The Basic Payment Scheme (BPS) has only been open for applications for less than one week, but there is already firm activity building in the trading of entitlements market.

Companies facilitating entitlement trading report the fact that because entitlement values are frozen in 2020, this is, in many cases, leading to more straightforward negotiations, with many deals rolling over.

Joseph Naughton, based in Ballinalsoe, Co Galway, says business has been building steadily in recent days and is following the trend of recent years.

The majority of deals are for leasing of entitlements, with small numbers of entitlements presented for sale to date. This is likely to remain the case, with those with surplus entitlements favouring leasing due to a clawback of 20% on entitlements sold without land and potential tax implications restricting sales volumes. There is no clawback on entitlements sold with land.

Joseph says the first month is usually when sales take place. As such he advises farmers interested in trading entitlements to act early.

As is also the case in recent years, demand for purchasing of entitlements outweighs supplies available.

With regards to leasing of entitlements, Joseph says most deals are one-year deals, with those leasing preferring to keep their options open and see what the outcome of CAP reform negotiations is.

The market has picked up where it finished in 2019, with the cost of leasing entitlements ranging anywhere from 50% of their value for low-value entitlements to 70% of their value for high-value entitlements.

As a result of convergence from 2015 to 2019, the lowest entitlement value is now 60% of the national average entitlement value – approximately €158.

The maximum value of entitlements is €700, but as entitlements are traded excluding greening, the maximum net unit value is in the region of €490.

The trends witnessed by Joseph Naughton are also seen by Owen O’Driscoll and Associates, which operates from Skibbereen, Co Cork, and Kenmare, Co Kerry.

Owen says activity is slowly building and that all expectations are that the trade will closely mirror 2019. He says the average cost of leasing entitlements ranges in the main from 60% to 70% and also reports that many deals look likely to roll over at levels negotiated in 2019, with leasing farmers keen to complete repeat business.

Owen has also witnessed an increasing trend of lessors completing one-year leases in recent years as CAP reform negotiations approached.

Use them or lose them

Entitlements with a value of in excess of €50m have been traded annually in recent years, with the latest figures available showing close to 6,000 people leasing out entitlements and 5,600 leasing in entitlements. Almost 3,000 of those leasing out entitlements leased out all of their entitlements in 2018.

Farmers should note that all entitlements allocated under BPS and the national reserve are subject to a two-year usage rule. Any entitlement that remains unused for two consecutive years will revert to the national reserve. Rotation of entitlements is no longer available.

The Department will always revert the lowest-value entitlements to the national reserve. This is the case even if the lowest-value entitlements are leased in.

It is important for farmers to ensure that they are not at risk of losing entitlements and for those who are leasing out entitlements to ensure they have been activated in the previous year.

The Department has no role in deals completed and state that this is carried out between the relevant parties.

As such, it advises farmers who are leasing out entitlements to ensure the lessee is aware of the importance of usage and safeguards the leased entitlements by supporting each entitlement with the declaration of one hectare of eligible land.

This status of entitlements can be easily checked through the Department’s agfood facility. The portal for checking the entitlement position is available on the main BPS screen, with the relevant link at the bottom right-hand side of the screen.

The closing date for the receipt of completed online applications to transfer entitlements for the 2020 scheme year is 15 May 2020.

There is one exception to this. The terms and conditions state if a change made to a BPS online application between 16 May and 31 May leads to a farmer having insufficient land to use all of their entitlements, they will have the opportunity to submit a transfer of entitlements application up until midnight on 31 May.

This option is only available to farmers who can show that they have made a change to their BPS application before 31 May and that change has directly led to the need to transfer entitlements.

All applications to transfer entitlements must be submitted using the transfer of entitlement online facility, with paper submissions no longer accepted.

Any queries in respect of submitting your transfer application may be emailed to transferofentitlements@agriculture.gov.ie.