Pictured:  Sarah Reece, associate partner with Berrys at Shrewsbury

The spring flurry of activity in the agricultural land market continued through the summer with land owners who were tempted to release acres being rewarded with huge interest and good prices.

Commercial farmers, keen to boost acreage in the light of higher commodity prices, remain the mainstay buyers in the farmland market with private investors seeking a safe home for their money coming back into the fray.

While in the past these investors sought complete farms for their capital growth and tax benefits, they are now seeking bare land for its income earning potential.

The latest RICS Rural Land Market Survey confirms that farmland prices reached an all-time high in the first half of 2011, coming on the back of the exceptional demand from commercial farmers. Residential demand was little changed.

The survey's 'transaction' based measure of farmland (which includes a residential component) increased by six per cent during the first half of 2011 (H1) to £7,479 per acre. The 'opinion' based measure (which is a hypothetical estimate by surveyors of pure bare land values) increased by five per cent to £6,115 per acre.

Both price levels are historic highs, but the growth rates mark a slowdown compared to H2 of 2010.

Commercial farmers remain keen to expand production to spread costs and make the most of elevated commodity prices which can be seen in the valuations placed on bare land; with bare arable land increasing to £6,681 per acre and pasture increasing to £5,549 per acre.

All bar two regions within Great Britain experienced rising bare farmland prices apart from the North West, where prices fell by one per cent, and Wales, where prices fell by two per cent. The strongest price increases during H1 of 2011 took place in the North East, where prices rose by 14 per cent and the East Midlands, where prices rose by 10 per cent.

With offices across the Midlands and North West of England, Berrys is well placed to assess the trends both regionally and nationally.

In Shropshire, there has been an increase in the supply of land and farms on the open market, but supply is still limited, which has resulted in strong demand. Bare arable land in particular is keenly sought after and is being snapped up by commercial farmers eager to purchase while they can.

The interest has been exceptional for the parcels of bare land we have recently marketed in various part of Shropshire. An arable parcel in north Shropshire substantially exceeded its £6,000 per acre guide price and offers for a 228 acre block south of Shrewsbury were quickly received for well above its guide price of £6,500 an acre.

Demand for pasture land is slightly more variable and dependant on the interest from neighbouring farmers.  

The picture is similar in Cheshire, where land prices remain amongst the highest in the country. The RICS survey records the North West region dipping just a few pounds below its 2010, £7,000 an acre, average to £6938 per acre, still well above the West Midland's recorded average bare land price of £6,375. But the gap is closing as the difference six months ago between the two regions was £1,000 per acre.

Graham Bowcock, corporate partner at Berrys' Northwich office believes that increased farm incomes and greater market stability are fuelling demand.  While the arable and red meat sectors show quite strong commodity prices, in the dairy sector the key to profits seems to be size and although returns are not great overall, the dairy sector is intent on getting bigger. 

Globally, diets in the East are becoming more westernised fuelling demand for commodities such as red meat and wheat.

The general economic downturn is making agriculture look attractive. A two to three per cent return from farming is better than most other areas, especially whilst the bank base rate is at 0.5 per cent and not yet showing signs of moving up.

Farmers can access competitive funding too, with their strong balance sheets and good historic track records all helping to ensure attractive interest rates and availability of money.

In Cheshire, there are still non-farmers with cash looking to invest in farmland, although most buyers are currently farmers.

The survey also shows land prices have increased by 10 per cent in the East Midlands and Nick Bowman, partner responsible for the farm agency in the Kettering office, confirms that the land market remains exceptionally strong with demand far outstripping supply and supply being very limited. There seems to be a widening differential between prices for arable land and pasture - with arable land in places pushing over £7,000 per acre.

"Confidence remains high and harvest results look variable, depending on soil type, but generally better than expected or anticipated.

"For the future, we are confident that farmland will remain a safe investment for farmers and non farmers alike," Mr Bowman added.

Sarah Reece can be contacted at Berrys' Shrewsbury office on 01743 267068, email sarah.reece@berrybros.com. Nick Bowman can be contacted at the Kettering office on 01536 532372 email nick.bowman@berrybros.com and Graham Bowcock in Cheshire is available on 01606 49200 email graham.bowcock@berrybros.com or visit www.berrybros.com