In February and March, the SCSI surveyed members about developments and expectations in the agricultural land market. The SCSI/Teagasc Agricultural Land Market Review and Outlook 2019 report sets out the survey’s findings.
The main message from the Land Market Review and Outlook 2019 is that prices for land without a dwelling house, which is probably the best measure of the agricultural value of land, were above those in 2017 (Table 1).
The highest prices and largest changes in price per acre occurred on the smallest parcels, perhaps
reflecting the greater affordability of these parcels and interest from purchasers other than farmers.
The region with the greatest percentage increase was Connaught/Ulster, but the results for the
larger parcels here were from a relatively small number of observations. The trends are summarised
in Figure 1. The smallest sized parcel was chosen, as it is the most commonly sold size group.
The rental market
Rental prices of agricultural land tend to be more sensitive to changes in returns than purchase prices. Most of the land rented in Ireland is for grassland, plus some for cereals and an assortment of other crops. Rents in 2018 compared with 2017 are shown in Table 2.
There was little change in the rent paid for grassland, either for grazing or preservation, except in Connaught/Ulster, where a large (29%) increase in rental price was reported. This rise was confirmed in some follow-up enquiries and may be due to a shortage of grassland on offer, plus the perception of good long-term rental returns from forestry. There were more pronounced fluctuations in the rental prices for potatoes and other crops, but the weather-dependent yields and returns for most of these crops would explain much of this.
Expectations about the types of farmer most likely to be seeking to buy and sell land in 2019 are shown in Tables 3 and 4. The most common type of buyer in all regions was expected to be the dairy farmer. On the other hand, it is drystock farmers who are expected to be seeking to sell. This was the case across all regions.
Land rental expectations
The renting of land is closely linked to the returns expected from farming the land. Land rental allows farmers to accommodate marginal changes to their enterprises without incurring long-term commitments. This is true for short-term leasing, but long-term leasing is gaining in popularity. The types of farmer who were expected to be most active in the rental market in 2019 are shown in Table 5.
Dairy farmers were expected to be the most common type of farmer seeking to rent land in 2019. They appeared to be expanding in all regions to take advantage of the more liberal dairy regime following the abolition of the milk quota.
Effects of Brexit
Brexit poses great uncertainty for the agricultural sector. It would be strange if land purchase and rental decisions were not affected by it. The effect of Brexit on buyers of agricultural land is illustrated in Figure 2.
Figure 2 shows that 71% of survey respondents reported that Brexit was having a deterrent effect on buyers of agricultural land. This varied slightly between regions but the effect was always between 73% (Connaught/Ulster) and 79% (Leinster not including Dublin).
When the uncertainty is removed, many of these buyers may return to the market but the price they will be prepared to pay for land will depend on the new, but presumably less uncertain, outlook.
In the case of land rental the deterrent effect was much less. In the majority of cases it was said to have no effect either way on rentals. However, the uncertainty was still a deterring factor. For renters, the deterrent effect of Brexit was reported as being present by between 33 and 37% of respondents. It was almost never an encouraging factor.
This article has only covered some of the points included in the SCSI/Teagasc Agricultural Land Market Review and Outlook 2019. The full report can be accessed at www.scsi.ie/documents/get_lob?id=1492&field=file.
Paul W. Kelly BSc PhD
Agricultural economist and former researcher with Teagasc, and former IAVI Academic Director.