NEGOTIATIONS will start in the near future between landlords and tenant farmers on the tricky subjects of farm rents. And the leading landowners are calling for "patience" when the negotiations begin.

Rents have remained stable for some years because of stagnation in the industry. Now, with increased milk prices and land values soaring, landlords feel that is time for them to share in the new prosperity.

This, however, is worrying members of the Tenant Farmers’ Association (TFA) because their members are facing alarming hikes in the price of animal feed, fertiliser and diesel.

Speaking at the weekend at a meeting near Harrogate, the President of the biggest landlord’s body, the Country Land and Business Association, called for patience. Said Henry Aubrey-Fletcher: “The only way to achieve maximum profitability for both parties was through negotiation and expert advice.

"Modern farming requires investment by both tenant and owner and the cycle of reducing rents and falling investment does neither party any good in the long run.

"We need to move the focus away from rent increases in isolation and look instead at how we can make tenant farmers more profitable. Profitable tenants are able to pay higher rents, which enables investment in the holding – a win-win situation."

Increases in grain and milk prices have helped push up farm incomes by around nine per cent last year according to figures from Defra. However, research by the CLA found that taking into account all non-farming activity and support payments, the core business of farming lost £1193 million during 2007.

The CLA president added: “We are reasonably confident that prospects in the medium term for arable producers are good and specialist beef producers - whose export markets have now re-opened - also have a fair outlook.

"On the other hand, dairy farmers have seen their recent price increases eroded by feed and energy costs and, where labour is employed, may have gone backwards.

"Manufacturing beef and sheep production is at best, challenging, in the face of increased imports and the overhang of movement restrictions. Pig and poultry production is facing increases in feed and energy costs and the sector looks set to shrink."

Outside of traditional farming activity, Henry recommended a “reality check” when entering into a rent review.

"If a farm has diversified significantly into another business sector or if a farmer has only a part-time holding, the residential value of the property and the latent rental value of the asset in the ‘real world’ need to be taken into account," he said.