Non-SDA Sales – VAT registered

In our last email update our prediction was that if prices hit £200 per hectare there could be a “bounce back”, especially with BPS claim forms shortly being available. This was at the end of February when prices were between £205 and £215 per hectare. However prices did hit £200 at the beginning of March and there was initially no “bounce back” as prices continued to fall as they have since last December. Indeed prices fell to £190 per ha and some sales were agreed at £180 per ha before starting to rise again in the first week of March in what now appears now to be the predicted “bounce back”. Prices initially rose to £190 and now are at £200 per ha at the time of writing (Thursday 24th March at 3.16 pm) at the beginning of the week when theoretically BPS claim forms online went live, or at least partially so. Traditionally this has meant, and indeed we have seen, the start of interest from those who are only now able to calculate what eligible land they have available this year and therefore what entitlements they need, or what entitlements they have spare.

The big question with the “bounce back” is, are we now on a rising market and will we again be heading towards £250 per ha? In trying to answer this one must consider the original concept that drove the market up to £250 in the autumn last year; how many entitlements were confiscated into the National Reserve in 2015, and will this practically leave a shortage of entitlements for 2016 bearing in mind the allocations from the National Reserve to new entrants? As mentioned before, the RPA cannot answer this question themselves, and indeed it seems unlikely they ever will be able to as the computer is not programmed to give such an answer! Perhaps someone who has the inclination could submit a Freedom of Information request?

Assuming there will be a shortage of entitlements, would this on its own cause an increase in price? On a day-to-day basis leading up to the 16th May of course supply and demand affects the market throughout the season. However when considering where the price will end up in the last couple of weeks, then yes, the price could be affected by the availability of the regions’ entitlements. Other than those that are forced to, most buyers are quite wisely not keen to get involved in last minute trading to avoid the risk of something going wrong (which this year with the online system are somewhat reduced in certain aspects but otherwise in other ways are increased, see below). Prices also in the last couple of weeks tend to be volatile either going dramatically up and down. So the question is, with a general shortage, does this automatically increase the price? In our opinion there has already been a shortage compared with previous years’ trading prior to 2015. However we have seen the price slip since the beginning of December until mid-March. Clearly receiving the 2015 BPS claim money did not have the expected effect of dealing with the effects of last year’s commodity price reductions which has squeezed farm finances. Will the downturn in commodity prices, and the lack of money generally, contain the price rises, if there is a general shortage of entitlements? It has been a tight trading environment since December and we would expect this to continue if the battle to contain farm costs forces buyers to drive as hard a bargain as possible against the obvious and still glaring financial necessity of claiming on every available eligible hectare in 2016. It will be hard to ignore the financial gains to be made in buying entitlements now and showing a profit on the purchase in the second year.

Another consideration is the EU Referendum, the result of which is anyone’s guess, and of course won’t be known until after the trading deadline of the 15th May. While few of the purchasers we speak to are asking about this, of course there will be other purchasers, not speaking to us, who may be more concerned and who have not yet come to the market as a result. Again there is little information still as to how we would exit Europe and how long it would take other than the reference in the original treaties referring to dealing with an application from a member state to leave taking up to two years. Many of course think it will take longer. Whilst the Referendum is worrying in respect to subsidies, if this has caused hesitation from purchasers, when “push comes to shove” it appears the suggestion of two years claim payments will provide the profit needed. Also it seems unlikely the UK would drop subsidies totally with the logic that they may adopt the existing EU system of entitlements to continue some support, even if it was reduced gradually over a number of years.

So will the price go up or down? Our opinion of course is probably not that much better than anyone else’s as demonstrated by the price going as low as £180 before we saw a “bounce back”, rather than £200 as we predicted. We can however add to the debate some statistics that may help illuminate at least what has been happening so far. Since the beginning of June 2015 to date, for every two telephone calls we have had from people enquiring about selling we have had three calls from people wanting to buy. As with any statistics, of course, this can be misleading, as maybe one should be looking at the actual number of hectares enquired about rather than the number of people calling. A further point is, of course, a lot of calls early on in the Autumn last year involved negotiations between landlords and tenants revolving around tenancies coming to an end, new tenancies being granted and land being taken back in hand. These parties didn’t actually carry out a market transaction. Subsequently any analysis of the numbers will be distorted by the high volume of entitlements following the market rather than making it.

