Agriview Winter 2020

AgriView Winter 2020

Rural update from Fisher German

Achieving net zero for agriculture Identifying opportunities to reduce emissions

Understanding your carbon footprint Carbon audit example for the Model Farm

Tree planting targets set to rise An insight from Trees Please

Welcome 2019 saw the government sign legislation committing the UK to achieving net zero carbon emissions by 2050 – the first country in the world to do so.

Achieving net zero will require significant emission reductions across all sectors, including the agriculture and land-based sector which currently represents 10% of total emissions. This may seem a threat to some, but it is a potential opportunity for many.

There is already evidence of some supermarkets asking suppliers to provide information relating to their carbon emission, and this trend is likely to continue. For those that are able to demonstrate emission reductions or a low-carbon product, this may in future provide a means of adding value in a world in which consumers (and consequently retailers) are becoming more aware of the emissions associated with food, and counteracting some of the discourse around environmental impacts of agriculture.

In this edition of AgriView, Tom Beeley explains

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what net zero will mean for British agriculture, and the Model Farm examines emissions on an individual farm level. A carbon audit should be the starting point for all farmers and landowners to understand the impact of a farm’s activities in terms of climate change.

We are already doing this for forward thinking clients to identify opportunities for change that will reduce emissions and save costs.

With tree-planting targets set to rise, fuelled by the UK government’s ambitious plans to tackle climate change, the future of the tree-planting industry is looking bright. We have insight from Charles Beaumont, Director of Trees Please Ltd, now the biggest tree nursery in the north

east of England with his thoughts on the future for the industry.

In addition, Richard Gadd provides an update on the farmland market, where 2020 is likely to record a historically low level of supply due in no small part to Covid-19 lockdown restrictions. The recent lockdown measures have resulted in some interesting shifts across the rural sector.

I hope that you find AgriView of interest. If you would like to continue to receive it along with other communication from us, please do keep in touch by emailing us at info@fishergerman.co.uk to subscribe.

David Merton 07770 333331 david.merton@fishergerman.co.uk

Case Study: Landmark 1954 Act renewal of a Telecommunications Mast Code Agreement – Vodafone Limited vs Hanover Capital Limited (2020)

Telecoms…

the best outcome?

Are you confident you are getting the best outcome from a telecom lease renewal?

For land and property owners, a telecom lease agreement can feel very one-sided and in the telecom operators’ favour.

Many lease agreements are expected to be coming up for renewal; and, following the introduction of the new Electronic Communications Code (ECC) in 2017, there is considerable uncertainty regarding the proper valuation methodology to be applied to existing agreements, and the code appears to heavily favour the operators.

Our consultants and telecoms lease advisors are nationally recognised niche practitioners specialising in telecommunications property advice, having actively worked within this market from the start. The team deal with all aspects of telecoms masts and the management of them.

We have negotiated more than 10,000 leases, licences and wayleave agreements on behalf of land and property owners across the UK. We only represent landowners and landlords, and do not act for any telecommunications network operators; however, we have a good relationship with the operators and a reputation for being firm, fair and pragmatic which aids our negotiations and their willingness to work with us for the best outcome for you.

With Fisher German you can be confident that our expertise and knowledge within this specialist subject ensures you receive the best advice. If you need any telecoms property advice, our talented team of specialists are here to help.

Chris Hicks 07808 571067 chris.hicks@fishergerman.co.uk

One particular area adding to a lack of clarity is that a large number of existing lease agreements have protection under the Landlord and Tenant Act 1954 and would ordinarily have been subject to valuation principles pursuant to the 1954 Act, as opposed to the ‘no scheme’ valuation rules provided for under the Electronic Communications Code.

The ‘no scheme’ basis follows compulsory purchase principles, with rights being valued on the basis of their value to the landowner, rather than to the telecoms operator. This is likely to make a substantial financial difference, favouring operators.

The Vodafone vs Hanover Capital case is the first known occasion where a court has had to determine such a claim since the new Electronics Code has been introduced. Whilst not a binding decision, having been handed down

by Manchester County Court, it is certainly a very persuasive one and provides much-needed clarity in such uncertain times.

The facts • Vodafone Limited was granted a 1954 Act-protected agreement of a telecoms site on Hanover Capital Limited land in 2008 for a five-year term upon payment of a one-off premium of £10,000.

• Vodafone argued that under the new Electronic Communications Code and the ‘no scheme’ approach the value of the land to the owner was £1,386 rent per annum for a 10-year term – determined by reference to an alternative use as a car park.

• Hanover submitted that rents under the old Code reflected the value of the site to the operator for use as part of its network and used transactional evidence to show what would happen in a hypothetical negotiation in the open market. They argued that

the market had not sufficiently changed since the ECC came into force and proposed a rent of £8,500 per annum.

Fisher German, as widely recognised experts within this field, were asked to contribute to the case by providing comparable evidence, including telecom rent reviews completed over the last two to three years within the area. This comparable evidence was used to support the position of Hanover.

Outcome • The Court, having considered the evidence put forward by both parties, concluded that the appropriate rental payable was £5,750 per annum and awarded in the landlords’ favour on that basis.

