'If you meet a farmer who tells you he's poor, he's lying'

Prime farmland has doubled in price in just four years, writes Catherine Pepinster

HOUSES and flats might still be as hard to sell as sand in the Sahara, but one part of the property market is booming as never before. In the past four years, the price of British farmland has doubled.

Across the country the rich earth of arable land, in particular, is now 92 per cent more valuable than in 1992, rising from an average value of about pounds 1,300 per acre then, to just under pounds 2,500 an acre today.

"The farming industry has changed dramatically in the last few years" said John Malcolm, chief economic adviser to the National Farmers Union. "During the second half of the Eighties, farming was in decline, with the nadir reached in 1991. Now profits have soared, the outlook is brighter, and land is going up and up in price."

The reason for the rise in prices is simple: the return on the land. Farming has never been so profitable. "These days, if you meet a farmer who tells you he's poor," one county chartered surveyor said last week, "he's lying."

The reasons for the buoyant profits are more complex, and stretch from the price of wheat on the Chicago commodity exchanges and the new food fads of Asia, to lack of rainfall and the complex movements of European currencies.

A special factor has been that remarkable innovation from Brussels, set- aside. As too much land was being farmed by too many farmers in the European Union, producing large surpluses that could have sent the price of farm produce plunging and driven small farmers in France and Germany into bankruptcy, under the Common Agricultural Policy the European Commission now pays farmers to take their land out of production.

Do nothing with it. Just leave it there. Then collect. For the first time in history, British farmland has a guaranteed return with no investment.

At the moment set-aside payments are pounds 138 per acre for land allowed to lie fallow, usually 10 per cent of the total. On a 2,000-acre wheat farm, 200 acres of set- aside will bring an annual cheque for pounds 27,600 from Brussels.

But don't forget subsidies. On that same farm, the 1,800 acres still growing wheat will attract a subsidy of pounds 110 per acre - another cheque from Brussels, this time for pounds 198,000.

It was the much-maligned former chancellor Norman Lamont who turned out to be the farmers' friend here. When he devalued the pound and pulled Britain out of the Exchange Rate Mechanism, the sterling value of EU farm subsidies went up. "The subsidy is supposed to compensate for price cuts, but they didn't happen," said Jim Ward, head of agricultural research of Savills, one of the country's biggest specialist estate agents. "But the farmers still got their bonus from Brussels."

The predicted price cuts did indeed fail to appear - and here we come to the money for the wheat itself. World wheat prices have been soaring. Bad harvests in Russia and the prairies of North America have pushed up prices to pounds 140 a ton in Chicago, after they had stagnated at pounds 120 a ton for 20 years.

There is pressure from Asia, too, where the growing affluence of the rice-eaters of China, Thailand and India is encouraging them to eat more meat. Chickens and livestock require grain, and the demand from the East has put further pressure on the already dwindling stocks in the world's silos.

At the moment a British farmer will get more than pounds 300 for each acre of wheat - so the farmer with 1,800 acres under cultivation will get a third cheque, for more than pounds 540,000.

It all leads to soaring prices for the land itself, with the highest prices in Britain found in the areas where arable land is at its best: in Lincolnshire, Leicestershire, Nottinghamshire and East Anglia.

Recent sales have been remarkable. Take Groby Lodge, in Leicestershire. There 375 acres, with a sizeable farmhouse, a dairy and five cottages, recently fetched pounds 1.5m. The land fetched pounds 2,500 an acre, compared with pounds 1,500 an acre three years ago.

In west Sussex, a listed Georgian farmhouse and one of the best pheasant shoots in England helped persuade the buyers of Springhead and Rackham farms to part with pounds 3.9m for 1,700 acres.

Further west in Hampshire, Laverstoke, with its fine Georgian house set in parkland, its fishing on the River Test and its 3,000 acres of prime arable farmland, was sold for pounds 9.6m, while one of the biggest deals done in the past six months was 19,500 acres in Lincolnshire, Norfolk and Cambridgeshire - sold to agricultural investors for around pounds 40m.

The rise and rise of farmland prices is good news for some of Britain's most beleaguered institutions and most powerful landowners - the Church, the Crown, and the peerage. But it is the farmer-turned- businessman who has been the sharpest entrepreneur.

"The biggest purchasers of farmland last year were farmers and farming companies. It makes sense for them: they can then spread their costs over more of their acres," said Savills' Mr Ward.

In Nottinghamshire, Peter Limb runs two farms, one of wheat and one with barley as its main crop. He has been farming his 740 acres long enough to have got used to the ebbs and flows of farming fortunes, but he has seen farmland around his own being snapped up. "I am not sure how strong optimism really is, but I've seen people, on the back of what's happening in the world markets, buying up more land," he said.

Fifty miles away in Sleaford, Lincolnshire, Mike Brearly manages a farm with dairy cattle, cereals and sugar beet. In the past 12 months he has seen canny entrepreneurs assessing the lie of the land. "We are going to see new people coming into agriculture now," he said. "I question just how many farmers have got the money it takes to buy up land that becomes available, and I wonder just how much new people coming in know about farming. You have to be really committed to run your own farm. It can still be a lonely life."

For the investors, though, farms are proving irresistible. "It's City money," said James Crawford of the agency Knight Frank and Rutley. "And it's City money that's not just British. Prices are going up fast because foreign investors want to buy British farms. Land in this country will soon be owned by the Dutch, the Belgians or the Germans."