Agriculture is better placed to weather the coronavirus crisis than most other industries, according to Andrew Wraith, head of food and farming at real estate firm Savills.
“I would rather be tasked at writing a recovery plan for agriculture than the aviation industry. I remain optimistic,” Wraith said in an online presentation.
He suggested the COVID-19 pandemic has moved food security up the political agenda in the UK, which could benefit farmers in the long term.
The crisis could also bring more balance to the debate surrounding the role of farmers in producing food and managing the environment, listeners to the webinar were told.
While most farming sectors have been hit by a downturn due to the closure of foodservice, in a survey of UK farmers conducted by Savills, 60% of respondents thought that coronavirus would eventually have a positive impact on agriculture.
Wraith suggested that this optimism could stem from farmers being used to crises such as oversupplied markets, weather events and disease outbreaks.
“As serious as the coronavirus is both nationally and globally, for most [farmers] the virus is a challenge comparable with other farming risks,” he said.
Farmland is gold
Meanwhile, analysis by Savills indicates that agricultural land in the UK has been a better investment over the past 30 years than many other common assets.
The firm’s head of estates Alex Lawson said that farmland has been significantly less volatile than the likes of stocks and shares.
He pointed out that land also has farming or rental income, so it is often described as “being like gold but with a coupon”.
“It is the tight supply and extensive reasons for buying that supports prices and insulates the market from volatility,” Lawson said.
In other industries, forced sales can lead to an oversupply of real estate on the market, but that tends not to be the case with farmland.
“Most sales are brought about by choice, and only when sellers have confidence in the market,” Lawson noted.
He maintained that debt levels among UK farmers are also “exceptionally low” compared to other industries.
“There is an estimated total land value [in the UK] of over £200bn and a long-term agricultural debt of around £14bn, so the loan to value ratio is below 7%.”
Disconnect
In recent years, the range of buyers has increased which has led to a widening disconnect between land values and farm commodity prices.
Lawson said that commercial farmers still make up 50% of land buyers in the UK, but other reasons for purchasing farmland include to tie up wealth and minimise inheritance tax, development potential, forestry, renewable energy, and lifestyle.