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Covid-19’s effect on land prices will ‘probably depend on the duration of the crisis’

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The fall in land prices and rise in retail values last year reflects the drop in farm output prices and increased demand from farmers to lease land, according to Miah McGrath, chair of the SCSI’s rural agency group.

He made the comment following the publication of the Society of Chartered Surveyors Ireland / Teagasc Agricultural Land Market Review and Outlook Report 2020.

The report found that average national land prices fell by 6% year on year in 2019, driven in the main by a decrease in the prices for dairy, beef and cereals, as reported by us here.

Covid-19

McGrath stressed that Covid-19 remained the great unknown in terms of developments this year.

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“The sudden emergence of the Covid-19 crisis and the speed at which it has moved has created a negative demand shock for farming.”

“While consumption of food within the home has increased, this has been more than offset by reduced consumption outside the home.”

“As a result, meat and dairy commodity prices have fallen. The short-term economic impact is likely to be quite negative, but the effect on land prices will probably depend on the duration of the crisis and this makes it very difficult to predict future price moves.”

Brexit

Up to this, he added, Brexit had been a major concern and findings indicate that 74% of SCSI members believe fears over Brexit deterred buyers, while 63% were of the opinion it deterred sellers.

“Given the negative economic effect Covid-19 will have, the importance of the EU and the UK agreeing a trade deal this year, is now more important than ever.”

“Purchaser confidence is likely to remain weak until more clarity on both issues emerge.”

Jason Loughrey, of the Teagasc Agricultural Economics and Farm Surveys Department, said that while all sectors benefitted from more normal weather conditions following the snow and drought of 2018, last year also saw across the board decreases in output prices for dairy, drystock and particularly for cereals.

Test resilience of ag sector

Trevor Donnellan, head of the Teagasc agricultural economics and farm survey’s department said: “Milk prices were down 5.6%, beef was down 6%, lamb was down 5.8% and cereals dropped between 25 to 30%.”

“How will the agriculture sector cope with the disruption caused by Covid-19?”

“It will depend on the economic health of the various parts of the agricultural sector in advance of the crisis, the actions taken by the agri-food sector itself during the crisis and the supports available to the sector to manage its way through it.”

“A build-up and overhang of stocks in some sectors could be one of the challenges that has to be dealt with as part of the recovery process.”

While it is very difficult to forecast how 2020 will play out for Irish agriculture, it will undoubtedly test the resilience of the sector, he added.

“However, taking a slightly longer view, the agri-food sector should be one of the first to see the benefits of a return to normal activity,” Donnellan concluded.

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