Feldspar
Member
- Location
- Essex, Cambs and Suffolk
It is not the people who are considered to be "good farmers" - people who grow profitable crops and run an efficient crop production business - who grow their business and are successful over the years.
I was talking to a friend the other day who is in the process of selling around 100 acres of prime development land for something in the region of £900,000 / ac. He did not have to be a great farmer to make this money, rather he stands to become far wealthier than any of his neighbours simply by an accident of location. He could have been producing 1 t/ac wheat with stratospheric costs for the last 20 years whilst his neighbour could have been producing 4 t/ac every year with as low a costs as anyone in the industry and it would not have made jot of difference to the likely future trajectory of the two farms. In the long run the 1 t/ac farmer will subsume the better farmer next door.
The story is far from unique; the majority of the largest landowners near us are those who have at some point sold off land for development. They are the people with 5000 acres and not because they won the Farmer of the Year award.
Now of course the smaller farmer next door doesn't have to sell his land just because the person next door has money to spend but I think it would be naive to think that wealthy neighbours have no effect. You only need a few people like this who are determined to buy land and suddenly your farm becomes worth a lot more were it to be put up for sale. You are a farmer with a son and two daughters; the son would like to farm but the daughters would like their money out. The higher the value of the land relative to the rate of return on the invested capital the less likely the son is going to be able to farm. He might be a damn good farmer but that will alter the rate of return only slightly in the face of land values at 12k/ac. The likely outcome is that the farm is sold to house grower next door.
The income from selling land for development is so disproportionate compared to 'normal' farm income streams that people who just grow wheat, barley etc. cannot hope to compete in the long term. Discuss.
I was talking to a friend the other day who is in the process of selling around 100 acres of prime development land for something in the region of £900,000 / ac. He did not have to be a great farmer to make this money, rather he stands to become far wealthier than any of his neighbours simply by an accident of location. He could have been producing 1 t/ac wheat with stratospheric costs for the last 20 years whilst his neighbour could have been producing 4 t/ac every year with as low a costs as anyone in the industry and it would not have made jot of difference to the likely future trajectory of the two farms. In the long run the 1 t/ac farmer will subsume the better farmer next door.
The story is far from unique; the majority of the largest landowners near us are those who have at some point sold off land for development. They are the people with 5000 acres and not because they won the Farmer of the Year award.
Now of course the smaller farmer next door doesn't have to sell his land just because the person next door has money to spend but I think it would be naive to think that wealthy neighbours have no effect. You only need a few people like this who are determined to buy land and suddenly your farm becomes worth a lot more were it to be put up for sale. You are a farmer with a son and two daughters; the son would like to farm but the daughters would like their money out. The higher the value of the land relative to the rate of return on the invested capital the less likely the son is going to be able to farm. He might be a damn good farmer but that will alter the rate of return only slightly in the face of land values at 12k/ac. The likely outcome is that the farm is sold to house grower next door.
The income from selling land for development is so disproportionate compared to 'normal' farm income streams that people who just grow wheat, barley etc. cannot hope to compete in the long term. Discuss.