Land price increase bad news

The National Farmers' Union (NFU) has warned that rising land prices could result in reduced profits for British meat producers.

In its quarterly Farming Outlook report, the NFU's Economic Department predicted that the rise of land prices will result in higher grain prices and sharp increases in the cost of animal feed.

Increasing costs and poor prices could undermine margins in much of the livestock sector. Pig farmers have seen the benefit of a 6% price rise more than cancelled out by the impact of more expensive feed and it is a similar story for poultry.

Higher feed prices will also impact negatively on the beef industry, which suffers from continued cost pressure as a result of marketing developments and regulatory pressures, and desperately needs higher market returns to remain sustainable. Despite a strong start this year, 2007 prices were falling below 2006 levels in May.

The sheep sector continues to experience continued cost pressures on the market and regulatory front. The first quarter saw low lamb prices and a large proportion of the market is operating below the cost of production. The situation for sheep producers has been worsened by pressure from New Zealand imports.

The report predicts that the steady rise in land prices is set to continue, due to strong demand from farming and residential buyers. "In the short to medium term, supply of land is likely to be restricted, while losses of land from agriculture will continue with land being taken for deve-lopment or for mineral extraction or forestry," it suggests.

"Therefore, unless there are significant changes in the taxation regime as it affects land, there is no reason to suppose that prices will fall in the near future and will be expected to continue mirroring their long-term growth path."

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