As a firm, however, looking at our register to date, the balance of available entitlements to those wanting to buy them is clearly weighted in favour of those wanting to buy but who have not yet taken the plunge, no doubt hesitant about managing farm costs and also hoping that prices could fall further. On balance there has been more hesitation on the buyers part than the Vendors, as of course prices were falling for three months until the middle of March. With turnover however now being brisk, this has left our register of Vendors thin on the ground, with the calls from purchasers continuing to flow in and increasing as they complete calculating their eligible areas. For the moment at least the tide has changed, with Vendors who have held their nerve being able to state their prices and have the purchasers chase after them rather than them having to chase after the purchasers. We cannot currently satisfy our “hot to trot” purchasers and now are looking for more Non-SDA entitlements to sell.

Non-SDA Sales – Non-VAT registered

This part of the market has fared better between December and the beginning of March with plenty of non-VAT buyers. However this will only ever be a small part of the market and currently we are looking for more non-VAT vendors to sell, effectively splitting the saved VAT with the non-VAT registered purchaser. At £200 per ha the £40 VAT has so far this year been split £30 to the vendor and £10 the purchaser.


With the relief of Vendors not having to “use it or lose it” this year, there has been interest in leasing out entitlements and we have a number of lots available. However there is little or no interest from anyone wanting to lease in, although demand may increase, especially if the sale price firms again towards the end of trading. However we suspect lessors will not wait to do something too close to the deadline and are likely to sell before this. The market has not yet been made for the leasing, however we have been offering people who want to lease in terms whereby they pay £60 per ha up front.

SDA & Moorland

The SDA market has been extraordinarily quiet with little for sale and little interest in buying. We currently have two lots available, being 17 and 20 ha. Trade started at £240 but we are now inviting offers at £230 per ha.

There has been more activity with Moorland, but with the price slipping to £70 per ha from £75 per ha where we started.


The Welsh, Scottish and Northern Irish markets remain quiet. This is due to either the delay in them receiving their 2015 CAP payments, or only receiving part-payments which does not allow them to identify accurately the entitlements allocated in 2015, and which is now vital as there will be historic elements individual to each farmer. There are only illustrative figures available for what these might be, and therefore what trade has taken place has been on a “wing and a prayer”, although understandably both vendors and purchasers are keen to push on as quickly as possible, as there will be limited time for trading in all three regions. The only relief for Vendors is that they do not need to use the entitlements allocated last year this year, and therefore they will be able to sell them in 2017 when hopefully things will be much clearer.


In Scotland the 50% siphon has been confirmed whereby this applies to the Basic Payment value of each entitlement traded, excluding Greening. Subsequently the purchaser will have the Basic Payment value of that entitlement reduced by 50%, and this new value will be used going forward. However as the Flat Rate element increases and the historic element diminishes, purchasers will end up at the end of the scheme being paid the same Flat Rate as everyone else. As with the old English SPS system, the multiplier for selling reduces with a higher historic element, and increases with a smaller historic element, as the Flat Rate will increase over the life of the scheme. Sales already agreed are seeing multipliers of between 1.2 and 2.9 based on the illustrative values now being given to farmers. However, because only part-payments of the BPS have been made, and 2015 transfers and allocations have not been finalised, and therefore the full value of the entitlements held by any individual is not yet known. The illustrative value however has been used for the trading so far, with some agents not being prepared to trade entitlements this year as a result of the uncertainties. The current position of the Scottish Government is that the deadline for trading is the 2nd April by submitting paper transfer forms! Unless there is some form of extension, then Vendors and Purchasers realistically are going to be waiting until next year to sort out their entitlements.


There is a similar situation in Wales, except there is no siphon. Part-payments have been made and trade has started based on, again, no final value being available and relying on illustrative figures only. Unlike Scotland, Wales have an online transfer system and currently the period for trading will end on the 3rd May. In both Scotland and Wales the multipliers relate to the Basic Payment element only excluding the Greening, which is expected to remain at the sale rate through the life of the scheme. The multiplier for Wales in this “Illustrated Market” is currently ranging from 2.2 to 4.2.

Northern Ireland

There is some doubt as to whether this market will get going at all this year. The DARD’s transfer system will reportedly be available between the 4th April and 3rd May but there is little or no interest from any buyers at the moment. Farmers are concentrating on making Young Farmer applications for extra entitlements and organising themselves accordingly. The market is not helped by late payments for 2015, queries over if entitlements are being currently allocated and the complexity of DARD’s online entitlement system including a transition period of seven years so a flat rate will not have been reached until 2020. A multiplier of 1.5-3 times face value is being discussed.


