Tenants Farmers Association supports rent reviews with landlords

Hello everyone, it's Friday the 28th August and welcome to episode 308 of the Coke podcast with me, Will Evans. This week we are talking about autumn rent reviews. The Tannet Farmers Association is urging tenant farmers to press the case for farm rent reductions as we enter one of the key rent review periods this autumn. As we all know, farming is being hit by a near perfect storm of high costs, low yields, weak returns and devastating livestock disease. Many arable businesses have endured successive disappointing harvests and exceptionally dry conditions have reduced grass and fodder availability, increased pressure on water supplies and left livestock producers concerned about winter feed. Bleatung is now bringing further losses and expense, while volatile energy, fertilizer and other input costs continue to squeeze margins. To discuss all of this, we are joined by George Dunn, who is the chief executive of the Tannet Farmers Association. Also with us is podcast producer Becky Ray. Everybody's favourite dairy market analyst Chris Walkland is away again, so he's sent in this market report. Well, I'm bringing you my report from Europe land today, where I'm keenly watching cheese prices still. Regular listeners will know that I've been banging on about the mild cheddar price amid some inexplicably low prices and basically saying that traders in Europe look asleep at the wheel given milk volumes. European traded prices, the EX and the futures indicators, have ranged around £3,000 a ton and below for some weeks and just haven't caught up with market manufacturer sentiment. Or maybe I've just got it wrong. And there's no doubt the mild cheddar price has been low. AHDB's August price, which frankly astonished me and some other manufacturers, I have to say, they put the milk, the mild cheese, mild cheddar price at just £3,060 for late July to the end of August and up only £10 on July to compare. My August price is £3,125. So AHDB is way down on mine, but I think that's because I lifted my end of August price quite considerably and they haven't done. They will do next month I would hope. So in last Friday's PTF report, that's a report I do for the UK processes. I bumped my mild price up by £175 at the lower end and £225 at the higher end to a range of between £3,203,350, that's the highest price for a year. And I did that because, frankly, manufacturers aren't going to sell for any less. I bumped up £125 to £3,750. And as you may remember, I politely tore into the ludicrously low futures and e-ex prices because they're just bonkers. As we know, Parkham and Wyke, two major cheese makers here, they've gone up to £40 for their Farmgate price for October. And this week, Saputo top to trunk them at £41 on a manufacturing litre. I would be surprised if Barbers doesn't match Wyke at the end of this week, maybe not Saputo, we'll see. But from these price moves, we can see how much cheddar prices have to increase and in a very short period of time. So as anything happen and happen as a result of my badgering on about the cheese price, well, good news folks, the e-ex mild index increased this week by £120 equivalent to £3,115. That's its biggest weekly increase for two years. That takes its price to £3,115, a decent enough start. The futures also bucked up their ideas and increased £85 per September compared to last week to £3.8 per £5. That's still way too low by. My book, it has £4,4 prices at £3, £2,3,5 which is better but still way off the pace I'm ahead of those prices. Now, and no one, no one is going to get British stroke nor the Irish cheddar at the prices. Stone eggs are suggesting I wouldn't have thought, and in a week, a 10 days time, they're not going to get Irish at those prices either. So basically folks, I think we might be seeing the cheese market move at last, certainly here and soon in Ireland, whether Europe does remains to be seen. We need it too. We can't afford for Europe's prices to be a break and or an anchor on ours. On butter, the Dutch dairy board increased to £4,000 euros this week. It's highest level since late April. So there, decent enough increase. The spot price ranges from around £3,9 euros to £4,100 with forward prices mostly above current levels. But the futures will air up just £5,000 euros this week to £4,410. Cream, while I'm not sure what's going on with cream, there's a very, very wide range being quoted. I've heard from Summit in the mid 160s a kilo still, and I've heard it's in the mid 170s still, and I've even heard a price of £1.80 for next week. The schools will be going back soon enough though and that might give it a kick start and much needed kick start because I think it has to be that to help the liquid processes match some of the cheese prices being quoted. If it doesn't, then they're just going to have to get more out of their customers. On powders, well powders have had another good week. They continue to strengthen and help by some excellent GDT pulse results this week, where Arla and Fonteira's powder reached their highest level since they're listing on the pulse last May. Arla's SMP top, €3,000 for the first time for example, and this propelled Dutch SMP on was to cross that threshold too, for the first time in fact since November 2022. The last time Dutch SMP dropped its price was on the 24th of June now, and since then food grade has increased by £340 euros and food grade by £540. So that's some good news for our beleaguered