Facts and figures: Is land leasing as lucrative as dairy farming?
In this article I will look at the financial case for leasing versus farming.
Two weeks ago I looked at the practical pros and cons of leasing out the farm.
In order to make a realistic comparison I will compare dairy farming with leasing out the farm, as making comparisons with dry stock or tillage would clearly be a mismatch given the poor returns these enterprises are currently yielding.
Rising milk prices are likely to exert upward pressure on rents once again and a more positive outlook for dairy commodities is likely to tempt more dairy farmers into long-term leases. The rental market for land in 2014 and 2015 went a little bit off the scale with rents of up to and beyond €300/ac being paid. While this is good for the landowner it may not be sustainable for the tenant.
This was partially caused by strong milk prices, but also due to the onset of the Basic Payment Scheme and the additional demand for land associated with the Young Farmer and National Reserve Schemes.
However, 2016 saw rents return to a more sustainable level whereby they were still attractive to the landowner but also a bit more affordable for the tenant. Typically new leases in 2016 saw rents close to or maybe under €200/ac, but early indications would suggest that 2017 will see rents creeping up to or above the €200/ac figure, and even considerably higher in the stronger dairy areas.
Every case will be different so I am using a fairly typical scenario of a 120ac farm currently being farmed exclusively as a dairy farm with 80 cows and followers, along with a Basic Payment of €12,000.