• The Court concluded that the new lease should be for a 10-year term with a 12-month break for the tenant exercisable on the fifth and any subsequent anniversary of the term commencement date.

• The Court agreed with Hanover that there should be a period of certainty for the parties and that a five-year period was sufficient to give respite from the disruption and expense of further litigation.

The decision provides some muchneeded certainty as to the potential outcome of any renewal of pre-ECC telecommunications agreements under the 1954 Act. The outcome is seen as a win for landlords given that: 1. The rent was assessed based on pre-ECC rent valuations and provides a significantly higher figure than those that may have been agreed on purely ECC principles; and 2. The Court was unwilling to grant a short term or a break clause which would allow the operator to quickly trigger a renewal and determination of rent under the ECC.

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So what does net zero mean for 2019 saw the government sign legislation committing the UK to achieving net zero carbon emissions by 2050 – the first country in the world to do so.

Transport was the largest emitting sector of UK greenhouse gas emissions in 2018

Energy supply delivered the largest reduction in emissions from 2017 to 2018

Other includes Public, Industrial Processes and the Land Use, Land Use Change and Forestry (LULUCF) sectors (note that LULUCF acts as a net sink of emissions). The percentages may not sum to 100% due to rounding.

The energy supply sector has accounted for around half of the overall reduction in UK emissions since 1990, at which point it accounted for 35% of all emissions in the UK. It was the largest emitting sector until its emissions fell below transport in 2016.

Net zero means that any greenhouse gas emissions that cannot be otherwise practically reduced would be balanced by schemes to offset an equivalent amount of greenhouse gases from the atmosphere.

This commitment marks a significant escalation in the UK’s climate change ambitions, which had previously set a target of reducing emissions by 80% by 2050 against a 1990 base year.

The latest greenhouse gas (GHG) emissions figures available suggest that in 2018 the UK emitted 451 million tonnes of CO2 equivalent (MtCO2e) which represents a reduction of 43% below 1990 levels.

The majority of the UK emissions reduction to date has been in the energy sector which was previously the largest emitting sector of the economy. This has been largely achieved through improved efficiency as well as investment in renewable energy to reduce the carbon intensity of the energy consumed.

The effects of this are now beginning to be seen in the energy sector with 52% of electricity coming from low carbon sources in 2018 and an expectation that coal power will be phased out entirely by 2025.

Achieving net zero will require significant emissions reductions across all sectors.

Transport – now the largest emitting sector – has been the most recent focus of government attention with the statement of ambition highlighted by a commitment to end the sale of fossil-fuel-only vehicles by 2035, with much hope being pinned on the electrification of transport.

So what does net zero mean for agriculture?

Although representing only 10% of total emissions, the agriculture and land-based sector will be expected to reduce its emissions

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Source: DBEIS 2018 UK GHG emissions 4/2/2020

– a fact the NFU has embraced with its ambition for the sector to achieve net zero by 2040, ten years ahead of the government target.

A 2020 report from the Committee on Climate Change (CCC – a body set up to advise government on policy to achieve carbon emissions targets) titled Land use: Policies for a Net Zero UK makes important reading for those in the agricultural sector. The report highlights the measures by which the agricultural and land-based sectors could contribute towards emission reduction and seems likely to influence climate change policy for the sector going forward. The report essentially outlines a twofold contribution that the sector can make to emissions reduction.

The first focuses on reducing the emissions from agricultural production through changes in working practices and application of new technology – a process that has already begun for many farmers with investment in renewable energy technology. Other sectors of the economy are already required to measure, report on and reduce emissions and it is possible that this will follow through to agriculture in the coming years.

However, the report recognises that the main sources of emissions from agriculture are methane (56%), associated with enteric fermentation in livestock, and nitrous oxide (31%), mainly associated with the use of fertilisers on agricultural soils. Whilst there are steps that can be taken to reduce emissions from these sources, these are difficult emissions to eliminate without impacting on agricultural outputs more widely.

As a result the report suggests that alongside measures to reduce these GHG emissions, efforts to decarbonise the agricultural sector could focus on opportunities to sequester carbon from the atmosphere and store it in ‘carbon sinks’, most notably through soils and creation of new woodland. This potential for land to act as a carbon sink is the second and potentially more significant contribution identified in the CCC report.

This is already being reflected in policy to some degree through the recently launched Woodland Carbon Guarantee scheme, which offers payment for carbon sequestered through new woodland creation.

With soils there is significant potential to

agriculture? reduce emissions released from soils as a consequence of agricultural production, while simultaneously increasing the carbon stored in soil. This potential to sequester and store carbon gives rise to opportunities to help decarbonise the economy more widely and is public good which might be recognised though future support.

The ability of the land-based sector to capture and store carbon in land also represents a potential diversification opportunity. Many non-agricultural businesses and organisations are now committing to become carbon neutral ahead of the government’s 2050 targets in line with their own environmental and corporate social responsibility (CSR) ambitions. To achieve neutrality, organisations will rely on the purchase of ‘carbon offsets’ from emissions reduction outside of their own operations as a means of compensating for, or ‘offsetting’, their own emissions which cannot otherwise be mitigated. As such the market for voluntary carbon offsets seems likely to grow.

