Entitlements - To Buy or Not to Buy?

Vandy West

Was leasing out the whole farm (45 ha) for a long time up to 2011.

Have no entitlements as land was leased during the reference years.

Farmed 10 ha (leased the rest) in 2012 (no SFP but got DAS/Sheep Grassland).

Plan to farm 20 ha (lease the rest) in 2013.

Keeping all sheep at the moment and building up numbers as € allow. Will be taking back the rest of the land as I can afford to stock it.

Have always been interested in farming, and finally am in the position to farm, not just taking back leased land to get the entitlements and then go back to the armchair. Am a bit over 40 so i most likely won't qualify as a new entrant/young farmer.

As the final decisions on CAP reform haven't been made, I can't get an answer to the key questions for my situation, which are..

1. If I buy entitlements now (for the 20ha i'll be farming in 2013), will I be able to use them in 2015 (or sell them on if I can't use them)?

2. If I don't buy entitlements (on the 20ha i'm farming in 2013) will I be granted entitlements for the land I farmed in 2012/13?

3. It seems entitlements above the national average will decrease by up to 30% and entitlements below the national average (270-300 ha?) will decrease by up to 30% (does this change in value happen overnight in 2016 or is it spread out from 2016 to 202?)?

It seems that the answers to my questions will not be answered before the SFP deadline for this year, so I was hoping for your opinions or guesses.

Thanks

JohnBoy

The problem is no-one knows.

I'd suggest if you can afford to at least get some low value entitlements, you'll pay less for them, and at least you'll have had something in your name.

Farm King

There was talk that 2014 would be a reference year and not a year / years in the past which would make more sense. I presume in a reference year a farmer should try to be farming as much land as possible and holding as much stock as possible? Would this be correct?

zetor 4911

My understanding and I am pretty sure of this is that to be eligable for entitlements in the new CAP you had to be farming in 2011 and have drawn at least 1 entitlement in 2011. If you are a new entrant since 2011 and you are a young trained farmer then you will get entitlements from the national reserve in 2015. If you are not a young trained farmer and did not submit an SPS application in 2011 with at least 1 entitlement then you will not get any new entitlements in 2015.

Username John

As John Boy said - no one knows.

I bought some entitlements last year, as the entitlements I had were very low - just to kinda hedge my bets a little. Not sure it'll make any difference, I suspect it wont - but I didn't lose money to them.

See here - http://farmentitlements.ie/
It would appear you could get lower value entitlements for around 1.2 - 1.5 times their value.
If you could get some of these, worst case scenario - you get paid for them this year, and that's it. You lose the 0.2 - 0.5
Best case - you get paid this year + 2014 (which I think is looking likely) so you're up, and maybe they will count towards some CAP reform into the future...

But - its easy for me to talk about your money too

Farmer Pudsey

But low value around 220-280/HA. Look like the next CAP will not be set up until 2015. So in all liklhood you will recieve payment for this year and next. This will get you your money back. You should be able to buy at 1.2-1.3. Allowing for a bit of intrest and Auctioneers fees it is a good way to cover your bets. Worst case senario you lose 70-90/entitlement however I cannot se that happening, They will cost you about 6500 for 250/HA.

bob charles

Forget it, concentrate your money on farming and be as efficient as possible, focus on making a few quid without CAP. If you have money to invest in any venture then they can be a good investment but if cash is limited the money will be in actual farming in the years to come. If you spend ages focusing on getting as much SFP/CAP etc as possible, good chance you will miss better farming opportunities

coolshannagh28

Buying lowervalue entitlements around e200 at 1 to 1.2 times face value is a free throw of the dice ,you get paid this year and next year ,barring a disaster with an inspection you make money .
Big question has to be will you miss out on qualifying entitlements if you purchase and will the value of your new entitlement be linked back to what you bought to your detriment.
Agree with Bob re investment in farm and stock as I see a very positive future for farming provided we can clean up our processing act and break up the cartel I see chinks of light here as anything that is bad for ABP has to be good for farmers.

