AEOS, Should you transfer to GLAS now?

AEOS was introduced in 2010 as a replacement scheme for REPS.  Both in terms of its aspirations and payments it fell well short of its predecessor.  Nevertheless the scheme opened for applications in 2010, 2011 and again in 2012.  Over the three rounds of the scheme approx 26,000 farmers joined.

AEOS has now been replaced by the new GLAS scheme.  This scheme will open later this month and the Dept. of Agriculture hope to fill up to 30,000 places this year.  A further 20,000 places will become available over the following two years.  For commonage farmers who are out of contract the decision to apply in 2015 will be relatively easy.  For farmers who are still in AEOS the situation is more complicated.  They will be allowed to transfer to the new scheme in 2015 but what are the factors that farmers should consider in making this decision. I believe every farmer in this position should consider the following issues before making up their mind.

·             Transition into GLAS

·             Access to the new scheme.

·             Full term in the GLAS scheme.

·             Input into the Commonage Management Plan.

·             Costs.

Transition into GLAS

For AEOS 1 farmers, i.e. people who joined AEOS in 2010, their contracts will finish at the end of 2015.  If they transfer to GLAS this year they will be paid AEOS for 9 months and GLAS for the remaining 3 months.  They will get a full year’s payments in 2015.  If they wait until 2016 to join GLAS they will get a full year’s AEOS payment in 2015 but in 2016 they will only be paid for 3 months in GLAS.  They will have lost the opportunity to have a seamless transition from one scheme to the next.  There are transaction costs associated with joining GLAS but delaying until 2016 means that those costs will be at their highest when their payments are at their lowest.  For this group joining GLAS in 2015 ensures a seamless transition to the new scheme with no break in payments.

For farmers in AEOS 2 & 3 while the opportunity to avail of the seamless transition will be there in 2016 they should also consider the other three points.

Access to the scheme.

There are many thousands of farmers with SAC/ SPA land who are also in AEOS.  They are barred from entry to GLAS in 2015 but will be allowed to join in 2016.  There will only be 10,000 places in 2016 and it is quite possible that the demand will exceed this.  If this happens there is no guarantee that you will get in.  This means that you may miss a year’s payments.

Full Term in the Scheme.

If anyone on your commonage joins GLAS in 2015 the clock will start ticking on the Commonage Management Plan.  Later applicants will only get paid for 4 years if they join in 2016 and only 3 years if they delay until 2017.

Input into the Commonage Management Plan.

With the Commonage Management Plan in place, it is very unlikely that the initial applicants will be willing to revisit large parts of this plan to accommodate new entrants.  Farmers who join GLAS in later years will in most cases have to accept the commonage plan as it is and will have very limited capacity to contribute to it.  

Costs.

Delaying will not result in any reduction in costs, the advisor and most probably the original applicants will insist that late applicants pay at least the same price as everyone else.

Discussion

Considering the turmoil over the last 6 months on the whole GLAS commonage issue and in spite of recent progress, some AEOS farmers may be tempted to adopt a wait and see approach to GLAS and hold off their applications until 2016.  They may also feel that completing another year or two in AEOS and then joining GLAS secures their payments for six or seven years rather than the five available by joining GLAS now.  While this analysis appears logical it does not take into account the negative impacts of delaying entry into GLAS.  It is based on several assumptions which may or may not be valid.  These include;

1.       That they will be able to access GLAS in 2016 or 2017.

2.       That they will have the same opportunity to contribute to the Commonage Management Plan as early entrants.

3.       That there will be no agri-environment scheme in the next  round of the CAP.

There may be situations in some commonages where there are very small numbers of shareholders, all of whom are in AEOS 2 or 3 and where everyone decides to hold off on applying for the scheme until 2016 or 2017.  In theory this would give them an extra 2 years AEOS followed by 5 years in GLAS.  This may seem like a good idea but it is not without risk. Look back to when REPS 4 was introduced; the farmers who left REPS 3 early to join that scheme were the winners.  The people who stayed on in REPS 3 with the hope of getting 5 years in each scheme missed the boat completely.

I appreciate that for some people there may be issues in respect of the costs associated with entry into GLAS, a determination on this can only be made by the farmer himself and I do not pretend to be able to advise on this.  The decision to join GLAS is one that each farmer has to make for themselves. Personally I believe that joining GLAS in 2015 is the best option.  It virtually guarantees entry for commonage farmers and gives them the opportunity to contribute to the development of the commonage management plan.  Delaying the application until 2016 puts off the transaction costs for another year but for AEOS 1 farmers it will cost them 9 months payments (up to €3,750) and they will still face the same costs the following year.  For all commonage farmers waiting until 2016 or 2017 carries the risk that they will not get in at all and the near certainty that they will get a reduced term in GLAS and have little or no input into the Commonage Management Plan. 

To borrow a phrase from popular economics, waiting until 2016 is just kicking the can down the road.  It does not solve anything and quite possibly creates new problems.