friends at Yutri, but it's not going to change their world yet. Ampre prices are still well below £30.00. And the futures, well they dipped a bit this week. They were down 50 euros to 3135, but we've now had three weeks in a row where the average price is over 3,000 euros for the next six months. So sum optimism there and all of the forward contracts are over £3,100 euros. Finally UK spot milk is around £47,000 and some are quoting over £50,000 and that may well get another boost when the schools go back. So there you are. That's me done. I'm off to my son's wedding now. So yes, a different sort of a day, a unique sort of a day. So I will on that note hand over to our guests. Goodbye. Thank you Chris. George, very warm welcome to the show. show. Can you introduce yourself to the listeners, please? Yeah, hi, Will. Hi, Becky. As you said, my name is George Dunn and I'm the Chief Executive of the Talent Farmers Association of England and Wales. Our role I've had now for knocking on 30 years, would you believe? Wow, 30 years. You've seen some changes in that time. Yeah, lots of changes. I go back to in this role to a conservative administration before Tony Blair. Wow. Does this seem a long time ago? Yeah. Okay. Are you from a farming background George? No, not at all. I'm a, I'm a, I'm a Belfast boy born and bred in the city of Belfast. So very, very much from a, from an urban background, but studied agricultural economics at university, did some time at the Ministry of Agriculture as an economist there, then actually worked for the country landowners association. So, very much a game keeper turned puncture. Okay. Well, positioned for the role then. Yeah, absolutely. All right. And as I said in the intro, the TFA is urgent talent farmers to press the case for farm rent reductions this autumn. Can you go into more detail on the thinking behind this, please? Yeah. So we are in, as you say, one of the most difficult farming years for a very long time. I mean, we've got the high cost of inputs. And that's been compounded by the war in Ukraine and the war in Iran more recently. The exceptionally dry conditions that we've experienced this year together with the in and out of very dry and very wet years that we've had in the recent past driven down yields, driven down the availability of forage. And of course, the advancing disease threat from things like blue tongue, which is causing misery, particularly across the southwest, but certainly advancing northwards, with cases in lots of cases in Cheshire and Lancashire and Cumbria. And the more familiar diseases that started with, we've come to know TBA being influenza. So what was often referred to as a perfect storm, really. And rents are notoriously sticky. They operate almost as a sort of a ratchet. So whilst theoretically rents are supposed to go up and down, they tend to get quite, go up quite quickly, but come down quite slowly, a bit like petrol and diesel prices really. But many, many of these rents have been settled in better times. And you know, if talent farmers aren't able to get a reduction this year, when are they ever going to get a reduction? So they're in this going on. It's about trying to control something which you can control, which is while we're calling on talent farmers to to take this step. Okay, you must speak to a lot of your talent farmer members regularly. What's the mood like amongst them at the moment? Well, yeah, I mean, at the end of the day, talent farmers are entrepreneurs. They are used to weathering the cycles of business. But it just seems at the moment that they've been hit from all sides. And on top of the issues that I talked about earlier, many talent farmers are having to operate under extremely insecure agreements, which makes the business decisions that they make and they're planning for the future quite precarious. With the average length of farm business talents, the talents that have been around since 1995, now just over three years. And with 90% of all new talent, he's let coming in at five years or less. I mean, that's no basis to build resilient businesses, also providing public benefits. And so we also see many of our members losing access to land for things like solar energy, for rewilding, for tree planting, for carbon schemes, which again, seriously undermines comfort. And so it's also massively frustrating when things like the Minabatter's profitability review and the government response to that is to do more diversification. Well, as a talent farmer, you are required to farm the holding and you are often restricted in what you can do beyond agriculture. And obviously farming should stand on its own two feet, but we'd want farmers to be able to look at how they can maximize the use of the holding and have those opportunities as well. So yeah, it sounds a bit negative, but there is a lot going on. Yeah. I mean, as you know, I'm a talent farmer as well, George and you and I have talked about that before. I also find it very frustrating when government talk about you should just all diversify. That's the answer, you know, and you just want to sort of point them towards your agreement that says agriculture or use only, you know, and it just feels so outdated now, doesn't it? These agreements. Yeah, exactly. And happily, at least in England, we're trying to convince the law commission and Wales to do the same, but the law commission has decided to do a review of agricultural talent and see legislation starting next year and one of the