The consequences of the many changes the new CAP will bring are beginning to sink in for most tillage farmers as the plan has been approved by Brussels and signed off by the cabinet.
Growers are now able to evaluate how their individual entitlements will alter in value in the new regime.
At the Teagasc Crops Forum in September, Conor O’Callaghan, a Teagasc adviser working in the northeast, presented an outline of how entitlements, with a range of values, would be revalued in the new regime.
Growers will be aware that the value of entitlements going into 2023 will influence the adjustments that will be made over the next four years. Because of this, Conor used three different entitlement values in the calculations he presented to represent values described as low, average and high.
In the current CAP the support payments were split into a basic payment and a greening payment. These are shown in Table 1, with the combined values equating the total entitlement value. In this exercise, he used three entitlement values, a low of €158, an average of €258 and a high of €379 per entitlement.
He then took two farm sizes, 40ha and 100ha, to calculate the farm support payments delivered through the different entitlement values.
In this exercise, the low entitlement value provided €15,800 to the 100ha farm, while the high entitlement value provided €37,900 in support payments.
The average entitlement value paid €25,800 in support.
These are the starting values from 2022. The calculations are relatively simple – the number of hectares multiplied by the different entitlement values providing there were no complications that generated penalties. The situation for 2023 is much more complicated.
A new payment structure
Most growers will now be aware of the changes in the new payment structure. However, few will have done the calculations as to what these changes will mean for their own specific situation because the calculations are quite complex.
And the net consequences will vary depending on the initial entitlement value, the size of the new BISS payment, whether land is rented in or all owned and whether an individual will be subject to capping.
In his presentation, Conor used the Department’s calculator (accessible on Agfood.ie) to work out the 2023 values for the different entitlement value numbers used in the first part of Table 1. This exercise gets even more complex when moved to a farm-scale evaluation but there is an example of this later.
The imposition of front-loading or CRISS means that any initial calculation should only be done on the first 30ha, as these hectares get a somewhat higher payment while subsequent entitlements get a lower payment. But for those with entitlements leased in to cover their land, you only get the enhanced payment on one 30ha.
The second part of Table 1 shows the individual elements of the revised payment and the net value consequence for each initial entitlement.
The BISS payments are all lower because of how the adjustments are made and capping relates to the size of one’s total farm BISS payment.
The eco-scheme payment is potentially payable on all hectares farmed and not just the number of entitlements held, as was the case with the BPS scheme.
Most support payments will fall in value but some will remain broadly similar while a few will increase.
When the BISS, CRISS and eco payment are added, one can compare the value of the first 30 entitlements relative to what they had been previously.
While the value for 40ha is higher, the BISS payment for the hectares above 30 are lower per hectare.
The average entitlement value decreased slightly but the high-value entitlement payment decreased by €2,360 for the 40ha and €7,880 for the 100ha
The bottom of Table 1 then shows that the total payment has increased for the low-value entitlement because it benefited from upward convergence.
The average entitlement value decreased slightly but the high-value entitlement payment decreased by €2,360 for the 40ha and €7,880 for the 100ha.
With many tillage-originated entitlements above average, most growers are likely to suffer negative convergence on the bulk of their entitlements, which means that initial payments will suffer annual decreases from 2023 to 2026.
For farm sizes that will generate BISS payments that exceed €60,000, the amount above that, up to €100,000, will be reduced by 85% with 100% reduction above €100,000. This means that all applicants will be subject to a maximum payment of €66,000 in the future, which is €60,000 + €6,000 (€40,000 divided by 100 multiplied by 15).
Example one
The effects of capping and CRISS add further to the losses associated with high-value entitlements on big areas. Conor gave a real example of a farm with 217.43 eligible hectares. There were entitlements to cover the full area but different ones had different values as follows:
190 at €307.98.8.56 at €366.98.18.87 at €258.36.The entitlements worth €307.98 work out to a BISS value of €180.38 in 2023. However, these are subject to further convergence out to 2026 where then end up with a BISS value of €169.88. So the 190 units end up with a value of €32,277.20. The 8.56 entitlements with a starting value of €366.98 end up with a unit BISS value of €187.30 for 2026 leaving a combined value of €1,603.29.
The 18.87 entitlements with a starting value of €258.36 end up with a unit BISS value of €154.25 in 2026 and generate a combined value of €2,910.70. The combined values for this example are shown in Table 2. Combined, in 2022, these entitlements yielded €66,532.80 in support payments to the farmer.
For 2026 and 2027, inclusive of the BISS, CRISS and eco-scheme payments, this income from entitlements will drop to €54,827.80. This is a drop of €11,705 in the income support to this farm.
While the support payment drop on many other farms may not be as high as this, all support payment reductions put the viability of businesses at risk, especially smaller businesses where a smaller reduction could represent a far greater chunk of income.
