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Buyers for farms in England are outnumbering sellers by 30:1, pushing arable land prices up by 40% over the last year.

James Baker, who leads Strutt & Parker's Estate & Farm agency department in Exeter, says good quality arable land is routinely selling for in excess of £6,500 per acre with values of up to as much as £10,000 an acre achieved in some premier quality cases.The lack of available farms is due to increased confidence among farmers arising from big rises in commodity prices during 2007.

He adds: "This recent increase in the profitability of arable farming has led to farmers, who are looking to expand and buy more land, competing with European and Irish buyers and investment buyers. The former, view land as being good value, while the latter are looking to take advantage of the inheritance tax reliefs afforded by ownership of agricultural land. It is this competition for farms that has resulted in the large premiums seen in the first quarter of 2008. On top of this since 2002, wheat prices have risen to £200 per ton, up 360% since 2002.

There are two main reasons for the rise in commodity prices. The first is America's ethanol subsidies. This year bio-fuels will comprise 30% of America's maize harvest. The extra maize used to produce ethanol amounts to approximately 50% of the fall in the world's overall grain stock.

Secondly, the growing wealth of China and India is increasing demand for meat, which in turn boosts demand for the cereals to feed the livestock. The International Food Policy Research Institute believes cereal prices will continue to rise by between 10% and 20% by 2015.

Mr Baker concludes: "The demand for agricultural land is the strongest I have experienced and now is undoubtedly a great time to sell. Nobody can predict where the top of the market will be, particularly in the current economic climate within the banking and financial sectors. Whilst I do not anticipate land values falling I remember well how farms halved in value in 12 months from 1990 to 1991. Until there is greater clarity about the depth of the problems facing the economy, one must add a note of caution."

4:04pm Tuesday 22nd April 2008

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