issues amongst many that we'll be raising with the law commission is this what we call disenfranchisement. How can we provide a better platform for talent farmers to have the ability to make a reasonable request to the landlord for diversification that can't just be thrown out on a whim? So yeah, it's a big issue that we need to be addressing going forward. I was just going to say it was the point about land been taken out of availability for agriculture. Do you think, Judge, there is a little bit more trepidation with landowners now because there seems to be lots of other commercial opportunities for land use that's taken, taken sort of agricultural and farmed land out of the system or certain they're making it, making landowners more likely to look at shorter term agreements? I think the tendency towards shorter term agreements is something that's been in the market place since 1995. If you go back over a period of time, we've rarely ever got above four years and that is, in a sense, more about control and the fact that landlords don't have to try too hard because there are many more people after land than there are people offering land. But you're absolutely right in terms of the choices that landowners have got these days in terms of how to use their holdings. We've got house building, traditional house building, commercial development, we've got solar energy, we've got wind farms, we've got data centers which are now springing up all over the place. We've got carbon schemes, we've got nutrient neutrality, we've got biodiversity net gain, we've got rewilding schemes. The list just goes on. The options and the choices there are becoming greater. We were supposed to at least in England have the facilities to think about these in a more holistic way through the land use framework that the DEFRA issued a few months ago. But we're a long way off finding a way through these things which balances the needs of food, environmental and food security and energy security whilst at the same time ensuring the resilience of the businesses that are on the ground. Okay. Presumably you've had a positive response from your members towards this call fraction, Jude. Yeah, so we put out this call a few days ago and we've been certainly engaging with many members who want to know how to take things forward on a more formal basis with the landlords. Now I understand that rent reviews can be a frightening prospect for many and we will be wanting to walk with our members as they go through this process. And sometimes as well, you know, conversations we're having with members of the town of farmers association is that they see the process of initiating a rent review almost as an aggressive act against the landlord. But they forget that they're landlords and the landlord's agents of more than happy to come after them to knock on the door for an increase in rent when things are in a better position. So we've got a message for landlords as well to say, look, try to be more open-handed in these circumstances. Look at sharing the burden of this difficult time by initiating the conversation yourself with your tenant rather than waiting for your tenant to find a share of that conversation. So rather than waiting for a formal notice, we're saying to landlords as well, look, is there anything you can do to allow this to be a smooth process? You would think, at the moment, you know, we took to well up perfect storm of issues we're all facing, you know, landlords agents when we're all in the rules sector together, they're very well aware of the pressures that tenant farmers and indeed owner occupiers are facing, aren't they? So you would think that if ever we're going to get a favorable reaction, now is the time, wouldn't you? Yeah, you would hope so. And certainly we're having conversations with some of the big institutional landlords to see if they can lead the way on this. I've got nothing to report back in terms of those conversations, but we are trying to say to some of those landlords who might be able to shoulder more of the burden than your average private landlord in the country to lead the way on this. So yeah, you would hope that there would be an understanding. And I think amongst the institutions, the genuinely is an understanding of concern. and we've had some proactive conversations from institutions saying, look, what can we do to assist? They haven't yet, as I say, come back with anything concrete, but at least those conversations with those major landlords are beginning. Okay. Tell me about the process. How should farmers go about asking for a rent decrease? Okay. So formally, the process begins with a tenant serving what's called a rent review notice on the landlord, and that sets and train a 12-month period over which the rent negotiation can take place. And there are slightly different notices depending on the nature of the tenancy. So if you've got an old-style agricultural holdings act, tenancy under the 86 act, then you've got to serve what's called the section 12 notice. And if you've got a newer style farm business tenancy, then you've got to serve a section 10 notice. Now, given the unprecedented nature of the situation we're in this year, the TFA has taken the unprecedented step of making our template letters and rent review notices available to all commas, whether or not you're a TFA member, until the end of October, which is most of the end of the current rent review season. Now albeit that will be on an on-applied basis, but we