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A.1.3. Agricultural land regulations Agricultural land regulations are the same throughout Germany. However, the procedural regulations of the main legal bodies of German land law in Bavaria are in part less strict compared to other federal states (e.g. the minimum size for a permit of a land sale in the procedural regulations of Grundstücksverkehrsgesetz is 2 ha in the federal State Bavaria, compared to 1 ha in Lower Saxony and 0.5 ha in the federal state of Saxony). For further details concerning the agricultural land regulations can be found in the main report for Germany.

–  –  –

Source: ASE 1999, 2001, 2003, 2005, own calculations.

In summary, from 1999 to 2005, the land rent market in the case study region is characterized by increasing prices (growth rate 6 %) and increasing rent share (growth rate 17 %).

The Bavarian land market’s small volume can be attributed to the prevalence of individual family farms that has developed in this area. The farmers are concerned with traditional values and one of their main aims is to maintain family property. Because of this, they prefer to run their farm part time, even if it is not the most profitable way to use their labour force, instead of renting or selling the land. If they quit the farm business, they will usually rent out their land, but they will not sell it. For further information concerning the rental market in Germany in general can be found in the main report for Germany.

A.1.5. Drivers of land values According to various experts, land sales prices in South East Upper Bavaria are influenced by market forces rather than by policies like decoupling, rural development and other measures.

The critical factors for the land prices are the level of the present agricultural commodity prices and the agricultural productivity of the plot. Irrelevant to the land price are the size of the farm, the development of the city population, and informal institutions.

In Bavaria, the current land demand for land to be used for the production of bio energy is a strong driving force of the land price. Other important factors to land prices are income taxes and value-added taxes. The income taxes and value-added taxes have a larger influence in Bavaria than in Saxony and Weser-Ems; the population growth in the region has resulted in a moderate impact on the land prices. As mentioned previously, the Law on the Sale of Agricultural Land (Grundstücksverkehrsgesetz) in as restrictive in Bavaria in comparison to other federal.

The aim of this law is to support the agricultural structures, making it possible to prohibit land sales to non-agricultural investors. However, some experts believe that this law anticipates land sales to non-agricultural investors beforehand; hence it has not only a regulative but a preventive effect on the land sales market.

Impact of the introduction of decoupled payments on functioning of the German land market 59 A steady price increase can be observed within the rental market in Bavaria (see Table 10).

Experts state that in the long-run, increases in agricultural productivity influence rental prices.

However, the actual increases in commodity prices led and continue to lead to additional increases in the rental prices. It is generally believed that decoupling will only influence the rental prices for marginal grassland (especially in the mountain pastures), if at all. Here, rents may increase since very few of these areas received 1st pillar payments prior to decoupling and the introduced payments will continue to increase from €89/ha to €340/ha until 2013 (SITUATIONSBERICHT, 2008). Other policy measures like environmental or less favourable area payments have no impact on rental prices. The same holds for taxes, the development of interests, and informal institutions. Furthermore, there are only a few infrastructure projects in the South East Upper Bavaria. These projects only influence local rental or sales prices.

Further information concerning the drivers of land values in general can be found in the main report for Germany.

A.1.6. Distribution of direct payments With decoupling, a share of livestock payments was redistributed to the grasslands in Bavaria. The remaining livestock payments were added to the payment entitlements of the farms which previously received the payments. Therefore, because of the different payments for arable land (€299/ha) and grassland (€89/ha), the average value per payment entitlement varies among municipalities, between €89/ha to more than €500/ha. In 2007, payment entitlements in Bavaria totalled €150 million; the average value for all of Bavaria is €334/ha (ZID). In municipalities in the northern regions of the case study area, the value of payment entitlements is the highest (see Figure 26). These regions are dominated by fodder cropping farms with dairy cows and beef fattening.

Figure 26: Average face value of SFP per municipality in South East Upper Bavaria Source: Own illustration, ASE 2003.

From 2009 until 2013, the differences in payment values will gradually be adjusted and it is estimated that the final regional payment for Bavaria will be €340/ha (SITUATIONSBERICHT, 2008). For further information concerning the distribution of direct payments in general, we refer the reader to the main report for Germany.

Lioudmila Möller et al.

A.1.7. Effects on structural change In comparison to other federal states, the level of structural change in Bavaria is relatively low.

Since 1965, there has been an average yearly decrease of 1.6 % in the number of farms in Bavaria. From 1995 to 2005, 25.9 % of farms closed. It is notable that in South East Upper Bavaria there is a difference in the percentage of farms that ended, from about 11.5 % in the mountain regions in the south up to about 22 % in the northwest. Furthermore, the rate of structural change has increased in recent years. Between 2001 and 2003, on average 3.5 % of farms shut down in Bavaria (BAYERISCHER AGRARBERICHT, 2006).

