Surely “Brexit will boost British farming, not destroy it” depends partly on what HMG does in response to a Brexit?
GlenDorran
Have kissed and made up with Iain Martin then?
Tim Worstall
Apparently so….I was able to let drop that his boss is a bit of a fan, which might have helped…..he’d also been drawing in my stuff from other places as well before.
GlenDorran
Good to hear.
Jim
You’re utterly wrong about subsidies being the reason for high agricultural land prices in the UK – the price of land stopped being related to the earning power of farming (including the subsidies) decades ago. You can’t buy farmland and finance it from the earnings of the land any more. Land is bought for cash nowadays. Its all City money, CGT roll-over and high net worth individuals burying their cash into land to avoid IHT. Farmers who want to buy it to farm it as a business are priced out of the market, even with agricultural subsidies.
Luke
Jim, my knowledge of farming is limited, but how about this as a summary of Tim’s article:
“Brexit (without UK farming subsidies) will mean most British farmers go bust. Those that buy from the receivers at reduced prices will make money.”
I sort of agree with him, except I doubt land prices will ever be as low as NZ or Argentina: either there will be some subsidies, or fertile British farmland in SE England will always have hope value for development.
I like the article. Direct subsidies will be some of the reason for high land prices. Others will include exemption from business rates, the inheritance tax exemption and red diesel. You can argue the proportionate effects of each in the price of land but no other industry ( ag is an industry after all ) gets all this.
The lands belonging to Prince Charles also get an extra bonus of the inheritances of the intestate.
Cheaper land prices would make it easier for new entrants, with new ideas for land use, whether that be Formula 1 tracks as picturesque as the old Hockenheim, or days out hunting red deer with spears.
PeteC
Nice work on the CapX gig there Tim. I quite enjoy Hannan’s articles on there, and now have another reason to add it to my RSS feed 🙂
tommith
“the price of land stopped being related to the earning power of farming (including the subsidies) decades ago. You can’t buy farmland and finance it from the earnings of the land any more”
You can and people do
salamander
Sorry Tim but I disagree with you about low cost bread being good for making sandwiches.
Unless you are taking about a Dave Lister triple fried egg chilli chutney breakfast sandwich in which case low cost bread is mandatory.
The Great Redacto
Hurray. Jockey’s Martin a good fellow.
john77
The price of bread is so minute compared to the other necessities of life in the UK that we’d barely notice the RPI impact if it trebled. Forty years ago I found a decent baker for the first time since I moved south and since then eating the best locally available bread has been a spending priority. It currently costs <0.8% of the occupational pension that I built up in the first 48% of my working life. My wife spends nearly as much on her TV licence as I spend on bread.
When Peel repealed the Corn Laws the price of bread really mattered but not any more.
Jim
“You can and people do”
The price of bare land (no house or buildings included) is c.£10k/acre nowadays. The absolute maximum you can earn from it would be £300/acre (incl subsidies) and that would be in a bumper year. Most years considerably lower, and at todays prices many farmers will be making losses, even when taking subsidies into account.
To buy 100 acres you’d need £1m. Deposit of 30% or £300k. Borrow the rest at 3.5% (for now) over 25 years. Just to keep up with the interest alone you’d need to make £2k month, or £24k/yr from farming those 100 acres. Subsidies would chuck in £7k yr, so you ‘only’ need to make £170/acre for every single acre for 25 years straight, and you won’t have paid off a penny of the original £700k.
Oh, and by the way, the price of wheat is currently c. £120/tonne, which it was 20 years ago. In nominal terms. Not inflation adjusted, real actual pounds. Much the same goes for every other farm commodity price.
Good luck.
PF
Jim,
Also, things ‘like’ pony paddocks and all that impacts on prices, from sales I’ve seen (depending on location). Ie, wealth shifting from city to country.
jgh
The only difference Brexit will make is if the UK chooses to do enough good stuff the EU currently stops us from doing, and chooses to minimise doing the bad stuff the EU currently stops us from doing. Leaving your parents’ home allows you to have a girlfriend stay the night, but also allows you to never bathe.
