British farmland prices ended 2012 at a record high, recovering from a first-half malaise - and are expected to continue rising despite the wet weather which has left growers looking at their worst harvest in a decade this year.

Farmland prices, as measured by transactions, recovered from a small loss over the first half of 2012 to hit an average of £8,520 per acre by the end of the year, representing a rise of 2.3% over the July-to-December period, the Royal Institution of Chartered Surveyors said.

A separate measure covering "bare" land, excluding the likes of farm buildings and standing crops, and based on the opinions of Rics members, also rose by 2.3% during the half, to £6,783 an acre, itself a record high too.

The rising tide of prices was "being drive predominantly by commercial farmers, who remain keen to expand production, given high agricultural commodity prices in many sectors", Rics said.

Indeed, appreciation was expected to continue, with surveyors hardening expectations of "further price increases over the next 12 months", again focused on the commercial side rather than lifestyle buyers.

Poor prospects

The clamour for farms, and particular growth in prices of arable land, belies a dismal year in 2012 for growers who, thanks to one of the wettest years on record, reaped their lowest wheat yield in 20 years, and sustained a 24% drop in potato production to the lowest since 1977.

Separate data on Friday showed potato stocks on farms falling less steeply, by 18% to 2.7m tonnes, with the shallower drop compared with output attributed to buyers filling more of their needs from imports.

And the continuation of the wet weather even into 2013 has left the UK looking at a further decline in wheat production this year, in preventing farmers from undertaking autumn sowing plans.

Strategie Grains, the influential analysis group, on Thursday cut to 12.4m tonnes its forecast for the 2013 UK soft wheat crop, which would represent the weakest harvest since 2001, down more than 800,000 tonnes year on year.

The Strategie Grains  estimate "could probably still be too high an estimate given the state of the crop and the feelings that plantings may only reach circa 1.5m hectares", Jonathan Lane, trading manager at grain merchant Gleadell, said.

Wheat, of which the UK is the European Union's third-ranked producer, typically accounts for roughly 70% of the total grains crop.

Two tier market

Rics highlighted one market nuance amid difficult agricultural times, in a strong preference for higher quality land.

"The strength of commercial farmland demand is not broad-based," the group said.

"Indeed, surveyors note that farmers in the main are discriminating in favour of large, top quality, neighbouring plots with as small a residential component as possible.

"As such, there is considerable price dispersion, even in the same areas - plots that are smaller, of lower soil quality or contain a higher residential component are attracting much less interest and achieving lower average per-acre prices."