The good news is that, when the online transfer system works, it will enable agents to identify issues with vendors before a sale proceeds and reduce complications that have to be sorted out after the deadline, avoiding vendors making mistakes and contractually having to pay compensation to purchasers for lost BPS claims. The bad news is that it is not yet working. Whilst online transfers have been taking place, the latest informal and verbal advice given by the RPA (subject to change and as a result unreliable if not in writing) is that when one has “pressed the button” to transfer it is irreversible without both parties agreement and the transferee actually actioning a transfer back. Therefore there is no chance for a transferor to “retract” an application to transfer at a later date, which they could previously do up to the point the RPA confirmed the transfer in writing. Therefore great care will be needed to avoid mistakes.

Theoretically vendors will be able to be paid out a lot quicker than under the old scheme, whereby it took at least six weeks for a transfer to be confirmed and often much longer. The bad news is that this is not yet working. Again, based on verbal and unaccountable comment from the RPA, the current position is as follows:

  1. No-one can rely on the online transfer as shown on the screen, even though it is taking place almost straight away and transferees are seeing this on their screens.
  2. Whilst the RPA’s intention is to have an automated letter (not email) sent out confirming each transfer, at the moment the system hasn’t been fully tested and manual checks are still taking place after the computer shows the entitlements have been transferred, before a manually produced letter is sent out. Therefore great care needs to be taken and one can see a number of complications could be produced if people unwittingly rely on the onscreen information without first receiving written confirmation.
  3. The confirmation of transfer letter will be sent to the individual who “pressed the button”. Therefore if it was an agent actioning the online transfer, they will receive the letter.
  4. Letters, as yet, are not being sent out and will not be for another two weeks. As with all predictions in respect to the capacity of the RPA online computer system, it should always be taken with a “pinch of salt” as clearly they are working things out as they go along.
  5. There is a computer glitch which the RPA say will be sorted out by the end of March. This involves the usage year given on screen for the entitlements. If it shows 2015 this indicates the transferor has not yet been paid, however the computer glitch means that in some cases people will have been paid, but the computer hasn’t caught up with it yet. If it is showing a 2016 usage year, theoretically this means that the entitlements are to be confiscated, however again there is a computer glitch with this. For example 50% of our BPS claim clients have 2016 usage year, but on further investigation with the RPA, in reality this query only applies to one or two and only for some of their entitlements. If the usage year is 2017, then theoretically one can proceed with the transfer as the computer is showing that the entitlements were successfully activated in 2015. We will wait to see as and when these glitches will be sorted out, but again this adds to the problems building up, creating similar market conditions as last year when there was heavy trading of entitlements as we approached the deadline. The official response to a lot of these problems is that Claim Statements are now being sent out, and that the Entitlements Statements will follow which will resolve these problems, but of course this still leaves the question as to when.
  6. Another query that has developed is, if a “new farmer” has not made the Active Farmer declaration at the time the button is pressed to transfer entitlements to them, the transfer will be cancelled. No-one yet knows what will happen with a cancelled transfer, and whether there will be any problems then for the vendor, i.e. will the entitlements be available to re-transfer immediately to someone else. For obvious reasons no-one is actively trying to test this part of the online system. Again the latest verbal information from the RPA about this is that the online transfer should update the computer immediately the application to transfer is made. However again one must keep one’s “fingers crossed” there are no glitches with this.


Again, the good news is that the mapping is impressive, although one can only print out one parcel at a time, and there is no area measurement tool. However it is the mapping that is causing the most problems, with online mapping changes carried out in 2015 using the online Siti Farmer system, in our experience, still not showing, together with similar problems with parcel and boundary changes that were submitted using RLE1 forms in 2015. Not only are amendments missing from 2015, but whole fields. With the current online system one cannot add new parcels. The latest information we have is that there should be a way of doing this shortly, although initially it appeared we would have to submit paper RLE1 forms. The main problem for everyone is when the glitches are going to be sorted out and how much work one does with ones’ claim now, rather than waiting for these problems to get sorted first? If one waits, one may be waiting forever; if one starts work now, the first process is to check the 2014 information with what is now online. One could check it now, but with these glitches being sorted out, the next day there could be changes as part of the system is updated, and one will have to re-check everything again. In some cases this may not be a problem, if one is able to do all the work and submit it the same day. However in so many cases different people have to check different parts of the form within a business, and of course if using an agent, forms are sent out to the clients before submission, having been prepared, for the clients to check. The advice has to be to start early, of course, as no-one as yet knows what complications are going to be ultimately created by the RPA, bearing in mind effectively they are in a worse position than they were last year, now with last year’s problems to sort out, together with whatever new problems are arising this year. The fear is that the Europeans will not be so ready to grant an extension to the deadline, and therefore becoming familiar with the online system early is advised so you can deal with the “scrummage” that might subsequently follow.

For buying, selling or leasing please contact Hugh Townsend, Dominic Rees and Julia Clark, and if you are looking for help with your BPS claim please contact Chris Allen.