Conor said many of his clients who have high entitlement values, frequently by virtue of the option to stack in previous transitions, will be substantially worse off in 2027 compared to the support payments they receive currently.
Example two
Conor presented a second example of a smaller 119ha farm business with 85 entitlements at €155.33 and 34 entitlements at €258, giving a current combined support payment of €21,975.05 to the farm.
Some of these entitlements are close to the targeted average while most of them are below average. In this type of scenario, any change in support value would either be small or possibly even show a net gain.
Allowing for all the changes, Conor calculated that the sum of all the individual payments should take this farm up to €26,978.61 by 2026. This is a net gain of €5,003.56, so this grower will benefit from the changes but he/she is likely to be in the minority in the tillage sector.
With support payments now separate to eco-scheme payments, it has become increasingly important that growers do what is necessary to comply with two eco-scheme measures to add back this income stream to the BISS payment. This means either fulfilling the rotation requirement or pushing out to 7% or even 10% of space for nature or soil testing the whole farm, etc.
Whatever the measure, that €63/ha approximately for the eco-scheme payment is a critical element of future support payments.
It is interesting to note that growers are beginning to view the eco-scheme payment as being different to BISS (which it is). Because growers will physically have to spend money or forfeit income to secure it, they are suggesting that this element of support should be decoupled from any future rental agreements.
However, we have had similar opportunities to alter conceptions around land rental in the past but the hunger for land meant that the renters did not avail of such opportunities and the high prices just kept getting higher. But this time it is different.
Now, the eco scheme is basically decoupled from the BISS payment. A farmer, any farmer, can qualify to get eco-scheme payments even if he/she is farming with fewer or no entitlements for land they are farming. So a farmer with no entitlements can still get the €63/ha eco-scheme payment.
This has the potential to significantly alter the value of rented entitlements for the future and it could prove to be a catalyst to encourage entitlement sales by non-active farmers as the future for ownership is increasingly uncertain.
For growers with leased in land and entitlements, will we see the value of the BISS element reduce to zero because they have really been worth nothing to the grower as they are just drawn down and handed over to the owner, often as tax-free rental income.
Only time will tell but the intensity in the land rental market is such that this potential outcome seems unlikely.
Farmers holding entitlements that are valued higher than the national average will see a reduction in the level of support they provide in the new CAP out to 2026.Some tillage farmers will benefit from the changes but the majority will be losers. The new rules could result in a considerable change in the attitude to renting entitlements and their value.Eco-scheme payments can be earned on land which does not have entitlements.
The consequences of the many changes the new CAP will bring are beginning to sink in for most tillage farmers as the plan has been approved by Brussels and signed off by the cabinet.
Growers are now able to evaluate how their individual entitlements will alter in value in the new regime.
At the Teagasc Crops Forum in September, Conor O’Callaghan, a Teagasc adviser working in the northeast, presented an outline of how entitlements, with a range of values, would be revalued in the new regime.
Growers will be aware that the value of entitlements going into 2023 will influence the adjustments that will be made over the next four years. Because of this, Conor used three different entitlement values in the calculations he presented to represent values described as low, average and high.
In the current CAP the support payments were split into a basic payment and a greening payment. These are shown in Table 1, with the combined values equating the total entitlement value. In this exercise, he used three entitlement values, a low of €158, an average of €258 and a high of €379 per entitlement.
He then took two farm sizes, 40ha and 100ha, to calculate the farm support payments delivered through the different entitlement values.
In this exercise, the low entitlement value provided €15,800 to the 100ha farm, while the high entitlement value provided €37,900 in support payments.
The average entitlement value paid €25,800 in support.
These are the starting values from 2022. The calculations are relatively simple – the number of hectares multiplied by the different entitlement values providing there were no complications that generated penalties. The situation for 2023 is much more complicated.
A new payment structure
Most growers will now be aware of the changes in the new payment structure. However, few will have done the calculations as to what these changes will mean for their own specific situation because the calculations are quite complex.
And the net consequences will vary depending on the initial entitlement value, the size of the new BISS payment, whether land is rented in or all owned and whether an individual will be subject to capping.
In his presentation, Conor used the Department’s calculator (accessible on Agfood.ie) to work out the 2023 values for the different entitlement value numbers used in the first part of Table 1. This exercise gets even more complex when moved to a farm-scale evaluation but there is an example of this later.
The imposition of front-loading or CRISS means that any initial calculation should only be done on the first 30ha, as these hectares get a somewhat higher payment while subsequent entitlements get a lower payment. But for those with entitlements leased in to cover their land, you only get the enhanced payment on one 30ha.
The second part of Table 1 shows the individual elements of the revised payment and the net value consequence for each initial entitlement.
The BISS payments are all lower because of how the adjustments are made and capping relates to the size of one’s total farm BISS payment.
The eco-scheme payment is potentially payable on all hectares farmed and not just the number of entitlements held, as was the case with the BPS scheme.
