Entitlement trade for the 2015 Scheme Year has already begun, with interest in Non-SDA emerging at a very early stage this season. The ink on the 2014 RLE1s is barely dry and we are already dipping our wicks to prepare them now for 2015. The first transfers have been agreed at £140 per unit plus VAT for good sized blocks of Non-SDA, with the market already having accounted for the potential influx of large quantities of smaller blocks will have on the market due to the five hectare rule from 2015. We will be actively trading these smaller blocks, however it could be unlikely that these transfers will be viable closer to the transfer deadlines as competition becomes more ruthless. Therefore those looking to sell under five hectares would be well advised to enter the market sooner rather than later. Those with larger blocks to sell are always advised to contact selling agents as soon as possible, in order that they are kept abreast of the market throughout the season and can choose the most opportune moment to sell.
This early trade is likely to be a result of the closed period for entitlement trading between the 19th October 2014 and mid-January, when trade should begin again. It is not yet clear if all trade in 2015 will be online, however one could suggest that it would be unfair to abolish paper RLE1s altogether, considering many in the farming community are not yet au fait with the online system and others will of course have trouble with rural broadband. A point of note here is that currently the six week period between the 2nd April and the 15th May is required for the RPA to process all the RLE1s they receive. If however transfers are to be online from 2015, will this period still apply or could transfers be arranged up to the 15th May (presuming this remains the SP5 deadline)?
Another point of note, although the implications are not yet apparent, is that those transferring in entitlements during the 2015 transfer window (from mid-January) will be subject to the ‘active farmer test’, in whatever form it emerges, whilst those arranging transfers pre 19th October 2014 will not. This sounds like it could be of some relevance, however presuming claimants in 2015 will be subject to the test, perhaps not. This is a ‘wait and see’ point until the ‘active farmer’ definition is confirmed.
Perhaps the most important point in respect to one’s entitlements is that in 2015 claimants must activate all their entitlements, otherwise they will be lost to the National Reserve. There is however some relief from this, in that this will only apply to claimants who have more entitlements than eligible land. Those choosing not to activate on certain areas, for whatever reason, should not lose the entitlements that could have been activated on this land, providing the land is eligible. This begs the question, why would one not activate on eligible ground, however there may be scenarios where this will apply.
There will also be changes to the two year usage rule, meaning that after 2015 claimants must activate all their entitlements at least once every two years, otherwise the surplus will be lost to the National Reserve. This means that one will no longer be able to ‘rotate’ surplus entitlements, as is currently common practice.
Modulation, in the sense we know it, will not apply from 2015. Instead there will be an inter-pillar transfer of funds from Direct Payments (Pillar 1) to the Rural Development Fund (Pillar 2). In England this will be 12% (to be reviewed in 2016), Wales 15%, Scotland 9.5% and Northern Ireland 0%. Previously modulation transferred funds in a similar way, in England this comprised 10% of compulsory European modulation and 9% of English modulation (on amounts above €5,000). Under the BPS funds that were previously transferred to Pillar 2 through compulsory modulation will be permanently transferred to Pillar 2 from the outset.
For larger claimants payments over €150,000 (excluding greening and any young farmer payment) will be reduced by 5%.
A young farmer payment will be available for those under 40 years of age, who have control (or joint control) of their holding. This will equate to a 25% top-up payment, based on the average value of all entitlements held. There is scope for DEFRA to reduce this figure if too many claimants apply. It will only be available for up to five years after the year the young farmer took over control of the business.
It will be interesting to see if a market will develop, legislation permitting, enabling the importing and exporting of ‘greening’ requirements, particularly to fulfil the three crop rule and EFA requirements. Watch this space.