Surely “Brexit will boost British farming, not destroy it” depends partly on what HMG does in response to a Brexit?
Have kissed and made up with Iain Martin then?
Apparently so….I was able to let drop that his boss is a bit of a fan, which might have helped…..he’d also been drawing in my stuff from other places as well before.
Good to hear.
You’re utterly wrong about subsidies being the reason for high agricultural land prices in the UK – the price of land stopped being related to the earning power of farming (including the subsidies) decades ago. You can’t buy farmland and finance it from the earnings of the land any more. Land is bought for cash nowadays. Its all City money, CGT roll-over and high net worth individuals burying their cash into land to avoid IHT. Farmers who want to buy it to farm it as a business are priced out of the market, even with agricultural subsidies.
Jim, my knowledge of farming is limited, but how about this as a summary of Tim’s article:
“Brexit (without UK farming subsidies) will mean most British farmers go bust. Those that buy from the receivers at reduced prices will make money.”
I sort of agree with him, except I doubt land prices will ever be as low as NZ or Argentina: either there will be some subsidies, or fertile British farmland in SE England will always have hope value for development.
I like the article. Direct subsidies will be some of the reason for high land prices. Others will include exemption from business rates, the inheritance tax exemption and red diesel. You can argue the proportionate effects of each in the price of land but no other industry ( ag is an industry after all ) gets all this.
The lands belonging to Prince Charles also get an extra bonus of the inheritances of the intestate.
Cheaper land prices would make it easier for new entrants, with new ideas for land use, whether that be Formula 1 tracks as picturesque as the old Hockenheim, or days out hunting red deer with spears.
Nice work on the CapX gig there Tim. I quite enjoy Hannan’s articles on there, and now have another reason to add it to my RSS feed 🙂
“the price of land stopped being related to the earning power of farming (including the subsidies) decades ago. You can’t buy farmland and finance it from the earnings of the land any more”
You can and people do
Sorry Tim but I disagree with you about low cost bread being good for making sandwiches.
Unless you are taking about a Dave Lister triple fried egg chilli chutney breakfast sandwich in which case low cost bread is mandatory.
Hurray. Jockey’s Martin a good fellow.
The price of bread is so minute compared to the other necessities of life in the UK that we’d barely notice the RPI impact if it trebled. Forty years ago I found a decent baker for the first time since I moved south and since then eating the best locally available bread has been a spending priority. It currently costs <0.8% of the occupational pension that I built up in the first 48% of my working life. My wife spends nearly as much on her TV licence as I spend on bread.
When Peel repealed the Corn Laws the price of bread really mattered but not any more.
“You can and people do”
The price of bare land (no house or buildings included) is c.£10k/acre nowadays. The absolute maximum you can earn from it would be £300/acre (incl subsidies) and that would be in a bumper year. Most years considerably lower, and at todays prices many farmers will be making losses, even when taking subsidies into account.
You can do the sums here: http://www.amconline.co.uk/index.aspx
To buy 100 acres you’d need £1m. Deposit of 30% or £300k. Borrow the rest at 3.5% (for now) over 25 years. Just to keep up with the interest alone you’d need to make £2k month, or £24k/yr from farming those 100 acres. Subsidies would chuck in £7k yr, so you ‘only’ need to make £170/acre for every single acre for 25 years straight, and you won’t have paid off a penny of the original £700k.
Oh, and by the way, the price of wheat is currently c. £120/tonne, which it was 20 years ago. In nominal terms. Not inflation adjusted, real actual pounds. Much the same goes for every other farm commodity price.
Good luck.
Jim,
Also, things ‘like’ pony paddocks and all that impacts on prices, from sales I’ve seen (depending on location). Ie, wealth shifting from city to country.
The only difference Brexit will make is if the UK chooses to do enough good stuff the EU currently stops us from doing, and chooses to minimise doing the bad stuff the EU currently stops us from doing. Leaving your parents’ home allows you to have a girlfriend stay the night, but also allows you to never bathe.