Most support payments will fall in value but some will remain broadly similar while a few will increase.
When the BISS, CRISS and eco payment are added, one can compare the value of the first 30 entitlements relative to what they had been previously.
While the value for 40ha is higher, the BISS payment for the hectares above 30 are lower per hectare.
The average entitlement value decreased slightly but the high-value entitlement payment decreased by €2,360 for the 40ha and €7,880 for the 100ha
The bottom of Table 1 then shows that the total payment has increased for the low-value entitlement because it benefited from upward convergence.
The average entitlement value decreased slightly but the high-value entitlement payment decreased by €2,360 for the 40ha and €7,880 for the 100ha.
With many tillage-originated entitlements above average, most growers are likely to suffer negative convergence on the bulk of their entitlements, which means that initial payments will suffer annual decreases from 2023 to 2026.
For farm sizes that will generate BISS payments that exceed €60,000, the amount above that, up to €100,000, will be reduced by 85% with 100% reduction above €100,000. This means that all applicants will be subject to a maximum payment of €66,000 in the future, which is €60,000 + €6,000 (€40,000 divided by 100 multiplied by 15).
Example one
The effects of capping and CRISS add further to the losses associated with high-value entitlements on big areas. Conor gave a real example of a farm with 217.43 eligible hectares. There were entitlements to cover the full area but different ones had different values as follows:
190 at €307.98.8.56 at €366.98.18.87 at €258.36.The entitlements worth €307.98 work out to a BISS value of €180.38 in 2023. However, these are subject to further convergence out to 2026 where then end up with a BISS value of €169.88. So the 190 units end up with a value of €32,277.20. The 8.56 entitlements with a starting value of €366.98 end up with a unit BISS value of €187.30 for 2026 leaving a combined value of €1,603.29.
The 18.87 entitlements with a starting value of €258.36 end up with a unit BISS value of €154.25 in 2026 and generate a combined value of €2,910.70. The combined values for this example are shown in Table 2. Combined, in 2022, these entitlements yielded €66,532.80 in support payments to the farmer.
For 2026 and 2027, inclusive of the BISS, CRISS and eco-scheme payments, this income from entitlements will drop to €54,827.80. This is a drop of €11,705 in the income support to this farm.
While the support payment drop on many other farms may not be as high as this, all support payment reductions put the viability of businesses at risk, especially smaller businesses where a smaller reduction could represent a far greater chunk of income.
Conor said many of his clients who have high entitlement values, frequently by virtue of the option to stack in previous transitions, will be substantially worse off in 2027 compared to the support payments they receive currently.
Example two
Conor presented a second example of a smaller 119ha farm business with 85 entitlements at €155.33 and 34 entitlements at €258, giving a current combined support payment of €21,975.05 to the farm.
Some of these entitlements are close to the targeted average while most of them are below average. In this type of scenario, any change in support value would either be small or possibly even show a net gain.
Allowing for all the changes, Conor calculated that the sum of all the individual payments should take this farm up to €26,978.61 by 2026. This is a net gain of €5,003.56, so this grower will benefit from the changes but he/she is likely to be in the minority in the tillage sector.
With support payments now separate to eco-scheme payments, it has become increasingly important that growers do what is necessary to comply with two eco-scheme measures to add back this income stream to the BISS payment. This means either fulfilling the rotation requirement or pushing out to 7% or even 10% of space for nature or soil testing the whole farm, etc.
Whatever the measure, that €63/ha approximately for the eco-scheme payment is a critical element of future support payments.
It is interesting to note that growers are beginning to view the eco-scheme payment as being different to BISS (which it is). Because growers will physically have to spend money or forfeit income to secure it, they are suggesting that this element of support should be decoupled from any future rental agreements.
However, we have had similar opportunities to alter conceptions around land rental in the past but the hunger for land meant that the renters did not avail of such opportunities and the high prices just kept getting higher. But this time it is different.
Now, the eco scheme is basically decoupled from the BISS payment. A farmer, any farmer, can qualify to get eco-scheme payments even if he/she is farming with fewer or no entitlements for land they are farming. So a farmer with no entitlements can still get the €63/ha eco-scheme payment.
This has the potential to significantly alter the value of rented entitlements for the future and it could prove to be a catalyst to encourage entitlement sales by non-active farmers as the future for ownership is increasingly uncertain.
For growers with leased in land and entitlements, will we see the value of the BISS element reduce to zero because they have really been worth nothing to the grower as they are just drawn down and handed over to the owner, often as tax-free rental income.
Only time will tell but the intensity in the land rental market is such that this potential outcome seems unlikely.
Farmers holding entitlements that are valued higher than the national average will see a reduction in the level of support they provide in the new CAP out to 2026.Some tillage farmers will benefit from the changes but the majority will be losers. The new rules could result in a considerable change in the attitude to renting entitlements and their value.Eco-scheme payments can be earned on land which does not have entitlements. 
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