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Pricing out the farmers

Updated: Apr 3, 2023

The Investor and the State in Irish Forestry

“With already strong demand in the agricultural land market and limited supply, the new Irish Strategic Forestry Fund is likely to further increase the competition for land, which will result in more farmers being priced out of the market and unable to expand operations to future proof their businesses.”

The Irish Strategic Forestry Fund

The Irish Strategic Forestry Fund, which was announced last January, will have up to €200 million capital from Irish and international investors to acquire existing forests, and acquire new land to create a portfolio of approximately 12,000 hectares. The fund will be administered by the British investment fund Gresham House and the State Forestry Company Coillte.

However, given that Coillte is a public company, the question is whether this constitutes state aid. In 2003, the European Court of Justice gave its final ruling against Coillte’s claim to be paid compensation grants to which only farmers (using part of their land for forest cultivation) were entitled.

The ruling stated that Coillte misrepresented itself as a “private-law legal entity”, whereas they were in fact a “public entity wholly owned and controlled by the State”. The pretence by Coillte that it is a private company has been echoed by the relevant Irish Ministers, then and since.

Obviously, this would prevent Coillte from proceeding on its declared objectives with both the Gresham House Agreement and its declaration to increase forestry cover in Ireland by 2050, unless the land purchases are by investment funds alone.

Irish and international forestry investors are now fully guaranteed by the State. The Forestry Programme 2023 to 2027, provides100% grant aid to establish new forests with premiums of between €11,200 to €16,500 per hectare over the 15-year term of the forest premium payments, depending on the forest type established.

This mostly benefits investors, not farmers, who face rising land prices as a result. Farmers argued that the Gresham House / Coillte investment is yet another method of both further inflating land values and entrenching this growing market in agriculture land. However, this investment is loudly promoted as a method of increasing bio-diversity.

The principal investor, Gresham House, spoke of using existing forestry land. So, will this be Coillte owned land, given the separation of farmers from Coillte? If purchased, given the departure of farmers from forestry, the land will be bought at inflated prices, pushing land prices upwards.

“Afforestation Payment” for Investors

The Department of Agriculture, Food and the Marine recently announced the new Forestry programme 2023-2027. Naturally, this was promoted as concern for the plight of farmers.

With respect to the Government’s proposed allocation of 1.3 billion (subject to EU state aid approval) for re-forestry, if Coillte and any farmers with whom it associates access these funds, this will constitute state aid, as previous Governments relentlessly pushed the Coillte state aid case to the highest EU Court of Justice level.

Therefore, this latest programme is a further direct state subsidy for investor-led forestry corporations and Coillte now has the status of a stand-alone entity, in competition with forestry investors.

As a result, Coillte is dysfunctional:

· With afforestation,

· With its relationship with farmers,

· Is effectively prevented from major afforestation,

· This conflicts with their commercial remit.

Coillte’s Role in “Forestry Partnerships”

Coillte’ existing forestry partnerships mostly exist from the 1990’s (before the EU Ruling against the Irish Government) with the result that relations with farmers are effectively in deadlock.

At a February 2023 meeting with the Department of Agriculture, Coillte discussed the implementation of its 2050 strategy in parallel with the new €1.3 billion Forestry Funding Programme. The question is how Coillte could possibly achieve the Government declared afforestation targets?

Public Landholder and Private Operation

To recap:

· Coillte is effectively blocked from working with farmers by the 2003 state aid case.

· Coillte effectively cannot implement any of its professed aspirations.

· Coillte is a public company directed to operate as a private entity by Government decree.

· Coillte can only operate as a commercial company, preventing association with farmers, unless it receives fresh Government instructions to act as a public company.

· As the February meeting and Dáil statements indicate, the Government continues to treat Coillte as an operative private company.

· Coillte’s 2050 self-declaration is null and void., as it cannot proceed to extensive land purchases of farmer land, given its public status.

· As a result, the Coillte 2050 declaration is a declaration in principle, and nothing more.

Long-Terms Plans

The perceived ambiguity and dysfunctionality in Government forestry policy serves to conceal the entry of new investment funds into the forestry market, now guaranteed by the state to the tune of €1.2 billion.

It is important to realise that the biodiversity rhetoric is public – relations concealing an emerging investor – state partnership. In this respect, agricultural land becomes a commodity for investors, and a mechanism for privatisation of state lands., as the state forestry company becomes increasingly redundant and subordinate to domestic and multinational investors.

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