Will 2013 be the cream of the crop for agriculture?

2012 will be remembered, not only for the Diamond Jubilee celebrations and the Olympics, but for farmers, it will be a stark reminder of the extreme weather conditions they faced and the impact on the industry, says Petty director Phil Kelly.

[caption id="attachment_23569" align="f-align-medium-right f-align-center" width="300"]Phil Kelly, director, Petty Chartered Surveyors Phil Kelly, director, Petty Chartered Surveyors[/caption]

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 county unplanted and planted crops looking very poor at the year end, giving minimal if any harvest.

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 as we head into 2013.

Worryingly, in this market this may then lead to an increase in the number of distressed sales which is something we hope we can avoid within this treasured market sector.

Despite this trepidation, average farmland values continued to strengthen throughout the year. This was in stark contrast to most other property and alternative assets, 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. Positively, we forecast growth of 40% over the next five years for average farmland values across Lancashire ensuring this market is regarded as a safe haven for cash.