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A.2.3. Agricultural land regulations Agricultural land regulations are the same throughout Germany. However, the procedural regulations of the main legal bodies of German land law vary by federal state (e.g. the minimum size for the need of a permit of a land sale in the procedural regulations of Grundstücksverkehrsgesetz is 1 ha in Lower Saxony compared with strict 0.5 ha in Saxony and less restrictive 2 ha in the federal state Bavaria (DEUTSCHES NOTARINSTITUT, 2008)). For further details concerning the agricultural land regulations, we refer the reader to the main report for Germany.

A.2.4. Land market developments The main characteristic of the land market in Western Germany is the relatively small number of transactions in comparison to Eastern Germany. In this context, Lower Saxony is atypical to federal states in Western Germany. In 2006, 14,783 ha UAA were sold, equating to 0.52 % of the total UAA in Lower Saxony, the highest share of sales in all federal states in Western Germany, approximately as high as in Saxony (0.54 %). In 2006, the average sales constitute 0.31 % in Western Germany, and 0.94 % in Eastern Germany (STATISTISCHES BUNDESAMT, 2006). The land price in Lower Saxony averages €13,170/ha, which is below Western Germanys average price of €15,941/ha. The average plot size fluctuated between 2.4 ha and 2.7 ha in recent years.

In summary, the land sales market is a narrow market: the land price has slightly decreased as has the total transacted area and the number of transactions (see Table 13). For further information concerning the sales market in Germany in general, we refer the reader to the main report for Germany.

Table 13: Land sales market in the Lower Saxony 2000-2006

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Source: STATISTISCHES BUNDESAMT, 1999-2006, own calculations.

In comparison, the share of rented land of the total UAA in Lower Saxony is the third lowest of all federal states. In 2005 about 35,818 farms rented 1,089,050 ha UAA, which equates to 52.7 % of total UAA. The rent share in the case study region Weser Ems is at the low level of 48.3 % (see Table 14).

Impact of the introduction of decoupled payments on functioning of the German land market 65

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Source: ASE 1999, 2001, 2003, 2005 (Own calculations).

The rent share in Lower Saxony fluctuated from 52.2 % in 1999 to 55.7 % in 2003 and down again to the present value of 52.7 % (SITUATIONSBERICHT, 1999-2008). In the case study region of Weser Ems, the rent share rose from 42.6 % to 48.3 % and the land rent for new rented areas increased from €339/ha to €349/ha between 1999 and 2005. In summary, from 1999 to 2005 the land rent market in the case study region is characterized by increasing prices (total growth rate 2.9 %) and increasing rent share (total growth rate 13.4 %).

The relatively high volume of the land market in Lower Saxony can not only be linked to the specific farm structure of the region, but is at least partly policy induced. One reason for the increasing rental prices is the fact that farms with high-stocking densities increasingly need land in order to comply with the restrictions for organic nitrogen application of the Nitrates Directive. With decoupling and cross compliance, this restriction became, for the first time, financially relevant for intensive dairy farms. Furthermore, farmers are concerned with traditional values; one of their main aims is to maintain family property. Even if farmers quit the farm business, they will rent land, but they will not sell it. For further information concerning the rental market in Germany in general, we refer the reader to the main report for Germany.

A.2.5. Drivers of land value According to interviews with leading experts, land sales prices in Lower Saxony are influenced by market forces rather than by policies like decoupling, rural development and other measures. The imperative factors for the land prices are the level of the present agricultural commodity prices and the agricultural productivity of the plot. The size of the farm, the development of the city population, and informal institutions hold no relevance regarding land prices. The regulations on high stocking and the extent of bio energy production have a strong and increasing impact on land prices. Likewise, the infrastructural development is important to land sale prices, where in Weser Ems such development has more influence than in Bavaria or Saxony. Income taxes and value-added taxes have a larger influence in Bavaria than in Saxony and Weser Ems.

In the rental market in Lower Saxony, a steady price increase can be observed (see Table 14).

However, the actual increases in commodity prices have led to, and will continue to lead to, an additional increase in the rental prices. The implementation of the SFP has had no influence on the rental prices. Similarly, other policy measures, like environmental or less favourite area payments, have no impact on rental prices. The same holds for taxes, the development of interests, and informal institutions. For further information concerning the drivers of land values in general, we refer the reader to the main report for Germany.

Lioudmila Möller et al.

A.2.6. Distribution of direct payments With decoupling, a share of the livestock payments was redistributed over the grasslands in Lower Saxony. The remaining livestock payments were added to the payment entitlements of the farms which received payments before the reform. This is due to the different payments for arable land (€259/ha) and grassland (€102/ha), and the varying average face value per payment entitlement among municipalities – between €102/ha and more than €500/ha. Entitlement payments in Lower Saxony in 2007 totalled €354 million. The average face value for the whole of Lower Saxony is €379/ha (ZID). In municipalities in the southwest regions of the case study area, the face value of payment entitlements are highest (see Figure 29).

