Buying Entitlements

arctictree

Anyone know where I could get some current information on the process of buying entitlements?

Sparkles2012

Ring your local Mart Office they would have entitlements for sale and for lease. The Department were mentioning a possible change to the 50% claw back for selling entitlements so people might be holding onto them until they hear what the Department announces. Possibility it will be mentioned when they open the BPS in March 2017.

Sparkles2012

Just an update for you: Minister Creed announces cut in clawback on sale of entitlements to 20% so you will probably see entitlements starting to be traded now.

arctictree

Thanks - I wonder is it a big enough incentive? I know a few farmers that decided not to sell their entitlements because of the 50%.

Timmaay

Can someone explain the rough economics of buying entitlements to me? I've 40ac without entitlements for the next few years, I'm not a young farmer anymore. The current bps scheme goes until 2019?

J.O. Farmer

Timmaay wrote: »

Can someone explain the rough economics of buying entitlements to me? I've 40ac without entitlements for the next few years, I'm not a young farmer anymore. The current bps scheme goes until 2019?

Probably not worth it. The seller will surely look for at least twice the face value meaning that you'll only have what you gave for them back in 2018. I'm assuming no change here due to convergence.
You will then get 1 years payments profit but your initial outlay will not be tax deductible (except for depreciation I'm not sure on this though).

Option 2
Lease the same entitlements at 2/3 times face value. After 3 years you have one years payments profit as before. Your payment for leasing them are fully tax deductible each year.

So after 3 years you spent and received the same money leasing as buying. You've written off all the leasing expenses against tax not sure about buying but you won't have written off any more.
The only possible benefit to buying is what happens post 2019. Will your bought entitlements be worth something/ more than leased in entitlements or how will the new regime work. Will you need to have owned entitlements or will you get new entitlements based on payments drawn in this scheme.

Timmaay

J.O. Farmer wrote: »

Probably not worth it. The seller will surely look for at least twice the face value meaning that you'll only have what you gave for them back in 2018. I'm assuming no change here due to convergence.
You will then get 1 years payments profit but your initial outlay will not be tax deductible (except for depreciation I'm not sure on this though).

Option 2
Lease the same entitlements at 2/3 times face value. After 3 years you have one years payments profit as before. Your payment for leasing them are fully tax deductible each year.

So after 3 years you spent and received the same money leasing as buying. You've written off all the leasing expenses against tax not sure about buying but you won't have written off any more.
The only possible benefit to buying is what happens post 2019. Will your bought entitlements be worth something/ more than leased in entitlements or how will the new regime work. Will you need to have owned entitlements or will you get new entitlements based on payments drawn in this scheme.

Thanks, by the sound of it 5 or 6 incalf heifers would net me alot better a return on investment ha.

Bass Reeves

Timmaay wrote: »

Can someone explain the rough economics of buying entitlements to me? I've 40ac without entitlements for the next few years, I'm not a young farmer anymore. The current bps scheme goes until 2019?

It would really depend on the value of the entitlements. The average value of entitlements including greening is around 270/ HA. The risk post 2019 is that greening will be flat rated across all payments ( it is equivalent to about 90 euro/ Ha average on payments I think) this is highly likely. Rate/ HA will be flat rated across all land this is not likely but a much bigger risk compared to last review. Payments will be front loaded with a higher payment on first 20 HA, this is being hinted across Europe with dissatisfaction with perceived super payments to some farmer.

Since the start of entitlements there has been a reduction in rates, in 2019 no payment can be higher than 750/Ha. IMO if we will see complete convergence over the next 10 years with payments flat rated. On buying entitlements If I got entitlements at sub 270/HA for less than twice there value and had land to claim them be buying. Yes they're not tax deductable but it looks like entitlements will be here in some form or another until 2030 at least. Now maybe the sky will fall in before then.

But costing it buying entitlements at 250/ HA costing 500 each. By 2019 you have 750/ entitlement collected. If around until 2025 over 2000/ entitlement col!Ected.

