Entitlements

D-mac

I leasing out a 24 ha farm last jan for 5 years with no entitlements, land was in very poor condishion as was in conacre with 20 years.
I cleared the worst of the scrub and put up a boundry fence and got power on farm. put up a crush and got a herd no.
I bought in maiden hefiers and sold them in calf as i have no winter facilitys. I thought at the time i was putting myself in a good position to apply to the new nasional reserve as i was 22 (23 now) but have since found i cant get a place in a green cert course even though i qualify for the on-line course as i have a level 8 course done. without the green cert i wont meet the criteria for the nashional reserve.
My question is it worth my while buying low value entitlements(250e) for 1.2 or 1.5 their value. I just wondering if i their still be worth something post 2015 or hang on and see??? i have a reseeding program i want to start and have other plans to expand and improve the farm but it will all take money.
If i could sucure a sfp it would it would allow me to organise cash flow.
Any advice would be greatly welcome.

coolshannagh28

There is another thread on this on the forum .Its a toss of a coin scenario !

benjydagg

D-mac wrote: »

I leasing out a 24 ha farm last jan for 5 years with no entitlements, land was in very poor condishion as was in conacre with 20 years.
I cleared the worst of the scrub and put up a boundry fence and got power on farm. put up a crush and got a herd no.
I bought in maiden hefiers and sold them in calf as i have no winter facilitys. I thought at the time i was putting myself in a good position to apply to the new nasional reserve as i was 22 (23 now) but have since found i cant get a place in a green cert course even though i qualify for the on-line course as i have a level 8 course done. without the green cert i wont meet the criteria for the nashional reserve.
My question is it worth my while buying low value entitlements(250e) for 1.2 or 1.5 their value. I just wondering if i their still be worth something post 2015 or hang on and see??? i have a reseeding program i want to start and have other plans to expand and improve the farm but it will all take money.
If i could sucure a sfp it would it would allow me to organise cash flow.
Any advice would be greatly welcome.

As I continue to say.

The new scheme is almost here. IF you have put in an SFP application in 2013, then you are now an active farmer.

If you buy e.g. €500/ha entitlements @ 2.1 (reference Joe Naughton auctioneer Ballinasloe). then these will be (worse case scenario) €400 in 2019, dropping SLOWLY each year from €500/ha less modulation.
Cost approx. €26,200;

Income 24 x €400 x 6 years = ??

NOW. You Must actively farm. You Must conform to greening rules, stocking density, animal welfare etc etc etc. But we do that anyway.

This is not financial advice. I am a farmer, not a financial adviser. But I think even Brian Cowen could do those maths. It's a no brainer.

coolshannagh28

Income 24 by 400 =9600 less modulation =9140 by six =54840 less original 26200=28640 over 6 years.
National reserve at current average 265 by 24=6360 less modulation 6224 by six=37344 over 6 years

bob charles

benjydagg wrote: »

It's a no brainer.

dangerous words:D:D

Sami23

How and where do you apply to purchase entitlements from the national reserve and are they available at face value or how much do they cost ?
Also, can you choose what value thay are ?
Sorry about these basic questions as I know they will be easily answered by most of you.

benjydagg

Sami23 wrote: »

How and where do you apply to purchase entitlements from the national reserve and are they available at face value or how much do they cost ?
Also, can you choose what value thay are ?
Sorry about these basic questions as I know they will be easily answered by most of you.

You cannot purchase from the national reserve. If you apply, and qualify, then you get low value ones for free.

If you want to purchase, page 45 of this weeks IFJ has 7 adverts. I recommend you buy from a bonded source. This involves a fee, but you will be covered in the case of dodgy dealers selling the same units numerous times.

One quote value I received yesterday was €500/ha for a multiple of 2.1 times.
That means, €500 x 2.1 plus fees & vat would equate to approx. €1100 per unit. 10% modulation for 2014 will bring them down to €450paid per HA.

Worst case scenario, these (in my opinion) will be worth around €400/HA in 2019. I am banking on the sale value of entitlements rocketing from now until 15th May. I may be wrong, but I'm putting my money where my mouth is.
The above calculation, has to be viewed as a sound investment. An investment of €1,100/HA generating an income of €2,450 minimum.

These are only my personal opinions, I am a farmer, not an adviser.
Please refer to your own circumstances, and get independent advice.

joto

Question: I inherited land from the father who passed away 2 years ago RIP. There's no entitlements on the land. I got the herd number transfered in my name with the intention of keeping cattle in a year or two.
At the moment I sell the silage ground to next door neighbour and am in AEOS 1 which I took over from the father.
Can I buy entitlements? When it says you have to "use them" in a given year what does this mean?

benjydagg

joto wrote: »

Question: I inherited land from the father who passed away 2 years ago RIP. There's no entitlements on the land. I got the herd number transfered in my name with the intention of keeping cattle in a year or two.
At the moment I sell the silage ground to next door neighbour and am in AEOS 1 which I took over from the father.
Can I buy entitlements? When it says you have to "use them" in a given year what does this mean?

