The land market post-decoupling - the predictions

By Shirley Busteed

Land values will remain steady, there won't be a huge glut in volume sales and con-acre prices may increase slightly during the initial years of decoupling. This is the general view of the agricultural land market post decoupling from a number of auctioneers around the country.

Even though there has been a lot of confusion and uncertainty for farmers in the past 12 months, agricultural land continues to sell and fetch strong prices at public auctions.

Undoubtedly, a certain amount of caution has crept into the market in the past year but the bottom line is farmers are still prepared to buy land.

According to auctioneers, farmers continue to remain strong contenders in auction rooms up to a certain price threshold - beyond this threshold many find it difficult to compete with business people.

Prices steady

Without question, a number of farmers put off the sale of their farm this year as the introduction of decoupling in 2005 looked almost guaranteed.

Some are just waiting to see what happens, activate their entitlements and then decide on the fate of their farm. Others have already weighed up their options and chose to sell this year because they believed they would be better off.

Land is making good money at the moment and according to auctioneers, there is no indication of this situation slowing - they predict that prices will continue to remain steady post-decoupling.

Farming is only one reason to buy land and in most circumstances, but not all, the sale of farmland has little bearing on the economic returns that can be generated from its purchase.

Business people have certainly become prominent suits in auction rooms around the country.

Plenty of activity this autumn

After a slow start to the year, there has been a continuous steady trickle in the volume of land being offered for sale on the open market in 2003.

However, a surprising amount of activity has already been witnessed this autumn. Now that some clarity and guarantees have been given in relation to decoupling, particularly in the past few weeks, farmers can sit down and review their decisions and more importantly their future.

The general consensus from auctioneers is that there won't be a major glut in the volume of land offered for sale post decoupling - this will help maintain prices.

However, there might be an increase in the next 12 months, if this autumn is anything to go by.

Con-acre values - slight rise anticipated

Clearly, farmers who rent land fear that con-acre prices will rise even further approaching and post decoupling.

Auctioneers agree that the greatest effect of decoupling will centre on con-acre and leasing values.

Because the future decoupling payment will be linked to hectares farmed, farmers will not want to lose entitlements and may end up competing with one another for con-acre, resulting in a price increase.

On the other hand, nobody knows just how plentiful entitlements will be available to buy, especially for those landowners who rented their land during the three reference years and opt to purchase them once decoupling is introduced.

Ultimately, it comes down to profit margins - tillage farmers have been burnt in the past having paid exorbitant prices for rented land.

They will have to weigh up the cost of losing entitlements against the cost of paying extra for con-acre.

Generally, auctioneers anticipate a slight increase in rental values during the initial years of decoupling, after which, they believe things will level-out. They certainly don't expect values to explode.

In terms of trading entitlements, the majority of auctioneers anticipate the development of a separate market for both selling and buying - the values of which could be distorted during the first year of decoupling.