Whilst this market offers significant potential for farmers and landowners, it is unregulated and not without its challenges. Difficulties include how to assess and verify the volume of carbon offset; the value attributable to a carbon credit; and how the emissions reductions are maintained and managed for the long term. From an estate management perspective, there are also implications around tax and planning to be considered from what are long-term changes in land use.

Currently the voluntary offsetting market in the UK is mainly focused on woodland creation where the emissions reductions are more easily visible and verifiable, with the Woodland Carbon Code providing a useful and established framework. Although offering significant potential as a carbon sink, soil carbon sequestration is less tangible and currently more difficult to measure, verify and maintain.

For farmers and landowners, the starting

GHG

Global warming potential

Carbon dioxide (CO2 )

1

Methane (CH4 )

25

Nitrous oxide (N2O)

298

Hydrofluorocarbons (HFCs)

14,800

Perfluorocarbons (PFCs)

7,390

Sulphur hexafluoride (SF6 )

22,800

Nitrogen trifluoride (NF3 )

17,200

The term ‘carbon emissions’ is used as shorthand for the emissions of the basket of seven main greenhouse gases (GHGs), each of which has a different global warming potential (as shown in the table above). Whilst carbon dioxide is the most prevalent emission and main contributor to carbon emissions, the other GHGs have a greater potency per unit, but are emitted in smaller volumes. For example, a unit of methane is considered to have 25 times the impact on climate change of the equivalent unit of CO2.

So that the GHG emissions of an organisation, product or activity can be expressed as a single figure, each of the GHGs is converted to carbon dioxide equivalence. So when ‘carbon emissions’ or ‘carbon footprint’ are referred to, we are generally referring to the total GHG emissions expressed in terms of carbon dioxide equivalence.

point should be undertaking an assessment of their own carbon emissions. This can be a useful tool in understanding the impact of a farm’s activities in terms of climate change and identifying opportunities for changes that will reduce emissions, and provides a benchmark against which emission reductions can be assessed in future. There is already evidence of some supermarkets asking suppliers to provide information relating to their carbon emission, and this is a trend likely to continue.

In future, evaluation of individual farm products may become the norm.

We are working with clients to examine the emissions of individual farm products; this will allow livestock

farmers, for example, to show the emissions per kilo of product. For those that are able to demonstrate emissions reductions or a low-carbon product, this may in future provide a means of adding value in a world in which consumers (and consequently retailers) are becoming more aware of the emissions associated with food, and counteracting some of the discourse around environmental impacts of agriculture.

Tom Beeley 07970 698729 tom.beeley@fishergerman.co.uk

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Model farm

TIGER FARM is a virtual mixed farm based in Leicestershire.

240ha Owned 128ha Agricultural Holdings Act Tenancy 40ha Five-year Farm Business Tenancy 111ha Contract Farming Agreement

Tiger Farm is a virtual farm that has been created by the Fisher German agribusiness team to model the different business dynamics and scenarios that are often faced by real farms.

Farm update Winter 2020 Extremely wet weather during October and November 2019 left the farm with less than 20% of its planned winter cereal area established. A switch to spring cereals and some fallow areas meant that there was a harvest, but the hot and dry May led to modest yields.

With most of the country in the same position, spring seed availability was low and so the options limited. Spring crops can offer good margins and lower establishment costs whilst achieving cultural control of problem weeds.

The shorter growing period relies on favourable establishment, and growing conditions during the drier months and the performance of spring crops have been very variable across soil types.

The dilemma was choosing a crop that could

produce a profit, or fallow land with a green cover to protect the soil and allow an early entry into the following crop. Consideration of the longer-term rotation was also made to try and avoid breaking up the existing rotation.

In the end the spring wheat was perhaps the surprising winner with later maturing crops escaping the damage of the wet August and producing scarce milling wheat at premium prices. Many winter-sown wheat and winter and spring bean crops fared poorly, caught by the extreme weather conditions, and spring barley crops shedding ears in the August storms.

The gross margin figures below are perhaps conservative in terms of output and high input costs but are reflective of farms with blackgrass pressure and soil types unsuited to higher value break crops. The scarcity of wheat

(and/or sellers of wheat) and a weakening sterling have contributed to high prices.

They illustrate that there is no substitute for maximising a winter wheat area, and using spring crops in the rotation to reduce the blackgrass weed burden over time which will eventually bring the winter wheat spray costs down. For the most severe blackgrass areas 3+ year grass leys or Environmental Scheme options followed by direct drilled crops are an effective control as well.

The experience of the 2020 harvest and a national barley crop priced for an export market with price discounts to wheat in excess of £40/t made spring wheat look the most attractive option in hindsight, but it has been an exceptional season for many reasons with a weak £ helping prices.