Read the single farm payment rules on the Dept website.

just do it

On the basis of return on investment the lower value entitlements are better as they will increase in value each year.

benjydagg

just do it wrote: »

On the basis of return on investment the lower value entitlements are better as they will increase in value each year.

If that's what you think "just do it".
I have the opposite opinion. To lose a portion of a large entitlement is better than a large increase on a small one.
30% decrease on €900/ha as opposed to 300% increase on €50/ha.

I will do my own thing regardless.

I backed Liverpool against Villa, and at the moment I'm in a bad position!!!!!!

Sami23

benjydagg wrote: »

If that's what you think "just do it".
I have the opposite opinion. To lose a portion of a large entitlement is better than a large increase on a small one.
30% decrease on €900/ha as opposed to 300% increase on €50/ha.

Yeah but your talking extreme opposite end of entitlement values with those figures.

I wouldn't know for sure but doubt there are many entitlements with values as low €50/ha but I'm completely open to correction on this.

Conmaicne Mara

Sami23 wrote: »

Yeah but your talking extreme opposite end of entitlement values with those figures.

I wouldn't know for sure but doubt there are many entitlements with values as low €50/ha but I'm completely open to correction on this.

Mine are €20, know another lad with €70 and another lad who'd be within that range. Plenty here weren't allowed build up stock due to destocking and CFP.

Username John

Sami23 wrote: »

Yeah but your talking extreme opposite end of entitlement values with those figures.

I wouldn't know for sure but doubt there are many entitlements with values as low €50/ha but I'm completely open to correction on this.

I have some that are 50euro, and some that are 14euro I think

nashmach

And of course if a Department man turns up your entitlements could look very dear too.

Have to be paid from after tax income as well.

farmernewbie

benjydagg wrote: »

You cannot purchase from the national reserve. If you apply, and qualify, then you get low value ones for free.

If you want to purchase, page 45 of this weeks IFJ has 7 adverts. I recommend you buy from a bonded source. This involves a fee, but you will be covered in the case of dodgy dealers selling the same units numerous times.

One quote value I received yesterday was €500/ha for a multiple of 2.1 times.
That means, €500 x 2.1 plus fees & vat would equate to approx. €1100 per unit. 10% modulation for 2014 will bring them down to €450paid per HA.

Worst case scenario, these (in my opinion) will be worth around €400/HA in 2019. I am banking on the sale value of entitlements rocketing from now until 15th May. I may be wrong, but I'm putting my money where my mouth is.
The above calculation, has to be viewed as a sound investment. An investment of €1,100/HA generating an income of €2,450 minimum.

These are only my personal opinions, I am a farmer, not an adviser.
Please refer to your own circumstances, and get independent advice.

Hi benjydagg,

I have 13.99 entitlements at 292 per entitlement. Do You think I should sell them and buy higher value entitlements?

rancher

farmernewbie wrote: »

Hi benjydagg,

I have 13.99 entitlements at 292 per entitlement. Do You think I should sell them and buy higher value entitlements?

If you didn't buy those entitlements, ie got them for nothing in 2005, you would be liable for 33% CG TAX on the full amount you get and you would have to pay vat on the ones you buy and have to pay for them out of your after tax income.....in other words, a lot of your money would be gone in tax.
I'm not an accountant but that's the way I think it is

farmernewbie

rancher wrote: »

If you didn't buy those entitlements, ie got them for nothing in 2005, you would be liable for 33% CG TAX on the full amount you get and you would have to pay vat on the ones you buy and have to pay for them out of your after tax income.....in other words, a lot of your money would be gone in tax.
I'm not an accountant but that's the way I think it is

Ah ok, no I inherited them last year along with family farm. So I just started farming last year. Thought I might be able to invest in increasing entitlements this year to generate profit for the next 5/6 years.

benjydagg

rancher wrote: »

If you didn't buy those entitlements, ie got them for nothing in 2005, you would be liable for 33% CG TAX on the full amount you get and you would have to pay vat on the ones you buy and have to pay for them out of your after tax income.....in other words, a lot of your money would be gone in tax.
I'm not an accountant but that's the way I think it is

Vat is only chargeable on deals in excess of €36,000 (approx., check revenue).
You are entitled to your personal capital gain exemption each year.
You can borrow to buy, and the interest is allowable against tax.

farmernewbie

benjydagg wrote: »

Vat is only chargeable on deals in excess of €36,000 (approx., check revenue).
You are entitled to your personal capital gain exemption each year.
You can borrow to buy, and the interest is allowable against tax.

