will have taken a prudent decision to sell forward some of their crop before harvest and will find as a result of the depression in yields that they have sold forward a far greater proportion of their crop than they had intended. With a rising market trend the forward prices secured are likely to be much lower than prices which can be obtained on the spot market," said Mr Walker.
"Many of the initial proposals from landlords have inevitably taken a bullish approach by predicting high and consistent output prices whilst applying little by way of inflation to input costs. Add to this the tendency for some landlords’ agents to over-egg the pudding on residential values on farm tenancies we're likely to see an increased number of disputes this year,” said Mr Walker.
“Landlords who have been able to secure high levels of rent from individuals taking marginal acres on short term Farm Business Tenancies on a speculative basis should not expect anywhere near the same level of rent from their longer term tenants, who have to factor in volatility and sustainability,” said Mr Walker.
“Both landlords and tenants need to take a sensible, realistic and prudent approach to this season's rent reviews. Resolving disputes by arbitration is expensive, time-consuming and divisive and I would therefore encourage all parties involved in rent reviews this year to make reasoned arguments during their negotiations. With its specific expertise, the TFA stands ready to advise farm tenants as the rent review process gathers pace through the remainder of the summer and into the autumn," said Mr Walker.