want to get as many tenant farmers serving notices on landlords for a review as possible because the more notices we have out there, the more chance we have of getting rents down in the coming periods. So even if you're not a member of the TFA, contact us, give us your name, address, and telephone number, we'll let you have a copy of the notice that you can use to serve on your landlord to trigger that process. I mean, of course, I'd vote here. We would advise anybody looking to do a rent review to take advice and to join the TFA for that wider advice that we can give, but serving the rent review notice is the starting, firing the starting pistol for that review. Do you think there's any downsides, George? Do you think, you know, sometimes entering into a negotiation, it doesn't necessarily fall in your favour. And so there might be trepidation for for the tenant in the person that initiates this conversation, you know, sometimes hunker down better the devil, you know, than the devil you don't, as the saying goes. Yeah, of course, Becky, people need to go into these negotiations with their eyes open, and to look at the risks. And clearly, these are mechanisms for either landlords or tenants to use to review that rent. And yes, the landlord could use the notice to argue for an increase, but I don't think any of the indexes of looking at the moment would assist a landlord in getting an increase. And of course, you've got to look at where you're starting from. If you're paying a peppercorn rent, then you're not going to get that removed. But if you're paying a sizable rent, then yes, that is a rent which you're more likely to get reduced. And people do need to be supported through this process. I'm not saying this is an easy thing for people to do, or this is a straightforward thing for people to do. And we regularly walk with our members who are in this process of review, and we have people who are nervous about taking this step. But this mechanism is available, and people do need to be looking at it because the conversations that I hate the most of those when members regret not doing what they should have done a while ago, and now they're facing a difficult situation for the business. So we do try to get people to look ahead, rather than just see the difficulties in the moment. And we all have to go to the dentist. We hate going to the dentist. It's painful sometimes. It's expensive. But hopefully the long term might come as data. Yeah, I think that that was going to be an analogy on today's show. No, dealing dealing with land agents or root canal. I'm not sure. Okay, what happens if they dig their heels in and just say, no, we're not, we're not going to put the rent down, not even to think about it. Go away. Yeah, well, I often say to members, the worst that a landlord can say is no. So that's the worst that's going to happen, isn't it? It's not going to get any any more difficult than that. But if they do dig their heels in and you do think you've got a good case having taken advice, then the usual backstop is arbitration. Now again, I understand arbitration is an expensive prospect. It's a scary prospect. And it's something that you have to go into advisedly. But we've even seen situations where negotiations have gone nowhere on a rent review or on another tendency issue. But the tenant making that step to apply for the appointment of an arbitrator quite often brings the parties to the table because they are looking at the possibility of having to argue their case before a third party. And there are mechanisms available now to assist of the RICS, for example, has a simplified arbitration service, which holds, which holds costs back. So they don't get out of hand and that might be an appropriate route to use if it's a straightforward, just a decision of a rent. And the TFA and I know other other places have a legal expenses insurance that people can purchase in advance of serving their notice, which will cover some of the costs involved and having to take that review. So your arbitration would be the standard backstop. Sometimes the payments will talk about the appointment of experts or the use of mediation. Again, all big, scary things. But we are here to walk members through those processes. Yeah, it can be intimidating. You know, there's no two as a baritite. You know, there's a lot to lose, isn't there? What advice would you give for those then? Perhaps they've already served the notice. So in this difficult situation, what advice would you give to them and how to go about it? Yeah, so as I said to Becky, you know, we need to make sure that people go into this with their eyes open, go in advisedly, do their homework, make sure they've got all the arguments ready for the landlord. If you're on a host, I'll turn and see making sure you're doing your your your forward budgeting to share what the next three years might look like. So that you've got some arguments to go to the landlord with and and additionally, just just so people are. I feel supported in this. You were we're engaging with the commissioner for the tenant farming sector in England and with the law commission to try and make this process more transparent or quicker or less less burdensome. Now, obviously, I was going to take time to achieve, but there will be strengthen numbers as well. So, you know, if you think of of our landlord who might have ten tenants and maybe one tenant serves a notice to review the rent on that estate, the landlord's agent might just