What Am I Missing Here?

This looks so insanely profitable that I simply have to be missing something here. It just cannot be existing.

So, single farm payments, the CAP subsidies. There\’s a market in them (the farmer can sell the subsidy stream and keep the land. You can buy the stream but not the land.)

But the prices seem absurd. Here. This one for example.

If I pay them £240 then I get a stream of income over the next 5 years totalling £786?

I don\’t have to do anything, the government just sends me the cheques? And it\’s guaranteed?

Why is anyone selling these at these prices? And why isn\’t everyone buying them?

What\’s the catch?

6 thoughts on “What Am I Missing Here?”

  1. The reason must be that there is always a small chance that the CAP will be knocked on the head.

    More interestingly, the actual value of UK farm land is about £4,000 per acre. Seeing as CAP payments (or their UK equivalent) are about £80 per acre, at a discount rate of 4%, the subsidies make up half the total value.

    If the market discount rate for the subsidy is much higher, then it appears that UK agricultural land does have some value after all (which is what you would expect, being relatively fertile and within easy reach of a large market).

  2. Basically you have to be a farmer to get the entitlement.

    Tim adds: Yup, more investigation shows that you’ve got to go and rent land, “naked land” in the parlance, in order to get paid out the subsidy annuity that you’ve purchased. This is something easy to do in Scotland, very tough in England. Oh for the knowledge of the whereabouts of 100,000 acres of naked land in England….

  3. An article here

    http://www.timesonline.co.uk/tol/news/world/europe/article1506042.ece

    claims it happens, but the comments are very dismissive, e.g.

    anyone can indeed buy Entitlements, those entitlements can only be activated by having an equivalent number of hectares of registered land under your control for the requisite 10 months ( 1 entitlement requires 1 hectare to be activated). That “Control” is indeed a grey area as Section B11 of the Single Payment Scheme Handbook and Guidance for England 2005 states ”You will not be awarded any payments under the SPS if you artificially create the conditions required to obtain payment”.

  4. Farmers are buying and selling to each other – one might be losing some agricultural land to a new Tesco and another has some old moorland that didn’t have any entitlements so he can buy some to claim on it. I think that is why the values are so discounted because of the limited set of conditions where you can actually claim it.

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