Transfer of single farm payment entitlements to farm successors: impact on structural change and rental prices in Switzerland

Abstract

This paper analyses the impact of tradable and non-tradable single farm payment (SFP) entitlements for farm successors on structural change and the lease market. Using the example of Swiss agriculture, the effects on rental-price trends and farm-exit rates are investigated. An ex-ante normative impact analysis is performed with the agent-based agricultural-sector model SWISSland, which simulates structural change processes and income trends in Swiss agriculture over a period of up to 15 years. A land market implemented at municipality level simulates the plot-by-plot leasing of land to surrounding neighbouring agents that is common in Switzerland. Allocation of plots to tenants as well as lease pricing is modelled taking into account the farm-specific land rents. The results show that personalised SFP entitlements which could not be transferred to a farm successor not only cause an intensification of structural change, but would also thus lead to a substantial reduction in rental prices. SFP entitlements which were successfully transferred to farm successors have only a slight impact on structural change and the rental prices of arable land. Only for grassland in the mountain region does a stronger shift result in a significant reduction in rental prices.