Crop

Winter wheat 9t/ha @ £150/t

Winter barley 8t/ha @ £125/t

Spring wheat 6t/ha @ £150/t

Spring barley 6.5t/ha @ £125/t

Spring oats 5.5t/ha @ £120/t

Seed

102

135

110

120

50

Fertiliser

220

200

160

165

120

Sprays

265

232

180

160

115

Misc

24

24

24

24

24

Total

611

591

474

469

309

1,350

1,000

900

812.5

660

739

409

426

343.5

351

Output GM

The challenge of selecting profitable break crops on heavy land remains; oilseed rape has become too high-risk for many growers in traditional combinable crop growing areas, and beans have the obvious limitations in terms of frequency in the rotation and variable yields, although the demand for proteins crops appears to have held well. Many farmers will be forced into drilling winter wheat after spring barley this autumn; not a conventional rotation but the obvious option. The removal of the Crop Diversity element of greening for the 2021 Basic Payment Scheme year (three-crop rule) at least makes that part of the equation easier.

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OWNED BY THE FOX FAMILY, the parents and eldest son work on the farm along with a full-time farm worker. There are two other children not currently involved with the farm. The farm uses seasonal labour as required.

A farmhouse, cottage and buildings are located on the Agricultural Holdings Act Tenancy.

A separate farmyard is owned.

Current enterprises comprise combinable arable crops and a flock of mule lambs, finished extensively.

Farm business review Income from subsidies made up 54% of average Farm Business Income (FBI: a measure of net profit) across all farm types for the 2018/2019 financial year.

However, this masks huge variation in profitability across different farm types and geographical regions. For example, in the above year average FBI from large mixed farms was £325 per hectare, but nearly doubled to £611 per hectare for farms in the top-performing 25%. The difficult growing conditions throughout harvest 2020 have led to disappointing arable results across the board, putting additional pressure on cash flow in the coming months, and widening the gap between the best- and worst-performing farms in the current financial year.

With the Agriculture Bill confirming the transitional reduction in direct subsidies from 2021, it is clear that many farms risk being unprofitable after the complete removal of Basic Payment Scheme from 2028, and farmers are advised to use the seven-year transition period to increase efficiency or diversify their business. At the time of writing we are still awaiting the detail of the post Brexit agricultural policy, but the reduction rates for the 2021 claim year have been announced and are dependent on claim area.

By way of an example, we have calculated the reduction for our Model Farm, a 408ha claim, as being approximately £30 per ha (an expected BPS receipt of £199 per ha) in 2021.

An impartial review of a farm business is a good place to start to identify ways to improve underlying profitability.

A DEFRA study concluded that less than 5% of variation in farm performance is related to geographic factors, such as soil and climate, but that decisions made by the farmer are key. A thorough assessment of the resources available to the farm including land, buildings, people, machinery and capital will reveal any under-utilisation or potential for change.

With an increasing focus on environmental

sustainability going forwards, it is also worth considering natural capital on the farm.

Enterprise gross margins should be analysed to assess the physical performance of the business, such as crop yields and variable cost levels. But a positive gross margin does not always translate to a net profit once overhead costs have been included, and attributing fixed overheads across different enterprises is essential to interrogate which aspects of a business are operating successfully.

Whole farm budgeting and forward projecting cash flow are essential tools for decision making, and likely to be required for any borrowing or grant applications. At the same time, partial budgeting is invaluable for modelling the likely financial implications of a proposed change or addition of a business enterprise.

A Fisher German strategic farm review would include: • A n evaluation of farm assets and resources, and their current use.

• A n objective review of strengths, weaknesses, opportunities and threats to a business.

• E xamination of enterprise gross margin performance, and benchmark of Key Performance Indicators against topperforming businesses.

• A llocation of fixed costs to different enterprises to assess net profit and optimal trading level for current fixed costs.

• A nalysis of balance sheet ratios to assess business resilience.

• Recommended improvements with an implementation plan and partial budgets.

There is no doubt that policy and trading environments will put pressure on farming businesses going forwards, but those businesses that are more resilient and open to new opportunities will succeed.

Key dates • D ecember 1 – holding register update deadline for sheep and goats on the land, complete inventory of sheep and goats to be submitted by 31st December 2020.

• D ecember 1 (until 30th June 2021) – Payment by RPA for BPS and Stewardship revenue claims 2020.

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Model farm (cont.)

Technical focus – carbon audit Climate change is a big challenge we face in the agricultural industry and the NFU have announced their ambition to achieve net zero for agriculture by 2040.

Key Source Emissions

Sequestration

• Aids development of beneficial management techniques based upon the current footprint.

Fuels

Woodland

Materials

Soil organic matter (SOM)

While the agricultural industry has often taken the brunt of negative press on climate change, agriculture has the ability to be part of the solution to this problem; the future practices of land managers and owners can influence this greatly.

Machinery

Hedgerows

• If more carbon is sequestered than emitted, a business can demonstrate they are offsetting other activities.

Crops

Perennial crops

Inputs

Field margins

Livestock

Permanent wetland

Waste

Land use change

Greenhouse gas (GHG) emissions that result in climate change include carbon dioxide (CO 2 ), nitrous oxide (N 2O) and methane (CH 4 ) – of which agriculture produces 10% of the UK’s total GHG emissions. UK farms have the ability to reduce their emissions but also sequester CO 2 from the atmosphere. To measure this in a business and benchmark against others, a carbon audit is the place to start.

Distribution

Understanding a business’s carbon footprint is likely to become increasingly important as climate change policies mean that the food supply chain has to pay more attention to it and work to improve their own footprint.

It is also a good way of understanding the business’s energy use and costs, thereby identifying ways to use resources more efficiently.

