2012 will be remembered, not only for the Diamond Jubilee celebrations and the Olympics, but also the extreme weather conditions. It was an extraordinarily challenging year for agriculture. It started with a drought, which led to a disappointing harvest and ended with a washout leaving large areas of the country unplanted, and planted crops looking very poor at the year end.

The yields and quality of crops, including forage, were significantly lower than average and this combined with higher costs, including sprays, fuel and feed, has put pressure on profits and cash flows into 2013. This may lead to an increase in the number of distressed sales.

Despite this, average farmland values continued to strengthen throughout the year. This was in stark contrast to most other property and alternative assets (see Graph 1 below), the exceptions being prime central London residential property and gold.

We believe average farmland values will continue to grow in the short to medium-term, driven by competition for top quality farmland. However, we expect weaker demand and slower growth in values for smaller farms with a significant residential weighting, at least until the mainstream residential market revives.

We forecast growth of 40% over the next five years for average farmland values across Great Britain – a trend that is likely to mirror the prime central London residential market. Both markets are regarded as safe havens for cash.