The market has become more finely balanced over the past 12 months with demand more price sensitive and the very high headline values are achieved less frequently. Local market knowledge, for both buyers and sellers, is therefore critical in a market where prices achieved range widely from average values.

The pressures on commodity prices and therefore farm profits and cash flows has weakened farmer demand and we don’t expect this to change in the short term. However, the fundamentals of land ownership still remain secure and the medium term (five year) outlook for commodity prices is relatively positive.

Farmland as an investment has performed very well during the recession. Its value is influenced by different factors than other types of property and equities and many regard it as a useful asset to diversify risk within a portfolio. UK farmland has largely outperformed all of the major UK property types as well as gilts and equities over the past 5, 10 and 20 years (see Graph 3).

Source: IPD & Savills Research

Although past performance can not be relied upon to predict future performance, the factors that underlie farmland’s performance have not fundamentally changed and we do not expect the total returns from land in the long-term to change significantly.