Factors for farmers to consider before leasing land

It’s a well-known fact that the cost of leasing land has increased significantly over the past few years, with a number of factors responsible.

In most parts of the country, dairy expansion and changes to nitrate derogation regulations have been the two main factors being attributed to the rise in land-rental costs.

This time of the year tends to be when the majority of land lease deals are struck ahead of the Basic Income Support for Sustainability (BISS) application closing date of May 15.

Earlier last month (March), Teagasc drystock advisor Andy Ryder who is based in Co. Mayo, said that the main talking point with farmers who are renewing leases, is the increased cost of land leasing.

He said: “Some of these farmers have been farming the same ground for 10 to 15 years. This is at a time when costs on farms, especially dry stock farms, are high and in some cases, direct payments have fallen.”

“I don’t believe some of these farmers are fully aware of the financial change that will occur for their farm this year especially where young farmers cannot avail of the young farmer’s scheme anymore, further convergence of BISS payments and other schemes are no longer available as application dates are closed.”

“Their farming system has been built around this leased land and the loss of the land will change their farm business dramatically.

“This is a dilemma farmers are facing. They need the land to maintain their current farming enterprise, but, is this land leaving any money at the end of the day?”

The Teagasc advisor urged farmers to consider some of the following points before deciding on leasing land:

Rental price

The Teagasc advisor explained that the price aid for land is naturally enough “by far the biggest factor”.

“Farmers pay for land on a per acre basis, but receive payments on a per hectare basis. Farmers need to get advice and put some real figures together to give a better picture of the situation.”

Distance from farmyard

He said: “Fuel cost and wear and tear of machinery is a real cost that is often ignored. With higher fuel prices and rising machinery costs currently, these often hidden costs cannot be discounted.”

Land quality

The Mayo-based Teagasc advisor said: “Too often land is taken to avail of support payments and the quality of the land is secondary.

“The simple task of walking the land and taking a soil sample will help you decide on the potential of the land. The main reason for taking on extra land should be to grow the farm and try to increase the profit margin.”

Hidden costs

Fencing and stock handling facilities are costs that occur when leasing land. It is an upfront cost.

He advised farmers to discuss these costs with the land owner prior to taking the land and said “the possibility of some rent reduction if money has to be spent on fencing as the fencing will be there after the lease has expired”.

Disease and parasites control

“Some land has a higher risk of red water and fluke for example. There is a cost when animals are lost or prevention measures have to be put in place. Is the land in a high risk TB area?”

Direct payments

“This is where policy in recent years have changed the cost of leased land. Based on individual circumstances, different farmers can offer higher rental prices and in a lot of cases it is not based on the production potential, but the direct payments that can be drawn down.”

Income tax

“Most farmers are part-time sole traders working off farm. Any extra money made on the leased land will be taxed similar to all other income.”

Extra livestock and housing

“This can be a problem for some farms if no planning has occurred. Farmers may have to purchase stock for eligibility for some schemes. Some farms can end up with too much grass and others may have to sell stock for the winter as sufficient housing is not available.”