be tempted to, you know, to dig dig the heels in and have a go and try to to resist any any decrease in the rent. But of all ten tenants of all ten tenants on that estate, so I've noticed it might just convince that estate to take a more flexible and and pragmatic approach. So what I would also say though is serving notice is the easy bit, you know, it's a bit like going back to my knowledge. It's a bit like booking your appointment at a dentist. That's the easy bit, you know, and it's it gets you off the starting blocks. Even after you've served notice, you don't need to do anything with it. If you decide later, that's it. Obviously, as I said previously, the landlord could pick it up and use it for their own negotiations. But I do understand people don't want to rock the boat. But for such a time as this, you know, we do need tenants to be grabbing the bull by the horns because, as I said, if we can't get reductions this year, well, one will be ever. Yeah. Okay. You've also called for those bidding on land and the new tenant fees to take a prudent approach. We all hear about these crazy rents being paid. Seems like now more than ever, you know, pressure on five stocks, you know, a lot of dairy farmers, sure, maize. What do you say to those tempted to offer sky high prices? Yeah, this might be a bit of a strong analogy here, but I think it's a bit like passive smoking. You know, while smoking can seriously damage your health, it can also damage the health of those around you. And I think it's the same when you agree a rent. You're not just agreeing a rent for the relationship that you have with your landlord. Your high rent might be causing significant problems elsewhere. So it's fine if you want to create problems for your own business by bidding over the odds for land, but you are also creating a ripple effect because landlords will be able to point to your rent as what we call a comparable to impact other negotiations that they're having. And what we are finding, it's a bit of a trope really, but we are finding that it's the large and occupiers with low rent and finance charges on their existing units who have an overinflated sense of their ability to spread their fixed costs of additional land to tend to bid over the odds to acquire new land. And really, this has got to stop. prudent bids in the market place, because it just doesn't impact your business, it impacts everybody. Yeah, I've sat across the kitchen table fairly recently actually from a landlord's agent who've said, "We know if we put this block of land on the open market, we get X rent for it." It can be hard to argue that they're wrong because you mentioned earlier the demand for land outstrip supply, but that doesn't tell a whole story, does it? You shouldn't always necessarily be looking for the highest rent. Yeah, you're absolutely right, Will, and I'm well aware of those conversations and those agents who always say, "Look at the market, look at the market, look at the market." But for me, it's like the froth on the beer, it's the head on the beer, it's the pub talk about yields and prices, but what's happening in the wider market place is also really important. If you look at the DEFRA rent survey figures, it's quite clear that the average level of rents, particularly on FBT, so those tendencies of people are bidding on, are a country-mile south of what agents talk about on a daily basis. If you look at those average rents and that DEFRA survey, that tells me that there are plenty of landlords, plenty of tenants out there willing to do deals at more prudent levels than the odd tender rent might suggest. We're asking arbitrators to do, who are the ones who, as I said previously, are the ultimate backstop here if there's no agreement, is to take a greater degree of notice of that statistical base rather than just looking at the one or two comparable rents that the landlord's agent chooses to highlight in their arguments. Look at the wider market, and those rents in the DEFRA survey are part of the market, as much as those tender rents are, and there will always be individuals, as I said earlier, who are willing to go over the odds to pay for land. But clearly within the sector as a whole, there is a much more prudent, much more sensible base of rent negotiations, because those DEFRA figures, in my view, don't lie. What does a good landlord tenant relationship look like? I'm asked this question often, Will, and I use a phrase that some of you or listeners may have heard me use before, and that is to say that I think a really good landlord tenant relationship is one where the tenant has got the best interests of the landlord in mind, but where the landlord has got the best interests of the tenant in mind. And I hawk back often to my very, very first meeting, I was chief executive of the TFA, in a little farm kitchen in Washerway, near Bodman and Cornwall, and it was January 1997, and south of the kitchen table was the tenant farmer of that holding and the landlord of that holding. And the landlord was saying to me, "Oh, what a great tenant I've got. He's looking after my farm. He's never, he never tires or sure me around. He's always telling me what he's doing, and he's investing in my holding, and he's looking after it really well, and oh, he pays me a rent as well every night and again, which is great. I mean, we got a really good relationship, and then I just heard the tenants say, "Oh, my landlord's fantastic. He's always interested in what we're up to