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Beware a farmland bubble

As the countdown to major reform of the Common Agricultural Policy (CAP) in 2014 begins in earnest, are farmers in danger of igniting another property boom?

With the method of payment set to change from a headage or production-based system to one based on acreage, there are already strong indications that agricultural land prices and rents are soaring in anticipation of the introduction of the new system.

Will we ever learn?

As Ireland painfully comes to terms with the implications of the bursting of the Celtic Tiger property bubble, it now appears as if we are at risk of inflating a fresh bubble, this time for agricultural land values and rents.

This must not be allowed to happen. While Brussels has set the broad parameters for the new-look CAP, it has allowed member countries considerable discretion in how they implement these changes at the national level.

The Irish Government must be prepared to use these discretionary powers to ensure that the benefits of the new CAP regime accrue to the farmers actually working the land rather than to landlords or property speculators.

Yesterday EU Agriculture Commissioner Dacian Ciolos lent support to such a policy when he promised that CAP payments to Ireland, which currently stand at €1.3bn a year, would only go to active farmers.

Unless this happens then, only a few years after the bursting of the last property bubble, we will already have started inflating the next one.