'Upsurge in demand' for marginal land resulting from nitrates changes
Philip Guckian, associate director, Sherry FitzGerald Country Homes, Farms and Estates said that "unsurprisingly, the land market has emulated the trends seen in 2022".
Farmers are less likely to discriminate between prime and marginal grassland as they pursue higher amounts of acreage to accommodate nitrates regulations.
This has resulted in an upsurge in demand for marginal land, according to Sherry FitzGerald's latest agricultural land market review
In general, the first nine months of 2023 saw strong growth across the Irish agricultural market. Over this period, land values have increased by 8.7%, according to the Sherry FitzGerald Agricultural Land Barometer.
Price growth in quarter three returned to a more normalised level, rising 1.3%, following growth of 6.1% over the second quarter.
The weighted average price of an acre of farmland in Ireland, excluding Dublin, stood at approximately €11,783 at the end of September 2023, up from €10,843 at the end of 2022.
In the year to date, prime arable land experienced the most significant price growth, at 9.7%.
This was followed by prime grassland, which grew by 8.5%, while marginal grassland prices grew by 7.1%.
Philip Guckian, associate director, Sherry FitzGerald Country Homes, Farms and Estates said that "unsurprisingly, the land market has emulated the trends seen in 2022".
"Following some uncertainty at the beginning of the year, strong growth was seen over the past six months," Mr Guckian said.
"A number of large and medium-sized farms have been brought to the market in the summer and coming into the autumn months as landowners seek to capitalise on elevated values."
Mr Guckian said that transactions have been positive at all ends of the market, "aided by the developments surrounding nitrate limitations".
"This is positive news given the turbulent economic environment being faced by farmers, with significant drops being recorded in output prices," he added.
"Withstanding these concerns, I expect quarter four to be another positive quarter for the agricultural land market."
Price growth has been seen across all regions, with the midlands seeing the strongest growth of 17.4%, Sherry FitzGerald said in its report.
This was followed by the west (13.9%) and border (12.3%) regions.
"These levels of growth come on the back of some high-profile sales within the agricultural land market, such as the 458-acre Rostalla Farm in Kilbeggan, Co. Westmeath, which sold for €4.5m in quarter two," the report said.
Currently, the most valuable agricultural land in the country is now located in the mid-east region, with a price of €13,416 per acre.
The weighted average price of an acre of prime grassland stands at €13,207, up from €12,170 at the end of 2022.
All regions experienced price growth over the year to date, with the most substantial of this being in the midlands, where prices grew by 19.3%.
The west (11.6%), mid east (9.2%), and south west (8.4%) regions also recorded high levels of growth.
"The recent introduction of nitrate rules has resulted in increased demand for prime grassland from dairy farmers as the alternative for many would be a reduction in milk production numbers," the report said.
The mid east region currently has the most valuable prime grassland in Ireland, with a price of €14,875 per acre.
The most inexpensive was the west region, where an acre will cost €9,600.
Marginal grassland values also recorded high levels of growth in the year to date, growing 7.1% and bringing the weighted average price of an acre nationally to €7,870.
Notable growth was seen in the border (27.1%) and west (19%) regions while the mid east region recorded a slight decrease of 1.9% over the first nine months of the year.
According to Sherry FitzGerald, farmers are "less likely to discriminate between prime and marginal grassland as they pursue higher amounts of acreage" to accommodate nitrate regulations, which has resulted in "an upsurge in demand" for marginal land.
On a quarterly basis, marginal land prices experienced a 1% decrease nationwide, the first quarterly fall in value for any land type since 2020.
The south east (5.5%) and midlands (3%) saw the largest drops in marginal grassland values over quarter three.
According to Sherry FitzGerald, land values are likely to continue their growth over the short-term, but at a slower pace than in the first half of this year.
Changes to nitrates rules this year like cow banding and the derogation drop to 220kg of organic nitrogen per hectare from 250kg in January 2024 "has already caused a surge in demand for both prime and marginal grassland, underpinning both purchase and rental prices".
"Combined with the recent fall in milk prices, farmers are certain to be in pursuit of more land or risk facing reductions to their income. Investors will also be seizing the opportunity to acquire appreciating assets as a hedge against stubborn inflation," the report said.
Despite a number of concerns, market conditions "look set to allow for sustained growth" for the remainder of this year.
