Agents specialising in the trading of entitlements report business largely continuing as usual with leasing still dominating transactions. Some agents have recorded a significant increase in the number of entitlements changing hands by way of sales, but this is occurring from a low base and as such, the level of transactions remains low relative to the number of entitlements being leased.
The willingness of some entitlement owners to sell entitlements without land and forego the proposed amnesty being introduced for 2023 and 2024, where the current clawback rule of 20% on entitlements sold without land will be removed, is on the face of it puzzling.
Agents, however, explain that such farmers are willing to take their chances now and envisage that the loss due to 20% clawback may be less than if they hold out until next year and sell their entitlements under the new CAP regime.
This especially applies to farmers with higher value entitlements, with these suffering more due to convergence, eco schemes and the Complementary Redistributive Income Support for Sustainability (CRISS).
The fact that there is a full year’s payment potential in 2022 is improving the attractiveness of these somewhat.
CAP strategic plan
Ireland’s plan is to implement 85% convergence over the duration of the CAP programme. This means all entitlement values will reach a minimum value of at least 85% of the planned average unit amount i.e 85% of €158.68 by 2026 (€134.88).
There will be a static category between 90% and 100%, while entitlement values above the average will be reduced annually to fund an increase in lower value entitlements.
As can be readily seen in the tables below, high value entitlements will be hit hard and farmers purchasing entitlements are said to favour lower-value entitlements to decrease the level by which the value of the entitlement will fall from 2023 to 2027.
Under eco schemes, 25% of direct payments will be allocated to funding the eco scheme budget in the next CAP. The cuts to higher value entitlements, as demonstrated in the tables, will be significantly higher.
Also, applicants can avail of eco schemes without requiring an entitlement to activate the payment i.e naked hectares will be eligible for an eco scheme payment, meaning that the eco scheme component that is extracted could be lost in the value of entitlements sold or leased.
The proposals for the CRISS include 10% of all direct payments being allocated to this fund. The proposed payment, known commonly as front loading, will be €43.14 paid on a maximum of 30ha.
This too could influence demand for entitlements, with farmers who are already receiving payment on 30 entitlements not in a position to draw down a CRISS payment from additional entitlements leased in or purchased.
The Department of Agriculture’s recently released CAP calculator is a valuable tool for anybody trading entitlements, as it shows exactly how entitlement values will change.
It is also a useful tool for any farmer to see how the value of their entitlements and overall payment will change.
The calculations in the tables below are based on one entitlement and one hectare used to activate it, but the calculator will also take account of changes due to the 30ha payment limit in CRISS and show the full effect of this on your payment.
Stocking rate calculator
There is also a stocking rate calculator present on the platform with the CAP calculator. It is important to note that this calculator is based on new livestock unit values which will be introduced in 2023.
It will be used for the Areas of Natural Constraint scheme in 2023 and also for calculating the stocking rate for eco schemes in a number of measures, along with the active farmer status.
The stocking rate for scheme compliance in 2023 will be based on 2022 figures, while it will also allow farmers to look ahead and check if their current farming activity would signify active farmer status.