The process of carbon sequestration is the capture and storage of carbon dioxide out of the atmosphere by organic matter, such as plants and soils.

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• Create an action plan with timescale and investment required to achieve.

Elements of a carbon audit Carbon audits are calculated through compiling data for a variety of parameters (listed in the table above). Data used generates a figure for GHG emissions either emitted or sequestered, providing a final net figure. The figures are given as ‘carbon dioxide equivalent’ (CO2e): this is a unit used to give a single measurement that includes CO2, CH4 and N20.

Certain parameters measured contribute considerably more to emissions and sequestration. Nitrogen fertilisers significantly emit more carbon than any other parameter included in the audit; similarly, soil organic matter sequesters far more carbon per measure than any other method of sequestration.

Why complete a carbon audit?

• Enables a clear understanding of an individual farm’s GHG emissions.

• Excess carbon can be traded within accredited private markets providing additional income.

• We anticipate carbon emissions and sequestration will be part of the new Environmental Land Management Scheme (ELMS) – possible financial incentives for reducing carbon footprint.

• Considering tree planting – the Woodland Carbon Code (WCC) is an up-and-running accredited scheme to enable trading of carbon units captured within woodlands.

• Forward planning to ‘future proof’ any business decisions from a carbon perspective • Helps support decisions for utilisation of less productive land.

The example carbon audit on the next page for the Model Farm is based on results generated using the Farm Carbon Calculator tool, from the Farm Carbon Toolkit. This enables a land owner to measure both carbon emissions and sequestration of a farm.

Charlotte Gore

Nick Wright

07785 425317

07918 628983

charlotte.gore@fishergerman.co.uk

nick.wright@fishergerman.co.uk

Model Farm results Current emissions Type

Description

Total

Units

Fuels

Red diesel, heating oil, electricity

28,500/10,000

Litres/kWh

Machinery, buildings

–

Horsepower/m

Inventory

Emitted (t CO2e) 97.23 58.07

2

Crops

Wheat, barley, oil seed rape, beans

2,283

Tonnes

207.74

Inputs

Fertiliser, sprays

240/811

Tonnes/kg

585.72

Ewes and lambs

1,312

Head

213.76

Plastics, cardboard, oil

12.5

Tonnes

Livestock Waste

2.17

Total emissions

1,164.68

Current sequestration Type

Description

Total

Units

Sequestered (t CO2e)

Mixed

20

Ha

-116.82

Woodland Hedgerows

2m width

30,000

Metres

-26.40

Uncultivated (6m width)

20,000

Metres

-3.96

Based on 3-yearly soil samples over 200ha

0.1

# % $ Field margins #

# # Soil organic matter (SOM) ! %("

( $ %( !

% ! # "!#%

# #

# $$ name

Farm Tiger Farm

Soil Clay/silty loam ! type #!""

Date of report 01/09/20 Farm area (ha) 430.26

Cultivated 361.94 # % $

Grass 48.32 # # #

Non-cropping 20.00 ! %("

( $ %( !

% ! # "!#% # #

)

! #!""

# $$

Options to reduce emissions: • Alter rotation – e.g. introduce cover crops • Cultural methods – e.g. fewer cultivation passes • Invest in fuel efficient machinery • Reduce inputs – e.g. nitrogen fertilisers • Renewable energy use

balance Carbon

& % ' %

• Changes to livestock diets

Options to increase sequestration: • Change practices to increase soil organic matter e.g. reduce tillage/soil disturbance – also increases productivity and workability

• Environmental plots – longer-term stewardship plots e.g. 5-year mixes

• Planting trees and hedgerows

Carbon balance

How to reduce emissions:

" (( $#(

)

&* ()' ) $#

' $# ! #

!) ' '$) ) $# . $+ ' '$%( *!)*' ! " ) $ ( . , ' % (( ( * ! #) " # '- * #%*)( . # )'$ # ') ! ( '(

How to increase sequestration:

-1,190.95 -1,338.13

Farm details

& % ' %

% change per year Total sequestration

9

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Trees Please

Trees Please Ltd. opened for business in the North East in 1987 and is now the biggest tree nursery in the region, supplying 15 million bare-rooted trees per year to its wide range of customers based across the UK. With the UK government’s ambitious plans to plant 30,000 hectares of trees every year by 2025, and Scotland already working towards its treeplanting targets to tackle climate change, the future of the industry is looking positive. However, with new regulations on migrant workers coming into force in 2021, and the withdrawal of an essential pesticide, company director Charles Beaumont admits the coming years will not be without their challenges.

Trees Please was first established in County Durham where production was based on a site in Ouston.

When Charles Beaumont took over the business in 1999, he made the decision to move the business to Corbridge, Northumberland, to land along the banks of the River Tyne to take advantage of the fertile, free-draining soil.

Since then, the demand for the company’s high-quality trees has grown year on year, and the nursery now occupies 300 acres of land to cater for its expanding customer base.

Our order book is mostly full two years in advance, with everyone being determined to get hold of the plants they need…

The business has progressed from supplying predominantly conifers, through supplying predominantly broadleaves and woody shrubs, to its current position of being able to supply practically anything the tree market requires.

