As many readers will be aware the entitlement markets are now in full swing, however this year has seen a large surplus of Non-SDA entitlements on the market, perhaps not due to a greater quantity of entitlements available this season, but fewer buyers in the market. This has deflated the high prices seen towards the end of 2013 and early January 2014 and has prompted some vendors to consider other options for dealing with their entitlement surpluses. In previous years many farmers in this position have rented in naked acres, however since 2013 there has been a third option for those holding excess entitlements; naked acre hosting. Although we are not aware of the RPA altering their stance, which is they will not declare that naked acre letting is ‘contrary to the objectives of the [Single Payment] Scheme’, and it is expected that some farmers will continue to rent in naked acres in 2014, the main concern with this option is that if the RPA come across a naked acre letting they are very likely to investigate in fine detail all the agreements in place, to ascertain its eligibility. This process can take some considerable time, and the inevitable delays in one’s payment together with the additional costs involved for professional fees to deal with the RPA, runs the risk of making the process uneconomical.
Naked acre hosting however seems at the moment to carry less risk, and although there is some possibility that at some point in the future the RPA could consider it ‘artificial’, the process is such that it is more difficult for the RPA to single out a hosting arrangement from other entitlement transfers. It is essentially a ‘private’ arrangement between two farmers avoiding any RPA eligibility query regarding land at one’s disposal as under the naked acre letting system. Hosting involves the transfer of entitlements between a farmer who does not have sufficient eligible land at his disposal to activate their entitlements, to a host who has additional land and insufficient entitlements to activate on it. The ‘entitlement owner’s’ spare entitlements are transferred to the ‘host’ for activation and are held on trust for the duration of the agreement. In return for activating their entitlements the entitlement owner pays a ‘hosting fee’ to the host, which is either held by a stakeholder until the entitlements are transferred back or, as many have opted this season paid directly to the host on exchange of contracts, with the entitlements remaining with the host allowing the option of a similar agreement the following year.
With the Non-SDA entitlement market currently trading at what some vendors feel are ‘rock bottom’ prices, many farmers with excess entitlements are looking to hosting this year, with a view of possibly selling entitlements next year when the market might be more buoyant. The complication is however that hosting must be arranged well in advance of the entitlement transfer deadline, which is effectively the 1st April as forms need to be posted direct to the RPA following the closure of the drop in centres. This means that one must decide now whether or not to host or sell excess entitlements, unlike with naked acre lettings, which can be arranged after the transfer deadline, but before 15th May.
If you wish to discuss your entitlements situation please contact Ashley Taylor for Non-SDA or Charles Gregory for SDA, Moorland & Welsh on 01392 823935