Experts believe that there have been no recent structural changes in South East Upper Bavaria due to decoupling, but rather from other factors, such as the generational change in the farming family. In the future, it is possible that the structural change in marginal grassland regions (e.g.

mountain pasture) will be decelerated due to the increasing entitlement payments in these regions.

For further information concerning the structural chance in general, we refer the reader to the main report for Germany.

A.1.8. Effects of changes in SFP on land values Experts believe that until now, there has been no observable influence of the SFP on land values, or if there is an influence, it is very small in comparison to other factors (e.g. change in commodity prices).

For further information concerning the in general, we refer the reader to the main report for Germany.

A.1.9. Conclusions The land market of Bavaria is steady with an increase of volume on the land rental market, whereas the land sale market showed a slight decrease. Experts believe that changes in policies had no or little influence on the land market. The factors of the land market include the present level of agricultural commodity price, the agricultural productivity of the plot and in regions of South East Upper Bavaria where intensive livestock farming is very important the stock limitations according to the Nitrates Directive.

Impact of the introduction of decoupled payments on functioning of the German land market 61


Executive summary The Weser Ems region of Lower Saxony has been chosen as a representative region of West Germany. In this region 53.2 % of the 25,340 farms are run full-time. Based on the natural conditions, a large percentage of farms specialize in livestock farming. The average livestock density in Weser Ems is presently 1.89 livestock units per ha.

Within Germany, the SPS was created as a dynamic hybrid payment and has since changed to a regional payment scheme. The estimate average value for Lower Saxony will be €326/ha, which is just below the average of €340/ha for the rest of the country.

Agricultural land regulations are the same throughout Germany. Unlike in Western Germany, a majority of UAA were sold in Lower Saxony. The average land price in Lower Saxony is €13,170/ha, which is less than the West German average price of €15,941/ha. The rent share in the case study region of Weser Ems is at a low level of 48.3 %. From 1999 to 2005, the land rent market in the study region was characterized by increasing prices and increasing rent share.

Policies like decoupling and rural development have had a relatively small influence on the land market. The most important factors regarding the market for land sales and rentals include the present level of agricultural commodity prices and the agricultural productivity of the plot.

With decoupling, a share of the livestock payments was redistributed to the grasslands of Lower Saxony. The remaining livestock payments were added to the payment entitlements of the farms which received payments before decoupling. The entitlement payments in Lower Saxony for 2007 totalled €354 million; the average face value for all of Lower Saxony is €379/ha (ZID).

During the past two years, structural changes in Lower Saxony have slowed down. Experts have shown that there have been no recent changes regarding structural change in Weser Ems due to decoupling and furthermore have shown that there has been no observable influence of the SFP on land values.

A.2.1. Introduction We have chosen the northwest region of Lower Saxony, called "Weser Ems" as a representative region for Western Germany (see Figure 27). The utilized agricultural area (UAA) of Weser Ems in 2003 is 929,533 ha of which 65 % is arable land and 35 % grassland.

Figure 27: Lower Saxony with the region Weser Ems

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Source: ASE, 2003.

Another important farm type in Weser Ems is the "Granivore" farm type. The region Vechta is famous for its high density of pig farming. Hence, it is no surprise that about 30 % of all pigs in Germany are located in Lower Saxony. Furthermore, 35 % of the layer hens, 35 % of fattened ducks, 49 % of fattened turkeys, and 53 % of chickens are produced in Lower Saxony.

Field cropping is less important in this case study region. The livestock density in Weser Ems is at an average level of 1.89 livestock units per hectare (see Table 12). This value is due to the extremely intensive pig and poultry production areas and lower densities in the less favoured areas.

A.2.2. Implementation of SPS A dynamic hybrid payment scheme was introduced in Germany in which payment entitlements consisted of regional specific and farm specific parts. The regional specific entitlements are again differentiated between grassland and arable land entitlements. However, it is possible to establish a grassland entitlement with a hectare of arable land and vice versa. In Lower Saxony, the grassland payment entitlements are valued at €102/ha and arable payment entitlements at €259/ha. The farm specific payment is added to these values, thus, the value of payment entitlements differs, depending on the production and structure of the individual farm. These differences will be gradually reduced, starting in 2010 and continuing into 2013, at which time the payment for each hectare should be the same. A further characteristic of the German decoupling model is the differences of the regional payments between the federal states. The actual values of the payments for arable and grassland vary among the federal states, as will the final regional payments in 2013. This will be calculated based on the total amount of payments and the total number of payment entitlements in the federal states received in 2009. It is estimated that in the federal states of Saxony, North Rhine-Westphalia and Schleswig-Holstein, the payment Lioudmila Möller et al.

per hectare will be the highest, at €359/ha. In the federal state of Saarland, they are expected to be the lowest at €258/ha. The average value for Lower Saxony will be €326/ha, below the expected nationwide average value of €340/ha (SITUATIONSBERICHT, 2008). For further details concerning the payment scheme, we refer the reader to the main report for Germany.

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