Farmland prices set to rise by 6% but inflation could squeeze incomes

Report warns about rising input prices and the likely impact on incomes

The price of agricultural land looks set to increase by 6 per cent this year as supply pressures and increase demand in the wake of Covid restrictions push up prices.

A report by State farming agency Teagasc and the Society of Chartered Surveyors Ireland, however, warned that wider inflationary pressures, aggravated by the war in Ukraine, were having a significant impact on farm input prices and this would have knock-on implications for incomes.

The latest Agricultural Land Market Review and Outlook Report found that the price of good quality land rose by 17 per cent last year, from €9,381 to €10,962 per acre, while the cost of poor quality value land dropped by 10 per cent from €5,900 to €5,308.

Co Kildare had the most expensive land, with good quality sites fetching an average of €15,350 per acre up from €13,600 in 2020. The cheapest farmland was in Co Leitrim where poor quality land on holdings under 50 acres was valued at an average of €2,760 per acre.

After Co Kildare, Co Cork was the second most expensive county with an average price of €15,070 per acre followed by Louth on €14,500, Meath on €14,230 and Tipperary on€14,000.

The survey of 95 auctioneers and valuers, conducted in February and March, also suggested demand for rented ground remains strong, with rents this year expected to rise by 10 per cent nationally.

Rents are expected to rise by 12 per cent in Leinster, and by 9 per cent in Munster and Connacht/Ulster, it said.

Last year Leinster recorded the strongest rental growth figures, with rental prices for silage, grazing, potatoes, and other crops rising by between 18 per cent and 29 per cent.

Market confidence

Overall the report said the lifting of Covid restrictions had boosted sales activity and market confidence. However, it warned that Russia’s invasion of Ukraine had major implications for input and output prices in agriculture.

“The key and worrying question for farmers is will higher farm output prices cover their higher input costs this year?” it said.

Teagasc economist Jason Loughrey said that inflationary price pressures that were identified in last year's report have sharpened in the intervening time. These pressures, he said, have accelerated due to the war in Ukraine and are likely to have a significant impact on farm incomes this year.

“2022 is likely to be remembered for significant increases in commodity prices and general inflation. The cost of the 3Fs, fuel, fertiliser and feed, began to rise last year, and now, following the invasion of Ukraine, the rate of these cost increases has escalated dramatically, with production costs in 2022 set to be much higher,” Mr Loughrey said.

“While the news on the costs side is quite negative, from the perspective of farmers there are positive developments on the output side, with significantly higher grain, dairy and meat prices now likely in 2022 than would have been forecast even two months ago.”

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times