Industry Eye: Rain was welcome but can you place a value on water on your land?

As always, it's a busy few days for us agents but great to meet and entertain past, present and future clients and thanks must go out to the Yorkshire Agricultural Society for putting on such a great event.

It was a welcome relief for many that we got a reasonable drop of rain on the Tuesday and Wednesday evening at the show and across the region.

The last few months for many have seen very little moisture and there was considerable discussion about the effects on crop yields but most importantly, winter forage for the livestock farmers. Sitting reading reports from recent straw sales is worrying and must be causing grave concern for those upland farmers reliant on buying in straw, let alone half empty silage pits with little growth in the fields for second cut.

It does seem that as soon as there is some respite in the red meat sector, the elements hit back with a dry spell.

This leads me on to discussing the value of water; it's a new concept on our shores to be discussing what impact a water resource has to the value of land but we believe that it does.

I pose the question then, is it an asset or liability and secondly, how do we place value on it?

In the past, having a large lake or a stretch of salmon fishing on the river, has normally meant an increase in the sporting and amenity value, but is there a greater underlying value and how do we value this accurately?

If we take our Australian cousins, land is valued accordingly to the availability of water and the reliability of such water resource.

It's not merely good enough to be allocated the resource, but you need the availability.

An Aussie friend from New South Wales who has recently been staying with me, has only been able to irrigate once out of the past seven years, leading to total crop failure most years.

Although they have allocation from the district reservoir, it's been dry for too many years to irrigate, therefore does their water resource have any value?

In the UK, it's becoming increasingly more difficult to get borehole licences and nearly impossible to get river abstraction in the summer months, yet irrigation provides so much more flexibility, particularly on the sand land in the vale of York.

So if you do hold such licences, how much will this add to the value of your farmland?

We are increasingly being asked such questions and particularly for bank lending purposes, it may of course be an additional unknown asset that can increase your net worth!

On the converse side, land below sea level potentially could be a reducing asset if sea levels rise putting pressure on sea defences or if we continue to have such fluctuations in rainfall patterns, land in the flood plains may have limited agricultural use.

Particularly if you are looking to invest in land, understanding whether the water resource is an asset or liability should be high on the list of priorities when assessing the value longer term.

CW 24/7/10