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Confidence returning to arable land market

Andrew Shirley, head of rural property research at Knight Frank, said: "As farmers gather together at Cereals 09, the biggest arable event of the UK’s agricultural calendar, it is opportune that we can now say with some confidence that the farmland market has started to show signs of recovery after almost nine months of falling prices.

"Across the country, our farms and valuations teams are reporting renewed confidence amongst farmers with deals on arable land routinely being done at over £5000/acre and in some cases in excess of £6000/acre where there has been special interest.

"Although crop prices are still some way from the peaks seen last spring, which helped to push land prices to record highs, cereal markets are slowly edging upwards after falling sharply in the second half of 2008. The increasing political focus on global food security is also giving farmers confidence that their industry offers them a long-term future.

"Farmers, however, also recognise that EU support for farming via the Common Agricultural Policy will inevitably diminish and that they cannot buy more land simply for the sake of owning a bigger farm. It is the most productive and profitable land that will be most keenly sought after."

Clive Hopkins, head of farms and estates at Knight Frank, said; "I don’t think that farmers ever really stopped wanting to buy land, but the impact of the credit crunch made anybody thinking of investing money in any sort of property very nervous. As a consequence, we saw a period of stagnation when very little farmland was traded and it was difficult to accurately gauge where prices were heading.

"Farmers can now see that some of the froth at the top of the market has subsided and perceive that farmland is looking good value again.

"Investors, from both the UK and abroad, are also active again now that their credit flows are starting to free up again as the banking system slowly unlocks itself. Compared with other more volatile asset classes, farmland looks a secure long-term investment. Ownership could also act as a useful hedge if, as many are predicting, we re-enter an inflationary cycle within the next 24 months.

"I do not expect land values to return immediately to the dizzy heights of last year when land was routinely changing hands for over £7000/acre, but I expect prices to steadily increase over the next few years."

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