On Fri, 27 Dec 2002 21:37:07 -0000, David P
wrote:

In article ,
says...
The land value increases are relevant to this thread only to the
extent they have affected farm profitability, e.g. to which extent
land value increases may have increased the cost of renting land in
the farmers accounts, and thereby contributed to the low UK farm
profitability up to 2002.


I don't have rental figures

Income from let land, % on capital value
(Source IPD Let land index July 2002)
Putting the two together..

1993 3,791 5.4 204.71
1994 4,229 4.7 198.76
1995 4,788 5.2 248.98
1996 6,058 4.2 254.36
1997 6,448 3.9 251.47
1998 6,134 3.9 239.26
1999 6,655 3.9 259.55
2000 7,103 4.1 291.22
2001 7,357 3.9 286.92

Something is clearly wrong there. I guess the yields that you are
quoting are yields on values subject to tenancy whereas I have quoted VP
[no tenancy] values.

"The income return from let land has remained relatively stable at
between 3 and 5% for the past decade. As rents on farms let under
traditional (Agricultural Holdings Act) tenancies started to fall in
the late 1990s due to the slump in farm incomes, their replacement
with higher Farm Business Tenancy rents and income from diversified
activities on farms and estates has helped maintain and even increase
income. Residential rents have increased and land owners have
diversified into commercial lettings of redundant farm buildings.
It is rent from these ‘non-core’ assets that has maintained the
long-term modest growth in overall income."

Rents are certainly *not* in excess of £100/acre
under AHA's. Rents under FBT's do have a tendency to hover around that
level but those rents are not related to the productive capacity of the
land.

There is only a small number of FBTs in the IPD sample, they
reported average rents of £79 per acre, while rents on traditional
leases were £62 per acre. Seasonal grazing rents averaged £57 per acre
in 2001.

Umm - are we actually going anywhere with this or have we simply
digressed into an interesting exchange of figures?

Dunno. It seems selfevident to me, that high price of farmland must be
adverse to farm profitability, but we may well be just looking at one
head of a multi headed monster. It should be possible to quantify the
total effect and asses its significance. E.g. if it can be estimated
to amount to £5 per increase in rent per acre , that should be enough
to influence the profitability of the total operation significantly
when we are talking current net incomes per acre as low as those we
saw in the first post to this thread.