every time I ask him about something." He always says, "Yes, now what's the question almost?" And he's allowing me to flex my business and do what I want to do here. And just in that little meeting in that farm kitchen, I saw a lovely landlord tenant relationship. And as I was starting off on my life as chief executive, I said, "I want to see this replicated around the country, and sadly, it's not often replicated. And happily, I have had other opportunities to see that type of relationship going forward." But that encapsulated for me a fantastic landlord tenant relationship. And yes, there was a commercial element to it for both sides. You know, the landlord recognized the rent was important to them, but the tenant was able to run a business to be able to pay that rent, and that, you know, that was, to me, a brilliant example of a good relationship. I think if we took the word tenant out of that question and out of the answer, we could put that on sort of a lifestyle's podcast category, couldn't we? Yeah, absolutely. Because that was just the example of a good relationship, wasn't it? Yeah, I suppose it was. Yeah. It is difficult though, isn't it? It's, you know, because there's commercial pressures both sides and that, you know, that's where it gets really difficult, and especially, you know, to sort of use the relationship analogy, when, you know, when, when you can look outside and think, who will if I want and try something new and different, then, you know, that there's, I don't know what, what's out there in terms of if I took it to the marketplace, and especially at the moment where, you know, where there's a lot of competition, that adds a level of complexity, doesn't it? Yeah, and you're back here, the money's important, it's going to be wrong, it's important that there is sufficient in the relationship for both sides, you know, we're not, we're not trying to say landlords should give their a land away free of charge or, or, or cheaply, but both sides of that relationship need to see each other's perspective to ensure that there is a sustainable and resilient relationship going forward, and there are many landlords around the country, you know, who are, quite rightly, concerned about wider issues, like the social impact of what they're doing, or the community impact of what they're doing, or the environmental impact of what they're doing, and I was on a lovely estate up in, up in Cumbria a little while ago, where, you know, it's a, it's a, it's a 5,000-acre estate where the relationship that the landlord has got with his tenants is almost, you know, eternal, it's just, this is brotherly, or even father to father to child, if you like, and the landlord recognizes the community assets, the church, the, the, the scout group, the guide group, the school governors who are all coming from the tenants on that estate, you know, the, all, all fed by that estate, so the money is important, but the wider issues are also important, and creating a lifestyle in a, in a community, in a, in a landscape within which you can be proud. Yeah, absolutely, okay, finally then, last question, what message would you give to tenant farmers, listen to this episode, who are worried about paying the rent this autumn? Yeah, so take advice, that's key, speak to somebody else that, and not just your neighbor down the pub when you're playing Skittle, someone who can really help you understand what the process is, but don't put your head on the sand because you will regret it in years to come if you haven't taken the opportunity to try and get that rent back, try, try and fight against that ratchet, and the, the, the sinking about having the conversation with your landlord is often worse than having the conversation, so, you know, I've lost count of the number of times where landlords have told me, privately, if, if they only had a conversation with their tenant earlier to know what the difficulties were or what, what the issues were, then they might have been able to, to, to solve something out when, when when things do go to go badly wrong, or if the rent can't be paid, and so, yeah, pick up the phone, get some advice, be honest with your landlord and the landlord's agent about where you are, where you're in difficulty, and obviously, if you're in England and the landlord takes an unreasonable approach, then knock on the door of the commissioner for the tenant farming sector to, to maybe look at whether your landlord has been unreasonable, and of course, wouldn't I say this one, Becky, the first port of call for any tenant farmer should be the tenant farmer's association. Absolutely. Okay. That's brilliant. Thank you, George. And that's all we have time for today. A very big thank you to our guest, George Dunn, as well as Chris Wilklin for sending in the market report and podcast producer, Becky Ray. Thank you very much for listening. Please see the show notes for more information, including our podcast disclaimer. We'll be back next week, but for now, it's goodbye from all of us here. And for those of you who are regular listeners, wondering where a North Bend is at the moment, I mean, Chris is always away, so, you know, you know he's always on holiday, but Ben and his wife, Jess, have had a beautiful baby boy. So he's taken a few weeks of potential leave. He's up to his elbows in 13 appies, but everybody here at the kite podcast team would like to wish him and Jess all the very best, wonderful news and massive, massive congratulations to you both.