“The majority of our clients are forest management companies, but we also supply to estate owners, contractors and, in particular, farmers,” said Charles.

“We grow a variety of trees, conifers, shrubs, broadleaves and hedging plants, and 95 per cent of production is currently supplied to Scotland.

“We have a total of 300 acres of land which we rotate between as much as we possibly can, resting areas with a green or farm crop to allow the land to recover.

so there is a constant flow of business from the country.

“2012 was also the year that ash dieback took hold, so now there is a far greater emphasis on using only UK-grown plants.

All UK forest nurseries have grown exponentially since that time.

“Our season runs from November to June and we currently have 17 full-time employees, as well as around 60 full-time equivalents at the end of the year.”

“Our order book is mostly full two years in advance, with everyone being determined to get hold of the plants they need, and we are in constant contact with forest management companies to ensure it remains this way.

Charles is the chair of the Nursery Producers Group, an association of the 11 largest tree nurseries in the UK which between them grow 120 million plants every year.

“The UK government has announced some ambitious tree-planting targets, but with the current planting rate at 12,000 hectares in Scotland, 1,500 hectares in England and 500 in Wales, there is still a very long way to go.

As the UK government has plans to plant 30,000 hectares of trees every year by 2025, he predicts that the future is bright for the industry.

“Nurseries are not yet gearing up for the new targets due to the uncertainty around them, but we are confident that the industry will be able to deliver the additional plants should they be required.

Charles added: “The biggest change we have seen in recent years was in 2012 when Scotland decided to tackle climate change much earlier, so we are constantly looking to the north.

“And they are not only looking at new planting, but also at felling and restocking,

…I could easily see us growing 20 million trees per year…

“At Trees Please we already have additional land, and I could easily see us growing 20 million trees per year.

“Although the government targets will be challenging, the focus on the importance of tree planting means that the next 20 years are looking positive for the nursery industry.”

But as the government targets will increase the demand for trees, its new immigration policy could spell the end for the industry’s seasonal workers from overseas –

The UK government has announced some ambitious tree-planting targets… something that could have a serious impact on the business.

“We are very much threatened by the government’s new immigration policy,” said Charles.

“We have a high number of seasonal jobs which are mainly filled by workers from overseas. Although many of our seasonal workers are actually resident in the UK, it could still have extremely serious consequences for us.

“The work of planting and harvesting trees is very labour intensive, and weeds are the number one enemy of the tree-planting industry, so we can also spend tens of thousands of pounds on hand weeding – but this will become an issue if we do not have people to do the work.

“We are already looking at automating the process; however, being in a relatively small industry means that the technology does not yet exist for us, so we are now looking at similar industries using automation that we can adapt for ourselves to ensure we are as prepared as possible.

“So with tree-planting targets set to rise and automation becoming increasingly necessary, the future of the industry is looking extremely interesting.”

11

The effects of Covid-19

Views from our professionals working across the rural sector

David Kinnersley Head of Agribusiness The key influence of Covid-19 (C19) on the agricultural sector has been the redirection of the supply chain from the food processor to direct consumer markets. While the arable market has been relatively unaffected, parts of the dairy supply chain have been impacted by the reduction in supply of dairy goods into restaurants, schools etc., and for poultry broiler placings, numbers have dropped with the lower demand for chicken from fast-food outlets and others. Those supplying the food service sector with fresh produce have also been affected.

The market for beef, lamb and pork has been less affected, partly due to wider market demand drivers. However, as has been seen elsewhere in the world, there is a vulnerability to meat processing plants being shut due to C19 infections in staff.

There have been silver linings, notably for the farm shops and local food producers who saw dramatic upswings in demand, particularly where they were set up for home delivery and C19-safe collection. Hopefully some of this support will remain beyond the pandemic; if nothing else, it has reconnected many people with their local food suppliers and producers.

With Brexit and the Agricultural Bill on the table, 2020 is certainly going to be a significant year.

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Scott O’Dell Associate, Planning The Covid-19 pandemic has made people significantly question the need to travel, particularly to the office and more generally for holidays.

Homeworking has become the norm and is set to continue in some form for much of the population. From a planning perspective, this has given rise to far greater flexibility in where we live and work. The pressure and focus of having to be in urban areas seems to have eased; huge numbers of commuters are staying put, and many are giving up their city pad to enjoy a less hectic rural life. The change brings opportunities to these rural areas including increased demand for housing, flexible work space, leisure, local shops/produce and other services.

Similarly, the government restrictions on travel have forced the nation to holiday in the UK and rediscover the countryside. Holiday lodges, B&B and glamping have all been winners, as well as the outdoor activity/leisure industry.

Landowners, farmers and businesses can capitalise on diversification and development opportunities to meet this growing and changing demand. Local authorities are eager to support rural economic development and investment.

The planning system remains highly amenable to conversions through Permitted Development Rights, and there is even greater flexibility in the changes recently announced to the Use Class Order whereby certain changes of use do not even require planning consent (click here to view). Out of a devastating global crisis there is positivity, and this is the re-engagement of the British population with its countryside as a place to live, work and visit.

