More than half of arable farmers want to expand the area they farm in the coming two years according to a survey by Barclays agriculture.

The survey, which was carried out at the 2011 Cereals Event amongst 160 farmers responsible for the management of over 52,000 hectares, also shows that 42 per cent expect their farmed area to remain the same. This leaves just three per cent who expect their land area to decrease, with one of these being in the process of selling land for residential development.

Of those who expect to increase the area farmed, 48 per cent intend to do so only by outright purchase.

The remaining respondents were happy to consider any combination of purchase, farm business tenancy or joint venture of some kind.

Martin Redfearn, head of agriculture at Barclays told South West Farmer: “The most obvious conclusion we can draw from this is that demand for land is likely to continue to exceed supply by a very considerable margin and, under the inexorable pressure of supply versus demand, prices will be under a similar level of upward pressure.

“Increasing land value would provide a welcome boost to a bank's security for lending, although it should be emphasised that ability to service debt is a more important consideration in assessing lending propositions. Agriculture is an industry that has an enviable track record for servicing and repaying debt, very largely without recourse to asset sales, so the underlying value of land, while a valuable back stop, is not of itself our primary interest.

“Those embarking on a course of expansion should be clear about the potential for set backs as well as the excitement of steps forward. We are as keen as we have ever been to support our customers as they look at opportunities to develop and expand their businesses. We are also mindful of the need to ensure that they do not expand or borrow themselves into a situation which puts them and their business into a position where they may struggle to service borrowing and repay loans."

Mr Redfearn said that farmers were “clearly more aware than ever of the need for risk management in a volatile world, and taking steps to limit their exposure to certain elements of risk.” That was welcomed but the industry had still some way to go in not only recognizing where risks lie, but in actively taking steps to mitigate them."

Regionally the amount of land for sale in the South West has almost doubled in the last two years.

“In the second quarter of 2011, 8,500 acres were marketed compared with 5,200 in the same period in 2010 and 3, 800 in 2009”, Simon Derby of Smiths Gore’s Taunton office, told South West Farmer.

“We don’t think it will have an impact on prices as there is pent up demand, which is still unsatisfied and despite the rise, the amount for sale remains at historically low levels.”

April to June is always the busiest quarter. The second quarter of the year is always the busiest with most land and farms marketed when it looks its best and to agree sales for completion before the next cropping year starts.

Some farmers have marketed as they think that land prices are getting to their peak again and, following last year’s good harvest and prices, that there are more buyers in the market.

“We don’t think that prices have peaked. Our farmland model suggests that prices will continue to rise as the wider UK economy starts to grow again. But the main driver of the market remains the balance of demand and supply – supply has not yet grown enough to satisfy strong demand from farmers and non-farmers” adds Simon.

The amount of land for sale across the country is up by over a third compared with this time last year.

Between 1 April and 15 May, 31, 466 acres of land were brought to market – compared with over 20,000 acres in the same period in 2010.

The increase has been variable across the regions. The greatest increases have been in the South East, where the area for sale and number of sales almost tripled, and Yorkshire and Humberside, where the area for sale doubled and number of sales are up by 50%.

Supply has contracted in some regions – in the North West from 3,400 acres last year to 1,700 acres this year. The number of sales also dropped in the West Midlands.

On a regional basis the data shows significant variation in the area launched during the first half of Q2 each year. Compared with last year, more land was launched in every region apart from the North West.