I would have cash to buy but not sure if it is worth it as my entitlements are nearly 300.

benjydagg

farmernewbie wrote: »

Hi benjydagg,

I have 13.99 entitlements at 292 per entitlement. Do You think I should sell them and buy higher value entitlements?

I am not giving advice.
But..
If you were to sell those entitlements, at a guess they should sell at 1.5 times. That would be €4,085 x 1.5 less costs i.e. €6,127 minus costs = €5,800
Less CGT - €1400 NET income €4,400

Buy 14 x €600
€600 x 2.2 times (a guess, could be higher closer to 15th May)
Total cost €19,000
Less income from sale €4,400 NET cost €14,600

This should generate €8,000 per year 2014 to 2019 subject to greening, cross compliance etc etc.

Staying as you are should bring in €4,000 yr.

Is it worth it? You decide.

I'm not an adviser, I'm a farmer.

benjydagg

farmernewbie wrote: »

I would have cash to buy but not sure if it is worth it as my entitlements are nearly 300.

The dearest entitlements I have seen were €3,000/HA

The lowest, €23/HA

farmernewbie

benjydagg wrote: »

The dearest entitlements I have seen were €3,000/HA

The lowest, €23/HA

OK so if I were to buy 13 * 3000 = 39000.

So for the next six years I get an income of 39000 per year instead of 5000. So an income of approx 500,000 instead of 50,000 in the next 6 years from SFP. Sounds too easy.

benjydagg

farmernewbie wrote: »

OK so if I were to buy 13 * 3000 = 39000.

So for the next six years I get an income of 39000 per year instead of 5000. So an income of approx 500,000 instead of 50,000 in the next 6 years from SFP. Sounds too easy.

You won't find the €3,000 ones for sale.

And the maximum entitlement value in 2019 is set at €700/HA.
That HAS been decided.
So the €3,000 ones will devalue massively.

That's why I picked €600 as an example.

farmernewbie

benjydagg wrote: »

You won't find the €3,000 ones for sale.

And the maximum entitlement value in 2019 is set at €700/HA.
That HAS been decided.
So the €3,000 ones will devalue massively.

That's why I picked €600 as an example.

Sorry I missed your 600 example. This makes since alright. Think its time to talk to an adviser. Thanks for the help.

benjydagg

farmernewbie wrote: »

Sorry I missed your 600 example. This makes since alright. Think its time to talk to an adviser. Thanks for the help.

Any time. These are only my own thoughts. But I have invested al lot of money in it.

Teagasc actively advised against buying entitlements in 2011 and 2012 as they told farmers that they would be worthless in 2013.

I know of some that sold all entitlements in 2011 on the basis that they would get free ones in 2014. The farmer that bought them is getting 9 years payment on them. The farmer that sold them, got a quick buck, and now is trying to farm without subsidies. And he can't..

Best of luck with whatever you decide.

Sami23

Where do get the forms to apply to the national reserve for entitlements or can it be downloaded online?

rancher

benjydagg wrote: »

I am not giving advice.
But..
If you were to sell those entitlements, at a guess they should sell at 1.5 times. That would be €4,085 x 1.5 less costs i.e. €6,127 minus costs = €5,800
Less CGT - €1400 NET income €4,400

Buy 14 x €600
€600 x 2.2 times (a guess, could be higher closer to 15th May)
Total cost €19,000
Less income from sale €4,400 NET cost €14,600

This should generate €8,000 per year 2014 to 2019 subject to greening, cross compliance etc etc.

Staying as you are should bring in €4,000 yr.

Is it worth it? You decide.

I'm not an adviser, I'm a farmer.

A €600 entitlement is projected to be worth €450 - 475 in 2019

cmac

Might be the dumbest question of the thread so far, but I understood that there was no National Reserve since last year.
We did your fist sfp application last year (no entitlements) and applied for the NR but were unsuccessful.

D-mac

the new NR is proposted to start in 2015. they will make you jump through hoops to get them i imagein.

paddysdream

Dont know the present position re. the national reserve but a few years ago you sent in one application and if unsuccessful then it(the application )carried over and you were considered in subsequent years.

Think there were a list of criteria with those at the top of the list being looked after first and if anything left over those further down getting something.

My brother(long story) applied in the begining and was unsuccessful the first year but got some about 3 years later.He got both extra entitlements plus the rest of his were increased upwards(a good little bit)
What you got was the average payment in your local DED(about 465 here).Your increase or extra entitlements couldnt exceed this figure.Unfair on those living in some areas and still a bone of contention.

This he put in with just the form plus a covering letter he wrote himself ie no teagasc or adviser input needed.

Reckon the new reserve will be for new enterants and young farmers first and then those with low ones will be next.

The previous scheme reserve application entailed proving why your figures were so low ie ill health ,inheritance,force majure,death of previous farmer with land set,etc etc.