Stuart Flint Head of Agency Sector The country residential market has performed in a way this year that we could never have forecast. The start of 2020 was marked by a high degree of optimism based on positive political and economic movements. No sooner had we got the Spring market in our sights, we started to understand the ramifications of the pandemic; and whilst we were all locked down, the market ground to a halt. Viewings couldn’t take place and restricted physical movements prevented surveys, valuations and removals, whilst conveyancing became very difficult to progress. The market stood still for months until restrictions were lifted and a tidal wave of activity swept through the rural property markets.

There was always going to be a backlog of viewings for country residential sales but these were up by an astonishing 140% in July compared to the same month in 2019. Fresh properties to the summer market attracted very high levels of interest, and competitive bidding was commonplace with many sales achieving over guide price. Properties that had been on the market for many months suddenly attracted interest and achieved sales that were elusive well before the coronavirus was ever heard about. The confidence levels in the market were unexpected, but much of the activity was Covid-related.

Many of the purchasers registering with us in recent months have re-evaluated their lives and their living environment. The volume of planned moves away from towns and cities to villages and rural settings has taken us by surprise, both in terms of numbers and the geographic flexibility of purchasers. The latter is undoubtedly fuelled by perceptions that working environments are changed for good, and even if people return to offices in significant numbers the likelihood is that working patterns will be much more agile.

Many buyers who might have traditionally focused their search on the Home Counties have stretched their search across far-flung counties, seeking more solitude and getting much greater value for money at the same time.

Duncan Bedhall Partner, Commercial Sector Covid has of course had a significant impact on the commercial property market; however, the various sectors have had very different outcomes.

Leisure and retail are, unsurprisingly, the worst affected and rent collection rates have not been good. However, rent collection from both office and industrial/warehouse tenants has been very positive with only relatively small arrears at the end of the quarter in the portfolios we manage. We have collected on average nearly 90% of all the rents demanded commercially over the Covid period. Our figures, however, are definitely skewed towards industrial/warehouse given that most of the property we manage is in this sector. Generally speaking, communication with the tenants has been very good, and in many cases landlords have been able to support and guide these businesses through the most difficult times.

Following lockdown, the strongest rebound in demand was for small warehouse units, particularly those of under 3,000 sq ft. We now have a shortage of these units and there is a limited number under construction. In our opinion this demand will continue given that retail spend on the internet pretty much doubled over the time of the pandemic and there is little sign that this will change. Usage of warehouse space should continue to increase at the expense of retail space in the high street.

We think agricultural buildings with good connections to major roads and motorways will be in a strong position to benefit from a move from retail to ecommerce. The press is full of stories of business people looking to move out of town for the good life in the countryside.

Whilst much of this movement is exaggerated, many people have realised that they don’t need to commute into a city centre every day and ultimately may realise that they can rent good storage and office space converted from barns in the countryside.

There continues to be demand for good quality commercial property investments as income yield is better than either bank deposits or stock market investments. Transaction volumes are low, as not much is being brought to the market; however, that could change as investors look to reposition their portfolios.

It would be wrong to give the impression that things have not been difficult over the Covid period, but business has adapted and good companies will survive and thrive.

Matthew Trewartha Partner, Rural Property Management The management of rural property through Covid-19 has been challenging for many reasons. Firstly, inspection of property, particularly residential, has been virtually impossible for a long time. When this is linked to the longer notice periods to terminate tenancies (now six months) we are left in a difficult position. It is surprising, though, that rent arrears have not spiked as we expected, and few tenants have requested rent reductions. We feel this is largely down to the personal relationships we have with tenants.

‌a tidal wave of activity swept through the rural property markets.

Rural land property has been easier for obvious reasons, but the movement restrictions that were in place and the fact that we are not key workers meant that many routine issues could not be addressed. Where we manage portfolios remotely, we had the additional challenge of not being able to book hotel accommodation or make dinner reservations.

Where clients have operational sites, such as reservoirs, quarries and landfills, additional effort has been necessary to manage third parties, such as telecom operators, who have needed access as essential workers. Keeping everyone safe and managing the expectations of all involved has been a key task.

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FOR SALE: Roadnook Farm, Wessington, Derbyshire

Farmland market Historically low supply with pent-up buyer demand

FOR SALE

2020 is likely to record a historically low level of supply across the farmland market, due in no small part to Covid-19 lockdown restrictions. Adverse weather conditions earlier in the year followed by movement and viewing restrictions during the lockdown forced many vendors to hold off marketing campaigns.

The usual rush of farms to the market during the spring months fell drastically short of expectations as early March signalled the start of UK-wide social distancing measures. By mid-to-end March further tightening of restrictions on movement were introduced and the farmland market, along with other property sectors, drew to a near standstill.

No surprise that supply of land to the open market at the end of May was circa 70% below 2019 levels with a little over 7,000 acres marketed.

With the easing of lockdown measures through June and July, and with pent-up demand from hungry buyers in the market, supply improved steadily. By the end of July supply had recovered marginally, but was still down on 2019 levels by around 50%. We experienced many vendors holding back farm launches for fear of a saturated marketplace. This did not transpire, but rather created a steady stream of opportunities through August and September.

As we approached the end of September supply had improved again and was running about 40% below 2019 supply levels, at just under 50,000 acres.

