Rural Update: Trading nations
Your weekly dose of news, views and insight from Knight Frank on the world of farming, food and landownership
10 minutes to read
Viewpoint
A shrewd negotiating strategy to win favour by giving Donald Trump his first major trade deal win, or a capitulation at the expense of agriculture? Debate will continue to rage about the wisdom of the government’s new trade deal with the US, and, to a lesser extent, its recent agreement with India. In reality, it’s probably too soon to tell, although worries that we could see a raft of Indian businesses buying up UK farmland and undercutting family farms seem overblown. Perhaps the government is hoping to placate the farming sector with the welcome announcement that around 3,000 farmers who missed the unannounced cut-off for applying for the Sustainable Farming Incentive (SFI) will be allowed to continue with their applications. However, an apology from Farming Minister Daniel Zeichner for the confusion created is unlikely to soothe too many of the feathers that have been severely ruffled by the likes of the changes to Inheritance Tax on farmland. There is much more work to do to regain the trust of rural businesses.
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Commodity markets
Milling wheat move
Feed wheat prices remain in the doldrums with improving US crop conditions putting a dampener on speculative trading. Demand is also muted as buyers wait for prices to fall further. However, the market for breadmaking wheat is picking up. Prices rose by almost £6/t last week, according to Farmers Weekly.
The headlines
Trade deals get mixed response
Trade deals with two of the world’s largest economies, which contain potential opportunities and challenges for the UK’s farmers, have just been struck by the government.
A free-trade agreement with India has been broadly welcomed by the NFU. Although the full details have yet to be drafted, the package includes the scrapping of tariffs on British lamb, which were levied at 33% on all imports.
Scaling back the import duty on Scottish whisky from 150% to 75% could also offer a boost to malting barley growers. Indians are the biggest overseas sippers of Scotch, knocking back 192 million bottles in 2024.
Concerns over imported food from India treated with farm chemicals that would be illegal in the UK have been raised, but the government insists there will be no softening of food safety and farming standards.
That hasn’t placated farmers angry that the trade deal just signed with the US will allow the reciprocal import of 13,000 tonnes of tariff-free beef between the two countries. Although this only covers non-hormone-treated beef, many worry it is the thin end of the wedge.
However, given that the UK consumes around 900,000 tonnes of beef each year, the more significant concession granted to the US in return for lowering its tariffs on British cars and steel is lifting the duty on 1.4 billion litres of American ethanol.
The UK’s bioethanol industry consumes up to two million tonnes of grain each year and produces important byproducts such as animal feed and CO2. Opening our market to such a large volume of imported ethanol could have an impact on both the arable and livestock sectors.
It’s worth noting that only the frameworks of the US and Indian trade deals have been agreed so far. The nuts and bolts of the agreements will take much longer to sort out before the deals are ratified.
SFI reprieve
After intense pressure from lobby groups like the CLA and NFU, as well as environmental organisations, the government has backtracked on its recent unannounced cliff-edge closure of the 2024 round of the Sustainable Farming Incentive (SFI).
In a written statement to Parliament yesterday (12 May), Farming Minister Daniel Zeichner confirmed that anybody who had saved their SFI application, but not submitted it, within two months of the scheme’s shutdown on 11 March will still be allowed to make an application. However, the value of each application will be limited to £9,300, the median average of claims so far.
Mr Zeichner apologised for the confusion, noting that while the website correctly told applicants their saved drafts would stay live for two months, a technical glitch also surfaced an outdated banner that promised six weeks’ notice before the scheme’s closure.
News in brief
Tech grant open soon
Defra has just issued guidance for the latest round of the Farming Equipment and Technology Fund, which opens on 29 May and closes on 10 July. Around £50 million is up for grabs, covering three themes: productivity (66 pieces of eligible equipment), slurry management (17 pieces of eligible equipment) and animal health and welfare (100 eligible items). Grants range from £1,000 to £25,000. For help with grant applications, please contact Mark Topliff.
Base rate cut
The Bank of England’s Monetary Policy Committee (MPC) voted to cut the base rate to 4.25% last Thursday. Bradley Smith, a rural lending specialist at Knight Frank Finance, comments: “The tone of the MPC suggests more cuts are likely. In terms of commercial loans, banks have entered a new trading year and are all keen to lend to farms and estates. As such, competition is strong with the majority now lending at sub-2% margins. The best deal I have done this year was at 1.18 over base, but with swap rates finally below 4%, it is now possible to fix at sub-5% for the best deals.”
Drought warning
The Environment Agency is urging farmers to work with the NFU to assess their water needs for the summer and take action now to ensure they have sufficient water to last the season. The warning follows the driest start to the year since 1929 for some parts of England. Reservoir storage across England is at 84% of total capacity. This compares to 90% at the end of April during drought-hit 2022.
