After the brisk entitlement trading up to the 21st October 2014 we are now seeing the market come alive once more for the second window of trade for the 2015 Scheme Year. October saw the price for Non-SDA entitlements drop to £220 per unit, and with the continuing surplus of Non-SDA prices remain low at £140 per unit for the first sales agreed in 2015.
There is unexpected demand from those with just under five hectares of entitlements, but with more than five hectares of eligible land, looking to top up and continue to claim under the Basic Payment Scheme (BPS). There are also some larger purchasers coming to the market with strong demand for large blocks of non-VATable Non-SDA at present.
Although entitlements cannot yet be physically transferred we have begun agreeing transfers in preparation. As many will be aware the RPA are yet to open this facility on the new online system, the CAP Information Service (CAPIS), however they have recently announced that it should be available in March. Our understanding is that the RPA technical team upload new facilities at the end of each month, suggesting that we will not be able to action transfers until the end of March. However in order to ensure that entitlement trade is not held back until this facility is available we are trading entitlements now, agreeing transfers (exchanging contracts), which will be actioned once the CAPIS transfer facility is up and running.
For those looking to purchase entitlements, now is a good time considering the current low price. When comparing the current Non-SDA price of £140 per unit with the predicted payment in 2015, which we would put at approximately €236.45/ha (after inter pillar transfers, including the greening payment and after a presumed reduction for the financial discipline), the current price represents a return on investment of 26.7% in year one and 533.4% over the next five years. This takes account of toady’s exchange rate of £0.75 per Euro, which is expected to remain ‘relatively’ constant with fluctuations between 0.70 and 0.84 predicted by major banks. These predictions give a 2015 BPS payment range of between £165 and £198 per hectare, however claimants would be advised to err on the side of caution when budgeting for 2015, as policy changes may still affect these rates going forward. Despite this no one can argue that these figures demonstrate an attractive investment, even if the price were to increase closer to one year’s payment as we have seen in previous years.
SDA prices are slightly lower at £125 to £130 per unit, with current demand for smaller blocks, despite some sizable areas of SDA currently on the market to sell.
Moorland entitlements are receiving offers around £58 per unit and with supply meeting demand at present, this looks set to continue.
ENTITLEMENT LEASING/HOSTING
With the current surplus of entitlements on the market many vendors are seeking alternative options to keep their entitlements, rather than selling at the current low prices (compared with last season’s average trade). The new entitlement leasing mechanism will be available in 2015 and many with a surplus are questioning whether they could lease out their entitlements in 2015, with the aim of perhaps selling on a more buoyant market in 2016.
The difficulty here is that there are many claimants with large blocks of surplus entitlements that they have been rotating over the years, who are willing to pay to keep their entitlements ‘live’ in 2015. Thus rather than renting in entitlements and paying a fee to do so, the market in 2015 looks set to be in reverse, whereby the entitlement owner pays a landowner with naked acres to activate their entitlements for them. Perhaps then both receiving a split of the Basic Payment in due course. This is an interesting prospect however there is currently a shortage of landowners with unclaimed land (naked acres) available.
