Autumn statement, ELMs uncertainty, Wot no eggs? Indoor wheat
The Knight Frank Rural Property and Business Update – Our weekly dose of news, views and insight from the world of farming, food and landownership
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Last Thursday’s Autumn Statement from Chancellor Jeremy Hunt, as expected, made for pretty gloomy listening. I’ve listed the bits most relevant to farms and estates below, but what stuck in my mind was this statement from Mr Hunt: “You cannot borrow your way to growth”. That may be true - as Liz Truss and Kwazi Kwarteng found out the hard way - if you don’t run your plans by your potential creditors in advance, but it seems to lack a certain amount of imagination and fly in the face of accepted economics, particularly when it comes to the UK’s energy needs. Rather than recognising that rural areas can make a significant, and relatively quickly delivered, contribution to solving the current energy crisis, Mr Hunt had disappointingly little to say on renewables, majoring instead on greenlighting the someway-over-the-horizon Sizewell C nuclear plant. Recent comments from his Defra Minister Thérèse Coffey also seem to confirm that she has inherited Ms Truss’s antipathy to solar and onshore wind farms, using the somewhat unfounded food security argument as her justification. There is a huge weight of private capital that sees green energy as a great investment, Mr Hunt should also embrace the opportunities and unleash the potential of the countryside.
Do get in touch if we can help you navigate through these interesting times
Andrew Shirley, Head of Rural Research
In this week’s update:
• Commodity markets – Sell grain, buy eggs?
• Autumn statement – Not much to cheer about
• Trade deals – Eustice knifes Truss
• Environmental schemes 1 – Elms rejig imminent
• Environmental schemes 2 – New opportunities open
• The Farmland market – Video and podcast update
• International news – Indoor wheat on the horizon?
Commodity markets – Sell grain, buy eggs?
Arable farmers with large unsold piles of grain in their barns might want to consider locking into a price now before the southern hemisphere harvest gets underway, advises Andrew Martin of our Agri-consultancy team.
“I’m mindful we might be seeing the end of the current high wheat prices as the Black Sea grain corridor agreement looks set to be renewed and global crop estimates are firming.” Meanwhile, the government has felt it necessary to calm fears that the UK is facing a shortage of eggs due to avian flu and producer price pressures. Media reports suggested that some supermarkets were set to ration egg sales, but a Defra statement pointed out: “The UK’s food supply chain is resilient – there are 38 million laying hens across the country and we are not expecting any significant impact to the overall supply." Might be worth checking out the shelves of your local store to see if that advice is being heeded or whether we are seeing loo roll 2.0.
Autumn statement – Not much to cheer about
Although Kwazi Kwarteng’s budget was bonkers, it was at least imaginative. Jeremy Hunt’s, by contrast, threw up few real surprises and offered plenty to be glum about, including freezing personal tax allowances. With his feet barely under the table at Number 11, there was limited tax tinkering by Mr Hunt, with capital allowances like Agricultural Property Relief remaining in place. However, with an extra £200 million allocated to revenue collection, anybody making use of those allowances could be even more closely scrutinised than before.
Farmers and estate owners that trade as limited companies and pay themselves with dividends will see annual tax-free dividend allowance halved to £1,000 next year and then cut to just £500 in 2024. The capital gains tax-free allowance is also set to fall, dropping from £12,300 to £6,000 next April, and then to £3,000 a year later.
Rural businesses with workers on the minimum wage will have to boost the salaries of those over 23 to £10.42/hour from next April. Those aged 21 to 22 will get £10.18 an hour, while those between 18 and 20 are in line for £7.49 an hour. Some could also be affected by the revaluation of business rates pencilled in for the same month, but extending rate reliefs for retail and hospitality business until 2024 may well help some diversified estates.
The Energy Bill Relief Scheme, which caps the wholesale price of electricity and gas, will end in April 2023.
Identified vulnerable sectors, however, will continue to receive an, as yet, undecided level of support. Rural organisations such as the CLA say they will be lobbying the government to ensure food producers are included in the scheme.
For more on the implications of Mr Hunt’s statement on property markets tune in to our latest Intelligence Talks podcast with my research colleagues Liam Bailey, Flora Harley and Tom Bill.
Trade deals – Eustice knifes Truss
With Chancellor Jeremy Hunt blaming much of Friday’s depressing Autumn Statement on Liz Truss, it wasn’t a great week for the former Prime Minister. But to rub salt into the wound former Defra minister George Eustice decided to stick the knife in as well. During a debate in the House of Commons Mr Eustice admitted that the free trade agreements (lambasted at the time by farming groups) struck with Australia and New Zealand by Ms Truss when she was Trade Minister were “not very good”. He said the deals, which will in time provide Antipodean livestock producers free access to UK markets, gave away far too much, got too little in return and had been “poorly negotiated”. Ouch.
Environmental schemes 1 – Elms rejig imminent
Defra’s flagship post-Brexit farm support initiative, the three-tiered Environmental Land Management Scheme (Elms), is set to be reconfigured. An official announcement is due soon, but sources I have spoken to suggest that the mid-tier of the scheme – Local Nature Recovery – is set to be replaced by a modified version of the existing Countryside Stewardship Scheme (CSS). Earlier reports that Landscape Recovery, the top tier of ELMS, was also due for the chop appear unfounded.
Although these late changes could shake overall confidence in Elms, already under fire for unexciting payment rates, tardy delivery and a lack of detail, the move back to CSS makes sense, reckons Henry Clemons of our Agri-consultancy team. Henry, who specialises in grant funding schemes, told me: “We know how the scheme works and it has the options to deliver amazing projects. I’m encouraging my clients to make the most of it (applications for the current iteration close on 29 July 2023) as it offers five years of stability.”
CSS also includes a Facilitation Fund that supports individuals who help bring together groups of farmers, foresters and other land managers to improve environmental outcomes in their local area.
Please get in touch with Henry if you are in the middle of an existing Elms application or considering joining the scheme and need advice.
Environmental schemes 2 – New opportunities open
Elms, of course, is not the only show in town. Farmers and landowners looking for funding for environmental projects have access to numerous other schemes. In Wales, for example, Natural Resources Wales is now inviting applications for a peatland restoration project that will provide capital development grants of up to £30,000. The deadline is 8 February. Other opportunities include the Farming in Protected Landscapes programmes and the forthcoming Rural England Prosperity Fund. Get in touch with Henry to discover all the options.
The Farmland market – Video and podcast update
As mentioned previously, our Q3 Farmland Market update, which reveals a sharp annual increase in average farmland values, is out now. If reading research reports is not your thing, I’ve packed the key findings into a 60-second video that you may find interesting. You can also listen to my colleague Jessica Waddington and me discuss the farmland market with Knight Frank’s Global Head of Research Liam Bailey in the latest edition of our Intelligence Talks podcast.
International news – Indoor wheat on the horizon?
When asked whether vertical farming will ever replace conventional al fresco farming, my answer has always been potentially yes for high-value crops like herbs and salad leaves, but definitely not for broad-acre crops like cereals. Now I may have to eat my words following an announcement from Berlin-based Infarm at the COP27 talks in Egypt. The firm claims to have trialled indoor wheat with the potential to deliver equivalent annual yields of 117 tonnes per hectare, way higher than the 10 or so tonnes you’d get from a traditional system.
Even though hardly any water and no chemicals are involved, sceptics point to the huge energy requirements needed to grow plants at that scale indoors.
Photo by Kelly Neil on Unsplash