The number of entitlements traded on an annual basis continues to follow an upward trend, with the process developing into a big business enterprise in recent years. Figures released by the Department of Agriculture shows 324,659 payment entitlements transferred in 2020, with these entitlements worth some €62,113,332.

The increase in activity has been underpinned by a sharp increase in the number of entitlements traded by way of leasing.

The Department of Agriculture reports that in the region of 14,400 farmers leased out entitlements in 2020. This compares to fewer than 4,000 farmers in 2015 and approximately 7,000 farmers in 2016.

A high percentage of these leases are for one year, driven by a combination of Ireland’s unique conacre system and also by the fact that farmers have preferred the approach in recent years, as they feel it gives them more options to contend with any CAP policy changes.

Similar values

Discussions with agents specialising in the trading of entitlements show that there are no significant changes in the leasing market for 2021.

The typical deals reported for lower value entitlements ranging in value from €200 to €300 (including greening) is generally 55% to 60% of the value returned to the lessor and 40% to 45% of the value retained by the lessee.

This ratio becomes 62% to 66%/67% returned to the lessor on average for entitlements ranging in value from €300 to €400 and ranges anywhere from 67% to 73%/74% for high value entitlements, although all agents report the number of these high value entitlements being traded is low.

The secret to the smooth transfer of entitlements is to act early

Joseph Naughton, Joseph Naughton Auctioneers in Galway, said the company has been busy from the start of the season and has been working proactively in contacting customers from the previous year.

“The secret to the smooth transfer of entitlements is to act early and we encourage anyone thinking about trading entitlements to seek advice well in advance of the deadline (17 May). It takes time to get the necessary steps, including selecting an agent to transfer the entitlements, processed. For new customers, there is also an information service in explaining the process and ensuring people know exactly where they stand.

most are operating one-year leases

“For example, the 2.05% reduction in the value of entitlements for 2021, as agreed in the EU budget in late 2020, is leading to confusion in a small number of cases, while farmers are also worried about possible changes in the impending CAP reform negotiations. As a result, most are operating one-year leases.”

Joe also says he has seen an increase in the number of young farmers looking for ground to rent in 2021, with the aim of applying to the national reserve.

Land rental agreements

David Quinn, Carnew Mart in Co Wicklow, says the fact that a lot of land rental and lease agreements are now complete for 2021 has increased the number of entitlements coming on stream in the last week. This comes as some farmers with surplus entitlements, who were holding out in the hope of securing additional lands, are now opting to lease.

David says that a high percentage of deals are rolling over from recent years and they have not noticed any significant changes.

There is generally no change

“We have seen some instances in the case of new land leasing agreements where farmers have decided to hold onto a small area of land and a corresponding number of entitlements to activate them.

“There is generally no change, however, where entitlements are being leased out without land, with a high percentage of deals comprising farmers who are leasing surplus entitlements, demand is strong and continues to exceed supply.”

Sale of entitlements

The number of entitlements reported as being traded by sale is extremely low. John McGee, JMG Agri-entitlements, Kells, Co Meath says: “Each year, the number of farmers looking to purchase entitlements far exceeds the number available. The 20% clawback rule and possible capital gains tax on the sale of entitlements generally encourages farmers to opt for one year leases.

There is a cautiousness among some farmers regarding the future direction of entitlements

“Where entitlements are being traded, the typical cost is 2.4 times to 2.8 times their value for average-value entitlements, with higher-value entitlements worth in excess of €350, selling for 2.9 to three times their value. There is a cautiousness among some farmers regarding the future direction of entitlements and we are seeing many customers who lease entitlements happy to continue to do so for 2021 and planning to review their situation when more information comes available.”

Use them or lose them

Farmers should be mindful that all entitlements must be used at least once every two years.

Any entitlements that remain unused for two years in a row will revert to the National Reserve. This information is easily accessed on the opening page of your BPS application, which states the current entitlement usage and number of entitlements that will be lost if not activated in 2021.