Greenhouse boost
Last week, we called for more support for the horticultural sector to boost the UK’s food security. A new glasshouse enterprise announced last week shows the potential benefits. The 40-hectare Rivenhall Greenhouse project, near Braintree, Essex, will produce over 28,000 tonnes of tomatoes, offsetting 7% of current imports. The site will use heat, CO2 and electricity from the Indaver Integrated Waste Management Facility, currently under construction.
Nature not a blocker
Environmentalists are claiming that the government’s newly published impact assessment of the Planning and Infrastructure Bill (PIB) provides no evidence that protecting nature is impacting the delivery of new housing. Ministers say PIB will speed up housing developments and large infrastructure projects by allowing developers to pay into a central Nature Recovery Fund (NRF) that will be used to create environmental improvement elsewhere. The Office for Environmental Protection (OEP) has already stated: “In our considered view, the bill would have the effect of reducing the level of environmental protection provided for by existing environmental law. As drafted, the provisions are a regression.”
30/30 target at risk
MPs on the Environmental Audit Committee have also just concluded that the government looks set to miss its environmental targets, which include protecting 30% of the nation’s land and sea by 2030. The committee’s latest report, among other criticisms, says the government’s proposed Nature Recovery Fund (see article above) risks diminishing the impact of Biodiversity Net Gain and that not enough is being done to encourage more private capital investments in nature.
Climate change legal case
The government is facing another environmental headache following the decision by Friends of the Earth to take its legal challenge against the UK’s national climate-change adaptation programme to the European Court of Human Rights (ECHR). The campaign group’s claim that the programme falls “far short” of what is legally required to protect key infrastructure and the general public, particularly those most exposed to climate-related risks, was dismissed by the UK’s High Court last year.
Scottish organic lead
Newly released figures from Defra reveal that Scotland is currently more enthusiastic than England and Wales when it comes to organic farming. In 2024, the total amount of land being farmed organically, including land under conversion, rose by 13% in Scotland to 132,000 hectares. The area flatlined in England, remaining at 296,000 hectares, but fell by 11% in Wales to 68,000 hectares.
Tree disease cash
There is, however, some good news for the future of trees. A £4 million funding package has just been announced to help tackle diseases such as ash dieback and fungal infections of Scots pine. Tree health is under increasing pressure as the UK’s changing climate makes our forests and woodlands more vulnerable to diseases and pests that were previously restricted to warmer parts of the world. The government says the potential loss of more than 100 million trees over the coming decades could cost the economy £15 billion.
Snail farming scam
One of the tax-efficient elements of owning agricultural property is that it is exempt from business rates. This benefit is being taken to the limit by snail farming enterprises that rent central urban office locations and populate them with just a few boxes of breeding snails. The sham arrangements are costing local councils tens of thousands of pounds.
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Property of the week
Northumberland wilderness
Hagdon Farm at Eglingham, near Alnwick, offers a serious taste of the wilderness for sporting enthusiasts and nature lovers. A two-bed traditional farmhouse is surrounded by 100 acres of in-bye grazing land, but the rest of the 915-acre property consists of Hagdon Moor, which has been managed for grouse and partridge. The guide price is £2.5 million. Please get in touch with Will Matthews for more information.
Discover more of the farms and estates on the market with Knight Frank
Property markets
Development land Q1 2025 – Market falls
The value of greenfield development land fell by 2% in the first quarter of the year. Urban brownfield sites, however, lost 5% of their value over the same period, according to the Knight Frank Residential Development Index. “Viability pressures and delivery risks continued to weigh on sentiment, with housebuilders citing persistent cost inflation and planning uncertainty,” points out researcher Oliver Knight, who compiled the index. “Urban brownfield and prime central London sites saw more downward pressure, driven by a widening viability gap, increased uncertainty linked to fire safety regulations, and reduced activity in the institutional and affordable housing markets,” he adds.
Farmland Q1 2025 – Values resilient
The farmland market in England and Wales is holding steady in the face of mounting sector pressures. Despite wider challenges across the agricultural sector and ongoing policy uncertainty, values have remained largely stable, underlining the market’s resilience.
The Knight Frank Farmland Index, which tracks the average price of bare agricultural land across England and Wales, showed a marginal drop of 1% in the first quarter of 2025 to £9,072/acre. This follows a similar small decline in the final three months of 2024, bringing the annual fall to just 1.9%.
Country houses Q1 2025 – Mixed picture
The average price of desirable homes in the countryside slipped by just 0.3% in the first quarter of the year, according to the Knight Frank Prime County House Index. Over the past 12 months, values have fallen by 1.6%. Expectations of an extra base-rate cut by the Bank of England this year could help steady markets, says Tom Bill, Knight Frank’s Head of UK Residential Research.