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Will CAP reform affect farmland supply and values in England?

Charles Dudgeon Director of Savills, said: "While there should be less disruption to the market prior to the next round of reforms than prior to 2005, because the rules for entitlement transfer are already clearly mapped out, if history repeats itself the farmland market may well experience some disruption during the following one or two years."

However, landowners already holding large acreages may be concerned about the risk of capping or subsidy reduction and be reluctant to buy more land until the details are clear. There will be a degree of nervousness among potential purchasers until the payment regions are known, which is unlikely to be before the end of next year.

The green payment restrictions will affect profitability on some farms, which may have a negative impact on land values.  Those likely to be hit hardest are dairy farms growing single arable crops, such as maize with no other features that would qualify for set aside, their only recourse being the reduction in herd size to free land up for set aside, which would reduce the gross margin with no significant overhead saving.

Specialist cropping farms may also lose a proportion of their core crop in order to free up land for set aside and/or other crops in rotation – the alternative being to stop claiming the proportion of subsidy allocated for environmental measures.

Ian Bailey head of Savills rural research said: "We ‘watch this space’ because it is very likely that some of the proposals will be dropped or at least significantly watered down as the debate continues in the coming months; but the market will no doubt register some nervousness."

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