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The UK Royal Institution of Chartered Surveyors recently published their report on the Rural Land Market Survey for second half of 2007.  The highlights of the report were that arable land prices rose by 29.6% in 2007 year on year, and broke the £10,000 per hectare mark for the first time.  This really should come as little surprise given the rapidly increasing farm returns during the period.

A number of articles ran in the broadsheets, such as the Guardian and FT, covering the report.  However, TheCityFarmer thinks that the angle these stories took, to focus on the expected retreat of buyers from the city as a result of the credit squeeze, hides the more important conclusion.  While there is no doubt some merit in that argument (and by the way the nervousness in the City is palpable at the moment), but the survey tells us that ‘non-farmer individuals’ only account for 37% of buyers so the impact of the city slowdown on the land market as a whole will be limited; especially as that 37% certainly do not all hail from the City. 

 TheCityFarmer sees the most interesting finding to be the future price expectations of RICS members, which is reported to be around 50% growth on 2007 values – the most buoyant expectations since the survey began.  If these predictions were to play out during 2008 we would see prices in the region of £7,500 per acre, a situation that could well signal a bubble.  As we know bubbles are liable to burst.

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Apologies for the delay in coming back to this post, time seemed to race away this week.  In part I we saw how the agricultural commodity prices were at record heights, or at least those long since seen.  The pertinent questions for the farmer and investor alike are is the high sustainable and is there any further upside?  TheCityFarmer looks at the influencing shifts of both supply and demand in the global market.  There are 3 factors that need to be considered.  Read the rest of this entry »

 As we know, wheat and other cereals have been enjoying a healthy period of a price growth over the last few years, and at the time of writing it is at a peak not before seen.   So TheCityFarmer aims to explain some of the possible causes.

There are a number of factors that can shed light on the increase illustrated in the chart below.  Often commentators will cite the difficult harvests experienced by those in important cereal producing nations such as Australia.  While this has, no doubt, made a contribution to the price by squeezing supply, it does not offer a long-term explanation.  

Feed Wheat Price Chart

To predict that the recent rises will be sustained into the long-term one would have to be able to point to some structural factors having a material impact on the forces of supply and demand in the market.   While measuring the magnitude of the affect is a vastly complicated matter that would require a great deal more inquiry than we can muster on this blog, TheCityFarmer is confident that there are forces, which are still in their early stages of development, which could indeed have the material impact required to sustain or even continue to drive up prices.  So what are they?  Feel free to leave your opinions in the comments field, but TheCityFarmer’s answer will have to wait for the next post which will be soon-coming.

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Part II of this post is now available here.

Welcome

Farming and the City are increasingly linked. Global markets set the price of farm products, which themselves are a fast growing asset class for institutional and private investors. Here TheCityFarmer brings the farmer’s perspective to agricultural commodity investors and shows how farmers can benefit by using the financial markets.
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