Agents specialising in the trading of entitlements have reported record leasing of entitlements this year, ahead of the 17 May deadline.
While demand for leased entitlements has been very strong, the prices paid have been steady in 2021.
“Where entitlements are being sold, the typical cost is 2.5 to three times their value,” John McGee, JMG Agri-entitlements, Kells, Co Meath, told the Irish Farmers Journal.
A change in rules is needed though to allow for sales to flow
“Farmers are trading their entitlements earlier every year, which shows a growing demand. A change in rules is needed though to allow for sales to flow.”
Agents are hoping for a change in the clawback rule and capital gains tax in 2022, which has blocked many farmers from opting to sell their entitlements.
The number of entitlements reported for sale is low, with the number of farmers looking to purchase far exceeding availability.
Joseph Naughton of Joseph Naughton Auctioneers in Galway said the clawback rule and possible capital gains tax has left many farmers with no incentive to sell. If entitlements are sold without land, there is a “clawback” of 20% of the number of entitlements sold.
Naughton said most of the applications have been submitted
For example, if 50 entitlements at €100 each are sold, the buyer would receive 40 entitlements at €100 each. Likewise, the seller is paid for 40 of the 50 entitlements sold.
Naughton said most of the applications have been submitted, with work ongoing to finish off the last few entries.
Figures from the Department of Agriculture show that 324,659 payment entitlements were transferred in 2020, amounting to €62,113,332.
The rise in activity comes on the back of a sharp increase in the number of entitlements traded by way of leasing.
Approximately 14,400 farmers leased out entitlements in 2020, in comparison to fewer than 4,000 farmers in 2015 and approximately 7,000 in 2016.
A high percentage of these leases are for one year.
This year, entitlements with a value of €200 to €300 per unit (including greening) are typically trading for 55% to 60% of their value returning to the lessor, with the remainder retained by the leasee.
For entitlements of €300 to €400 in value, the ratio is 62% to 67% returning to the lessor.
Must be used
Farmers should note 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.
Farmers can access their current entitlement usage and the number of entitlements that will be lost if not activated in 2021 through the opening page of their BPS application.