From 2009 until 2013 the differences in the face values will be adjusted step by step and it is estimated that the final regional payment for Lower Saxony will be €326/ha (SITUATIONSBERICHT, 2008). For further information concerning the distribution of direct payments in general, we refer the reader to the main report for Germany.

Figure 29: Average face value of SFP per municipality Source: Own calculations, ZID.

A.2.7. Effects on structural change During the last two years, the structural changes in Lower Saxony have slowed. Between 2005 and 2007, an average of 4.4 farms closed everyday. The two years prior, 6 farms closed daily.

According to the first agricultural poll in 1949, there were 292,000 farms, six times more then today (LANDVOLK-PRESSEDIENST, 2008). Experts have shown that there are no recent changes regarding structural change in Weser Ems due to by decoupling. Of greater importance are the generational changes in farming families. For further information concerning the structural change in general, we refer the reader to the main report for Germany.

A.2.8. Effects of changes in SFP on land values Experts have shown that until now, there have been no observable influences of the SFP on land values. If there is 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.

Impact of the introduction of decoupled payments on functioning of the German land market 67 A.2.9. Conclusions The land market of Lower Saxony is very steady with a slight increase in the land rentals, whereas land sales have shown a slight decrease. Experts have indicated that the change in the policies have had little or no influence on the land market. The main factors affecting the land market are the present level of the agricultural commodity price, the agricultural productivity of the plot and the stock limitations according to the Nitrates Directive, as in Weser Ems, where intensive livestock farming is very important.

Lioudmila Möller et al.


A.3.1. Introduction The Saxonian Loess Area (Sächsisches Lößgebiet) in the Federal State of Saxony, located in the southern part of the former GDR, was chosen as the representative region of East Germany (Figure 30). The utilised agricultural area of the Saxonian Loess Area in 2003 was 546,928 ha, of which 85 % is arable land and 15 % grassland. The number of farms in 2003 was 4,110. The average farm size is 133 ha, which is characteristic for East Germany, where the average farm size is 202 ha. On the contrary, in Western Germany the average farm size is 34 ha (ASE, 2003;


Figure 30: The Saxonian Loess Area in the federal state Saxony.

Source: Own illustration.

In the Saxonian Loess Area, 69 % of the agricultural land is used by 9 % of the farms, all of which are larger than 422 ha. Concerning the legal form, 8 % of the farms are legal entities and use 59 % of the agricultural land. The remaining 41 % of the land is used by individual farms and partnerships (ASE, 2003). A further characteristic of East Germany is the high percentage of rented land. In the Saxonian Loess Area, 83 % of the agricultural land is rented (ASE, 2003), which is 2 % more than the average for East Germany. In Western Germany the share of rented land is 59 % (Bauernverband 2008). This difference in the farm and ownership structure between East and West Germany is the result of their respective historical development. First, East Germany traditionally had larger farms than in West Germany. Second, large collective farms with 200 or more landowners were created during the communist era. After the German reunification, however, these farms were transformed into cooperatives or companies. As these farms have not naturally developed, they have a high share of rented land. However, with increasing financial consolidation, more land is being purchased and the amount of rented land is decreasing.

The natural conditions in the Saxonian Loess Area are favourable due to the very fertile soils and the climate that is almost continental, with cold winters and hot summers characterised by little rainfall, approximately 550 mm per year. The favourable natural conditions lead to a high share of farms that specialise in field crops (see Table 15) with a high share of cereals, especially winter wheat, in the crop rotation (often more than 60 %). At 6.7 t/ha, the five-year average yield of wheat (2003-2007) in the Federal State of Saxony is slightly below the nationwide average of approximately 7.3 t/ha (STATISTISCHES BUNDESAMT a).

Impact of the introduction of decoupled payments on functioning of the German land market 69

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Compensation and Indemnity Act is to restitute land to land owners dispossessed by the land reform of 1946 and to enable tenants who did not have the possibility to buy land in the former GDR, to buy land at a lower price (65 % of the current market price). Concerned persons can buy land at the lower price in a specific amount, which depends on the soil quality of the land. For example, former tenants can buy approximately 120 ha of land of a medium soil quality. They are, however, obliged to use this land agriculturally for at least 20 years; otherwise the BVVG may cancel the contract.

A.3.4. Land market developments The land market in Saxony, as well as the land market of Eastern Germany, has been impacted by the communist era. Three main factors can be identified: (1) the privatisation of stateowned land, which was confiscated in 1946, (2) the transformation of large collective farms and state-owned farms into smaller private farms, partnerships or corporations, and (3) the reduction of old debts from the communist era.

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