Vandy West

Thanks for all the information and suggestions. Will most likely get the 'best' lower value entitlements I can get at a decent multiple, if the bank manager agrees. Agree with Bob and cool 're investing in farm, but also want to expand flock somewhat slowly to give time to improve my own abilities.

Farming seems to be like any other business as 'it takes money to make money'.

bob charles

Vandy West wrote: »

Thanks for all the information and suggestions. Will most likely get the 'best' lower value entitlements I can get at a decent multiple, if the bank manager agrees. Agree with Bob and cool 're investing in farm, but also want to expand flock somewhat slowly to give time to improve my own abilities.

Farming seems to be like any other business as 'it takes money to make money'.

If you are submitting and SFP form for your 20ha then you will be in the loop when things change and be in the running for whats next even if not getting money at the moment.

Young ewes can and will be bought for pocket money if the current market doesnt change fast and remember that "the darkest hour is always before the dawn" suppose its what keeps us farmers going, but by feck there has being some amount of false dawns

Considering the way the EU is up in a heap it strange that cutting the CAP budget isnt getting more of a mention. Of course there is allot of horse trading (we could have an expert to send:D:D) to be done before final decisions are made regarding the CAP

freedominacup

bob charles wrote: »

Forget it, concentrate your money on farming and be as efficient as possible, focus on making a few quid without CAP. If you have money to invest in any venture then they can be a good investment but if cash is limited the money will be in actual farming in the years to come. If you spend ages focusing on getting as much SFP/CAP etc as possible, good chance you will miss better farming opportunities

If you're right then is selling entitlements a plan?

JohnBoy

It's hard to argue with your logic bob, but if low value entitlements can be bought that will pay for themselves in the next two years then I think they're a good idea.



No one, myself included, has a clue what will actually happen with the new cap. I'd be looking to hedge my bets, but would not do anything drastic in terms of stocking up on land, livestock or entitlements in the run up to the new system, but I would if possible have a little bit of anything that wont lose me extra money.

bob charles

freedominacup wrote: »

If you're right then is selling entitlements a plan?

I would consider entitlements buying and selling seperate form the farm if possible, if you have lots of spare cash and naked acres then if say you buy and entitlement worth €200 per annum and pay €240 for it, then you stand to collect €400 before taxes. thats a tidy return IMV. If cash is tight and you are weighing up wether to spend money farming or investing in other options, I would go farming. Long term I think it will be a better investment. I would be 100% confident that if your are say returning an SFP form with 100ha, and allocated say entitlements worth €0, you will be in the same boat as everyone else when the new proposals come. Buying SFP was a great scheme a couple of years ago before it was announced that the current scheme would run for a few more years. I was considering at the time as I most of my acres are naked but couldnt find a sleeping partner with the cash, as I was/am under enough pressure to finance my farming operation, borrowing to buy SFP was a good step, such is life

I wouldnt base any decisions on what might happen, presumption is the mother of all F**k ups

freedominacup

bob charles wrote: »

I would consider entitlements buying and selling seperate form the farm if possible, if you have lots of spare cash and naked acres then if say you buy and entitlement worth €200 per annum and pay €240 for it, then you stand to collect €400 before taxes. thats a tidy return IMV. If cash is tight and you are weighing up wether to spend money farming or investing in other options, I would go farming. Long term I think it will be a better investment. I would be 100% confident that if your are say returning an SFP form with 100ha, and allocated say entitlements worth €0, you will be in the same boat as everyone else when the new proposals come. Buying SFP was a great scheme a couple of years ago before it was announced that the current scheme would run for a few more years. I was considering at the time as I most of my acres are naked but couldnt find a sleeping partner with the cash, as I was/am under enough pressure to finance my farming operation, borrowing to buy SFP was a good step, such is life

I wouldnt base any decisions on what might happen, presumption is the mother of all F**k ups

I thought assumption was the mother of all f**k ups:D