English entitlements worth less, brokers say

English entitlement trading deals are being done at lower values than Scottish ones, brokers say.

Though trading in English entitlements will not start in earnest until farmers receive their valuations from RPA towrds the end of February, forward deals were taking place at prices of 1.75 to 1.9 times the entitlements’ annual pay-out, before deductions were accounted for.

Some reported that high-value entitlements were selling relatively cheaply compared with lower-value ones, because the SFP they attracted would fall in coming years instead of rising.

The optimum value was about £178/ha (£71/acre), one broker said, because it balanced the historic and area elements of the payment to provide a stable income.

Tony Rimmer of Carver Knowles said that values had been affected by the Prime Minister’s EU budget negotiations last year, which could see up to 30% of the SFP diverted by 2012.

Uncertainty meant most of the transfers he had brokered were on set-aside entitlements, where intensive dairy farmers were paying about £185/ha (£75/acre) to get rid of them.

George Paton at broker Webb Paton said he was advising most English farmers not to sell until next year. “Set-aside payments are worth about £810/ha (£328/acre) over eight years before cuts and I am sure they will eventually have a positive value.”

He also advised farmers with fruit, vegetable and potato entitlements to sit on their hands until mid-March, to avoid selling themselves short into a market that did not yet fully understand entitlement values.

“It is the same as the early days of milk quota. Farmers would offer farms with quota attached, so there was only one buyer for the quota which would go for a bargain price.

“The market had to realise that a better value could be secured for entitlements if they were marketed separately from the land, he said.

He predicted a rise in FVP values and the volume of entitlement trading generally next year, not least because taper relief will cut vendors’ capital gains tax liability to 10%.

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