Taxation and environmental land management: Grain market daily

Market commentary

• UK feed wheat futures (May-24) closed yesterday at £164.50/t, gaining £3.75/t on Friday’s close. New crop futures (Nov-24) closed at £184.00/t, gaining £3.75/t over the same period.
• The domestic market followed both the Chicago and Paris wheat market up yesterday. The Chicago market ended higher extending last week’s rally on technical positioning and bargain buying. This is despite news of China cancelling purchases of U.S. wheat.
• The Paris market followed the Chicago market up, rebounding from lows. Large short positions held in the market are seen to be leaving prices prone to rebounds, especially as we enter spring for northern hemisphere crops.
• Paris rapeseed futures (May-24) closed yesterday at €430.75/t, gaining €7.50/t on Friday’s close. Statistics Canada estimated yesterday that farmers will plant 8.7 Mha of canola for harvest 2024, down 3% from last year. This is possibly in response to the general downturn in rapeseed/canola prices. This Canadian crop will be crucial for determining rapeseed premium to soyabeans at the end of 2024.

Taxation and environmental land management

With England’s farming industry in the middle of the Agricultural Transition, schemes are being expanded to pay farmers and land managers to provide environmental goods and services alongside food production.

The devolved nations have announced similar schemes, and one question on many people’s lips has been "Will land entered into environmental schemes or ecosystem services still qualify as agricultural land for taxation purposes?".

The uncertainty surrounding tax obligations was seen by many farmers as a barrier to uptake or participation in both private and public environmental schemes. With UK government keen to drive uptake in the English SFI scheme in order to reach its environmental targets, a call for evidence was launched to provide some clarification for farmers.

HMRC and the Treasury’s response to the consultation has now been published.

In summary, the Government has decided:

• To establish a joint HM Treasury and HMRC working group with industry representatives to identify solutions that provide clarity on the taxation of ecosystem service markets where existing law or guidance may not provide sufficient clarity
• To extend the existing scope of agricultural property relief from 6 April 2025 to land managed under an environmental agreement with, or on behalf of, the UK government, devolved administrations, public bodies, local authorities and/or approved responsible bodies
• Not to restrict agricultural property relief to tenancies of at least eight years

AHDB welcomes this clarification and will be monitoring the activity of the working group to keep our levy payers fully informed of any proposed changes going forward.

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