Farmland values forecast to increase
SCSI auctioneers and valuers are forecasting that the price of agricultural land nationally will increase by 6% on average this year, mainly due to an expected recovery in milk prices and continuing strong demand from farmers and investors.
As part of the Society of Chartered Surveyors Ireland (SCSI) / Teagasc Agricultural Land Market Review and Outlook Report 2024, auctioneer and valuer members of the SCSI, operating in the agricultural sales and rental market, say average rental prices in 2024 are expected to increase by 4%. In Munster, average rental prices are expected to rise by 7%, while in Connacht / Ulster an increase of 6% is forecast. In contrast, SCSI agents expect average land rental prices in Leinster to decrease by 1% this year.
In 2023, land rental prices increased strongly in Munster (+23% for grazing only) and (+9% for cereal crops) with relatively minor changes for most land types in Leinster and Connacht/Ulster.
While price increases will continue to be driven by high demand and low supply, SCSI auctioneers and valuers say the rate of increase is moderating due to a number of factors including higher interest rates, poor weather conditions and lower farming returns. Teagasc is warning that the impact of the adverse weather on agricultural output, production costs and farm incomes, is a concern and presents an area of uncertainty for the current production year.
Non-residential agricultural land
The average value of non-residential agricultural land in 2023 was €9,297/ac, which is an increase of 11%, up from €8,368/ac in 2022. National average non-residential farmland prices ranged from €6,286/ac for poor quality land – up 13% from €5,564/ac in 2022 – to €12,308/ac for good quality land – up 10% from €11,172/ac the previous year.
According to the Society of Chartered Surveyors Ireland / Teagasc Agricultural Land Market Review and Outlook Report 2024, the Central Statistics Office data shows that the share of agricultural land, which transacts for sale annually is only around 0.5% of agricultural area and this is one of the main reasons for the strong demand for agricultural land for rental here.
In Munster, land rental values increased on average by 12% last year following on from a 13% rise in 2022. Prices per acre ranged from €297 for grazing only to €389 for potato crops. By contrast in Leinster (excluding Dublin), rental values decreased by 2% following a 9% increase in 2022. Here prices ranged from €249 for grazing only to €429 for potatoes. In Connacht / Ulster, average rents were relatively stable with a 4% increase in average rents for meadowing / silage land to €183/ac, counterbalanced by a 3% reduction for grazing only land to €157.
According to the survey of 129 auctioneers and valuers from all over the country, there wasn’t any significant changes in volume of land sold last year compared to 2022, with executor / probate sales providing the main source of farmland sales.
Prices around the country
This year’s annual survey, the 11th in the series, provides a county-by-county breakdown of the prices of good and poor-quality land. The survey found the most expensive land in the country is in Waterford, with good quality land on less than 50ac fetching an average of €20,000/ac. The land with the lowest price is poor quality land in Mayo, where the average price for poor quality land on holdings over 100ac is €2,733/ac.
According to this year’s survey, after Waterford, the most expensive land on small holdings is in Tipperary, followed by Kildare, which had the most expensive land last year. The average price of good quality land on holdings of less than 50ac in Tipperary is €17,539/ac, followed by Kildare on €16,400. Meath on €16,225, Carlow on €15,750 and Cork on €15,667 round off the top six places.
In Munster, prices for good quality land on holdings under 50ac range from Waterford’s €20,000 to €9,500 in Clare. Prices for poor quality land ranged from an average of €7,600 in Tipperary to €5,375 in Clare.
In Leinster prices for good land in 2023 on holdings of less than 50ac range from Kildare’s high of €16,400 – up from €15,333 the previous year - to €11,750 in Offaly, while the prices for poor-quality land range from a high of €9,600 in Kildare to €6,583 in Longford.
In Connacht/Ulster, prices for good land on holdings under 50ac ranged from an average of €13,400/ac in Donegal – up from €12,143 in 2022 – to €7,978 in Leitrim, up from €6,140 the previous year. Prices for poor quality land ranged from an average of €7,750 in Monaghan to €3,833 in Mayo, the lowest price in the country for holdings under 50 acres.
The main findings:
- National average farmland sales prices forecast to rise by 6% in 2024.
- Average value of non-residential agricultural land in 2023 was €9,300/ac, an increase of 11% on 2022.
- In 2023, national average non-residential farmland prices ranged from €6,286/ac for poor quality land to €12,308/ac for good land.
- The most expensive land is in Waterford, where good quality land on small holdings is fetching an average of €20,000/ac.
- The least expensive land is in Mayo where poor-quality land is selling for an average of €2,733/ac on holdings over 100ac.
- Last year, average land rental prices increased by 5%.
- SCSI agents expect average national rental prices to increase by 4% this year.
- While agents say land prices will continue to rise, they expect the rate of increase to moderate this year due to lower returns and higher interest rates.
- While higher margins are forecast for dairy farmers, 2024 will prove very challenging for tillage farmers.