With many farmers reporting below-average yields for the 2020 harvest, and obvious income pressures, we do expect to see a fall in on-farm investment over the next 12 months. With BPS payments reducing from 2021 we are seeing an increase in the number of retirement sales coming forward a year or two earlier than originally planned.

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The emerging lifestyle and amenity market The recent lockdown measures have resulted in some interesting shifts in buyers’ requirements across our rural marketplaces. The majority of our agency teams across the UK have experienced a surge in demand for rural properties including secluded rural dwellings, smallholdings and farms. The farmland market has spiked the interest of many who would otherwise have considered such properties too remote and inaccessible for the daily commute.

The weeks following the easing of lockdown restrictions were spent arranging viewings for the wide range of farms and smallholdings we had recently launched, whilst trying to register the unprecedented number of urban and London-based residents searching for a rural retreat. Not only are these buyers seeking a more rural location and lifestyle, but many are looking to the secure and tangible nature of farmland as a safer asset in which to hold capital through the uncertain economic outlook.

We see this trend continuing as a greater proportion of the population move towards full- or part-time homeworking arrangements, with less reliance on access to major road and rail networks for commuting purposes. These buyers are generally seeking residential properties with smaller acreages and some amenity value.

Biodiversity We have seen the green shoots emerge for some poorer-quality and less flexible land holdings as corporate, private and development bodies look to secure land for carbon offsetting/trade, biodiversity, educational and conservation purposes. The forestry markets continue to strengthen, as expected, with buyer demand and values increasing. Based on the principle of responsible investing, such demand for biodiversity and carbon offsetting opportunities continues to intensify but will be location-driven and subject to limitations on topography, access and natural capital potential.

E: Bilston Brook Farm, Lichfield, Staffordshire

FOR SALE: Saltersford Farm, Holmes Chapel, Cheshire

Looking ahead History tells us that in times of economic downturn, farmland investment generally strengthens, as do values. The low-yielding and low-risk asset is often sought to weather the storm and restructure balance sheets in the short to medium term. We are likely to see a further uptick in demand in the months ahead, not least as the number of lifestyle buyers intensifies.

In the short term, any significant adjustments to Capital Gains Tax rates may unsettle investors’ confidence and reduce demand from a proportion of our buying clients. Potential vendors may also delay or decide against sales in preference of alternative farming structures, allowing for the ability to raise capital through the sale of machinery for example, and entering into suitable farming agreements with third parties, whilst also structuring businesses for Inheritance Tax purposes.

We expect an increase in supply of farmland to the market in 2021.

Subject to any significant tax changes, debt- and retirement-related sales are likely to rise steadily. We see this trend continuing over the next 12 months. In addition, some farmers are considering sale and leaseback opportunities and offering land privately to ‘rollover’ buyers with significant price premiums.

We expect an increase in supply of farmland to the market in 2021… and Brexit trade negotiations; with ongoing economic uncertainty, both buyers and vendors are likely to approach the market with caution.

Whilst awaiting further clarity around the Agriculture Bill, and specifically the proposed environmental land management schemes, we expect the farmland market to remain calm.

Progressive farmers and diversified farming businesses will continue to invest, as will those seeking land for sporting and amenity purposes or from a tax-driven perspective.

Even if you are not considering a sale imminently but would like to understand more about values and the farmland market in these uncertain and complex times, we would be very pleased to hear from you.

We believe a greater proportion of mixed and combinable cropping farms will be marketed as cost pressures rise, and for those commercial holdings with limited opportunities through future environmental schemes.

Richard Gadd

We expect average values to remain fairly static through the remainder of 2020 and into 2021, albeit with a continuing wide range of values being achieved. Looking forward, values will likely be dictated first and foremost by future domestic support policy

richard.gadd@fishergerman.co.uk

07966 481487

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Meet the team Our 26 offices provide local experts in all these work areas. If you would like guidance on any rural property matters, please contact one of us and we will ensure you get to talk to the very best advisor.

David Merton

Stuart Flint

Head of Rural Sector – Estate management and strategic consultancy

Head of Agency Sector – Farms, estates and country house sales

07770 333331

07501 720422

david.merton@fishergerman.co.uk

stuart.flint@fishergerman.co.uk

David Kinnersley

Darren Edwards

Agribusiness

Sustainable energy

07501 720405

07918 677571

david.kinnersley@fishergerman.co.uk

darren.edwards@fishergerman.co.uk

Helena Tibbitts

Charles Meynell

Valuation

Expert witness

07918 628985

07836 212307

helena.tibbitts@fishergerman.co.uk

charles.meynell@fishergerman.co.uk

John Ikin

Scott O’Dell

Compulsory purchase

Planning

07887 627978

07785 616659

john.ikin@fishergerman.co.uk

scott.odell@fishergerman.co.uk

Ben Marshalsay

Richard Benson

Development

Building consultancy

07771 974322

07768 552827

ben.marshalsay@fishergerman.co.uk

richard.benson@fishergerman.co.uk

William Gagie

Richard Gadd

Minerals

Farm agency

07551 152691

07966 481487

william.gagie@fishergerman.co.uk

richard.gadd@fishergerman.co.uk