High land-leasing prices will be underpinned into 2024 because of the decision to reduce organic nitrogen limits for derogation farms, auctioneers have claimed.
The derogation changes will drive on the demand for land from impacted dairy farmers. This will dampen the downward pressure on leasing prices due to reduced returns from both milk and grain.
While auctioneers maintained that the extremely high prices of €500/ac to €600/ac paid this spring may not be repeated in 2024, they said the derogation decision will copper-fasten the €100/ac lift in average leases which emerged this year.
Lease prices moved from an average of €220/ac to €250/ac in 2021-22 to €320/ac to €350/ac this spring as dairy farmers sought to hoover up additional land to compensate for the expected derogation changes.
Reacting to the derogation decision, Wicklow-Wexford auctioneer David Quinn said the move would certainly have an impact on the land market.
“Absolutely, it’s going to add to demand, but this is coming off the back of a year when we had massive, massive prices for leased land,” he said.
“In my opinion, the real crazy prices can’t be repeated because dairy and tillage incomes don’t justify them. The higher average price is more likely to hold, but it could fall by 10% to 15%. It is difficult to know,” Quinn added.
“Prices will depend on the volume of land that comes on the market and, anecdotally, I believe more places are likely to come up for lease next year.”
Similar sentiments were expressed by Mitchelstown auctioneer Eamonn O’Brien, who said there were competing forces at play in the land market.
“The derogation decision is certainly going to put upward pressure on the rental market, but I can’t see the top prices paid this spring being repeated. They will have to come back as the repayment capacity is not there,” he explained.
Stephen Barry, of Raymond Potterton and Company in Navan, agreed that the derogation decision will save the land market from a sizeable drop in rental prices by keeping the dairy farmer active.
“The percentage of dairy farmers that are going to reduce numbers is very small,” Barry claimed.
“They have the setup and labour for a certain number of cows, and if they need to bolt-on expensive leased land to maintain numbers, that’s what they will do,” he predicted.
Kilkenny auctioneer Joe Coogan said a lot of dairy farmers “have been pushed to the edge of the diving board” by the derogation decision, and they will “have to dive in or cut numbers”.
“If they lose numbers now, they won’t get them back. So, I personally believe that the vast majority of dairy farmers will lease more land,” Coogan said.
Tom Crosse of GVM in Limerick said the derogation decision will increase the “appetite” for land among dairy farmers and keep a floor on the rental market.