- Teagasc warns that recent weather conditions are likely to have impacted margins and incomes and remain an important area of uncertainty for the year ahead.
Land market commentary
Peter Murtagh, Chair of the SCSI’s Rural Agency Committee, said that while demand for land - primarily by dairy farmers - had continued to drive land sales and rental prices increases last year, price expectations for 2024 have moderated due to a number of factors.
“We can see this most readily in the rental market which reacts more quickly to economic changes in farming. Last year, average rental values increased by just 4.5% across all farming uses despite predictions of double-digit growth similar to that which occurred in 2022. These increases did not materialise due in the main to poorer overall returns in farming and very poor weather conditions which dampened demand from some farming sectors - particularly in Leinster and Connacht / Ulster – and kept a lid on rental inflation.
“In Munster, which has a higher prevalence of dairy, rental values increased by over 12%. One of the features of the market that is emerging is that some dairy farmers have a demand for land to allow them to adjust their stocking rates to ensure they comply with tighter environmental restrictions relating to water quality.
“Last year was a very poor one for tillage farmers and with the very poor weather continuing well into 2024, auctioneers and valuers are forecasting a modest average national increase in rental values of just 4% this year, ranging from a 7% increase in Munster to a decrease of 1% in Leinster. Rents in Connacht / Ulster are expected to increase by 6%.
“While land values are expected to increase again this year, mainly due to an expected improvement in milk prices and strong interest from farmers and investors, the increases are forecast to be an average of 6%, well down on the double-digit growth recorded last year. On a provincial level Leinster, Munster and Connacht/Ulster are projected to experience an increase of land values by 4%, 11% and 5% respectively.
“Last year, over a third of respondents to our survey expected a significant increase in dairy farmers buying land, now 12 months on, that figure has fallen to just 3% of respondents. In addition to the lower milk prices we saw last year, one of the other factors which SCSI auctioneers and valuers referenced was the impact of higher interest rates, particularly on smaller farms that came to the market as buyers are more likely to avail of borrowed funds for these types of holdings in contrast to those purchasing large farms.
“While dairy farmers are ranked as the number one buyer by 69% of respondents, it is interesting to see that ‘other’, which could also be categorised as ‘investor’, constitutes 20% of buyers. This shows there is clearly interest from buyers in acquiring land for forestry or equine purposes, or individuals with a high net worth seeking to diversify their assets by investing in agricultural land," he said.
Agricultural outlook
Teagasc Economist, Dr. Jason Loughrey said that while milk prices should be higher in 2024, the outlook for the cereals sector remains negative. He highlighted the likely negative impact of recent weather conditions on economic outcomes at farm-level and the uncertainty of the weather conditions for the rest of this production season.
“We have had poor weather for farming since the end of Summer 2023. This has affected the 2023 harvest, cut short the 2023 grazing season, disrupted the planting of winter and spring crops for 2024 and delayed the start of the 2024 grazing season. From an agricultural perspective, weather conditions have been particularly challenging for tillage farming. The wet conditions have also led to higher bedding and feeding/housing costs for those with farm animals and the depletion of fodder reserves on some livestock farms.
“Milk prices fell by 28% last year from record levels in 2022. Some improvement in milk price is evident in the early months of this year. Overall, a 10% increase in milk prices is forecast for 2024 with the average net margin per litre of milk expected to increase from a relatively low-level of approximately 7 cent per litre last year to 12 cent per litre this year, which is closer to the average of the last decade.
“Annual average beef prices in 2024 are forecast to be approximately 2% to 3% higher relative to 2023 while the margins on sheep farms are also forecast to increase this year. However, there is particular uncertainty for cattle rearing farms due to the timing of cattle sales. Average heavy lamb prices are about 18 % higher (year-to-date) when compared with the same period in 2023. While pork prices are currently behind 2023 levels, these prices remain high by historical standards.
“Higher than average heavy rainfall in Q1 2024 has led to very soft ground conditions and water logging and has delayed the planting of crops and the turnout of animals to pasture. While an excess of rainfall has been a problem, farmers will be concerned that improved weather conditions when they arrive, do not then pivot into drought conditions later in the growing season. Therefore, weather and growing conditions this year will play a crucial role in overall farming profitability and could also impact the prices paid for land over the year” Dr Loughrey concluded.
Renewable Energy Opportunities
This year’s report includes a special feature on three renewable energy generation sources with direct or indirect implications for agricultural land use, namely the use of agricultural land to grow feed stocks for anaerobic digestion that produces biomethane, the use of agricultural land for onshore wind generation and the use of agricultural land for solar energy generation.
If national targets are achieved Teagasc believes up to 120,000ha will be required for the production of clean green biomethane, 2,000ha will be needed for onshore wind and 16,000ha may be needed for solar energy by 2030.
While the report notes that the income earning potential of land leased to a solar or wind energy generation company will exceed the income likely to be earned per hectare from conventional agricultural production systems, it advised landowners to seek legal and taxation advice before finalising any agreement.