Policy Drivers of Land Mobility in Irish Agriculture

This paper compares financial returns deriving from a range of agricultural land use options in order to examine the effectiveness of agricultural land mobility policies in Ireland. Irish agriculture is characterised by a lack of land mobility despite a number of policy initiatives designed to address to problem, most notably tax exemptions on income derived from the long-term leasing of land. Using socio-economic data from the Teagasc National Farm Survey, a number of hypothetical farms are created using a microsimulation approach to compare incomes across farm systems and land use options. Tax and subsidy policies are applied to derive rates of return for the hypothetical farms under a variety of land use scenarios. The analysis finds that in numerous hypothetical scenarios, leasing out agricultural land on a long-term basis can prove more profitable for cattle and tillage farmers than farming the land. Only dairy farmers derive consistently higher disposable incomes from farming their land as opposed to leasing it out. However, despite these results, 66% of Irish agricultural land is used for cattle and tillage farming. Further work is required to determine the reasons why many Irish farmers prefer to farm land unprofitably rather than lease the land out at a profit.