Bass Reeves

Timmaay wrote: »

Can someone explain the rough economics of buying entitlements to me? I've 40ac without entitlements for the next few years, I'm not a young farmer anymore. The current bps scheme goes until 2019?

It would really depend on the value of the entitlements. The average value of entitlements including greening is around 270/ HA. The risk post 2019 is that greening will be flat rated across all payments ( it is equivalent to about 90 euro/ Ha average on payments I think) this is highly likely. Rate/ HA will be flat rated across all land this is not likely but a much bigger risk compared to last review. Payments will be front loaded with a higher payment on first 20 HA, this is being hinted across Europe with dissatisfaction with perceived super payments to some farmer.

Since the start of entitlements there has been a reduction in rates, in 2019 no payment can be higher than 750/Ha. IMO if we will see complete convergence over the next 10 years with payments flat rated. On buying entitlements If I got entitlements at sub 270/HA for less than twice there value and had land to claim them be buying. Yes they're not tax deductable but it looks like entitlements will be here in some form or another until 2030 at least. Now maybe the sky will fall in before then.

But costing it buying entitlements at 250/ HA costing 500 each. By 2019 you have 750/ entitlement collected. If around until 2025 over 2000/ entitlement col!Ected.

arctictree

Anyone know if there are any entitlements being sold now under the new clawback?

benjydagg

arctictree wrote: »

Anyone know if there are any entitlements being sold now under the new clawback?

There are a LOT of buyers I'm hearing.

And, I doubt if anyone will be tempted to sell for 2 times value. More like 3 times or even higher, because of the 20% clawback.

My GUESS is 2020 will be a rollover year, so there may be 4 years left in the current scheme.

Remember, there is no logic to what we farmers will do.

No official trades done yet, as the paperwork isn't available.

handlemaster

Whats the lease value on entitlements. I heard 60% of face value .. is this correct ?

Bass Reeves

benjydagg wrote: »

There are a LOT of buyers I'm hearing.

And, I doubt if anyone will be tempted to sell for 2 times value. More like 3 times or even higher, because of the 20% clawback.

My GUESS is 2020 will be a rollover year, so there may be 4 years left in the current scheme.

Remember, there is no logic to what we farmers will do.

No official trades done yet, as the paperwork isn't available.

Nobody will be buying at 3 times there value. With 20% clawback it is hard to gauge the market. Remember as well the 20% is in the number of entitlements not in the value.

So If i want 8 in No 300 euro entitlements I have to find a seller with 10. Paying 7.2K and having auctioneer fee's of 5% on top is unlikely to happen. It will really come down to whether owners need to sell them or not. More than likely 2019 will again be a year where entitlements that are leased will be taken by the reserve unless transferred into a working herd No. As well remember that there are linear deductions all the way to 2019 so if you are paying 3 times the value it really is nearly 3.5 time the 2019 value when deduction and fees are taken into account..

In reality twice the face value will be around the market I think anything above that and you are as well off not buying.

benjydagg

Bass Reeves wrote: »

Nobody will be buying at 3 times there value. With 20% clawback it is hard to gauge the market. Remember as well the 20% is in the number of entitlements not in the value.

So If i want 8 in No 300 euro entitlements I have to find a seller with 10. Paying 7.2K and having auctioneer fee's of 5% on top is unlikely to happen. It will really come down to whether owners need to sell them or not. More than likely 2019 will again be a year where entitlements that are leased will be taken by the reserve unless transferred into a working herd No. As well remember that there are linear deductions all the way to 2019 so if you are paying 3 times the value it really is nearly 3.5 time the 2019 value when deduction and fees are taken into account..

In reality twice the face value will be around the market I think anything above that and you are as well off not buying.

Leased out entitlements revert to the owner after the lease is up.
That is a written rule. They will not go into national reserve.

5% is a vastly inflated cost by auctioneer.
Shop around.

Farrell

handlemaster wrote: »

Whats the lease value on entitlements. I heard 60% of face value .. is this correct ?

Paid 58% last year

benjydagg

Farrell wrote: »

Paid 58% last year

It all depends on the value of the units.
High value entitlements were traded for 80% in 2016.