An amnesty on the 20% clawback rule and a devaluation of some entitlements through changes introduced in the CAP Strategic Plan, have contributed to entitlement sales jumping by approximately 71% in 2023. Figures obtained from the Department of Agriculture, Food and the Marine show there were 53,689.37 entitlements traded via the sales avenue in 2023.

This represents an increase of approximately 22,326 entitlements, while the value of entitlements sold increased by 54%, rising from €5.28m to €8.15m, as demonstrated in Table 1. A number of factors are credited for the increase, with the primary one being the introduction of an amnesty on the 20% clawback rule for entitlements sold without lands.

Prior to this amnesty, 20% of entitlements offered for sale without lands were lost in the transaction. For example, if 50 entitlements with a value of €180 each were sold, the buyer would receive 40 entitlements worth €180 each, with the remaining 10 entitlements lost.

Amnesty ending

The ending of the amnesty (deadline of 15 May 2024) and planned reintroduction for 2025 is giving rise to predictions of higher entitlement sales in 2025. Many agents/auctioneers involved in the trading of entitlements comment that some farmers with entitlements available to sell held off from opting to sell in 2023 and were biding their time until they saw how the market responded. Another factor which has had an influence is the requirement for farmers receiving scheme payments under the new CAP to demonstrate that they satisfy the definition of an active farmer. This was not required in the previous CAP for Basic Payment Scheme payments and meant farmers could still continue to receive such payments without actively farming.

Without delving too deep in to the requirements now, the active farmer requirement can generally be met by meeting the minimum stocking rate of 0.1LU/ha across the 12-month calendar year (plus at least 0.1LU for seven consecutive months), producing crops for sale (hay, silage, tillage crops, etc), or delivering an environmental good on lands.

This active farmer definition concerns more farmers than expected, with the Department estimating that 10,500 farmers fell in to this bracket at the start of 2023.

Reduced value

While a reduction in the value of many entitlements is the last factor credited with fuelling higher sales. The ring-fencing of 25% of the Basic Payment Scheme money to fund the new Eco Scheme and the fact that the voluntary environmentally-focused scheme is completely separate to payment entitlements, have significantly reduced core entitlements values.

Added to this is another 10% cut to fund the Complementary Redistributive Income Support for Sustainability (CRISS) and a 3% cut for the Young Farmers Scheme. Just one entitlement is required to activate the CRISS payment.

This leaves 62% of the core value before taking account of a cut to fund the National Reserve and possible implications of 85% convergence. This devaluation of the core entitlement value is said to have encouraged some farmers and particularly those also affected by the active farmer clause to now permanently move entitlements.

Leasing remains dominant

The leasing of entitlements continued to dwarf entitlement sales in 2023, despite the number of leased entitlements halving. Table 2 displays trends in the leasing of entitlements for the last four years. The number of entitlements changing hands via leasing peaked in 2022 at over 625,000 entitlements, worth some €117.5m.

The devaluation in entitlement values is also reflected in the value of entitlements falling by a greater figure of 58%, or €68.2m. Entitlement values recorded by the Department never accounted for the greening component of the payment.

It is impossible to predict how the trading of entitlements will fare in 2024. The increase in the number of entitlements leased in 2022 was not anticipated, nor was the sharp reduction again in 2023.

Huge business

The leasing of entitlements has developed in to a huge business over the last decade. Ireland is obliged to provide a platform under CAP for the trading of entitlements. The Department is keen to facilitate a higher handover of entitlements in permanent deals to get entitlements moving in to the hands of active farmers and reduce the possibility of so-called ‘armchair farmers’ benefitting from CAP payments, but not actively farming. This is the foundation of the amnesty introduced for 2023 and 2024.

Next week

Next week’s page will present details of a survey of current entitlement trading values, along with case studies to inform farmers making decisions on whether to sell or lease entitlements, and important considerations that need to be taken in to account when entering a longer-term lease agreement.