Dairy farms in demand despite milk price agony

Dairy farm sales have been few and far between in 2014 resulting in firm prices. However, there are mixed opinions about how the recent slump in milk prices will affect prices.

Duncan Barrie of CKD Galbraith said farms in Ayrshire and the south-west of Scotland were keenly sought.

“Equipped dairy units, land and buildings that can complement an existing enterprise, and farms that can be converted to dairy, are in strong demand. We are still experiencing strong interest from Northern Ireland.”

Willoxton Farm, near Mauchline, Ayrshire, is a 287-acre dairy unit that includes a substantial modern purpose-built dairy complex. It was launched in July at a guide price of £1.5m and has already gone under offer.

Recent milk price reductions did not appear to have dampened demand, said Mr Barrie. “However, a continued period of income reduction will ultimately affect buyers’ serviceability relating to purchase power and expansion.”

Craig Brough of H&H Land and Property said scarcity of land and farmers striving to create bigger dairy herds continued to drive the market in Cumbria and south-west Scotland.

“While the milk price is in the doldrums, farmers don’t buy farms based on today’s commodity prices. Land is still an exceptional investment, and good dairy farms are increasingly few and far between.”

High-quality, ring-fenced, fully equipped farms would have a land value of £8,000-10,000/acre, said Mr Brough. One good example creating a strong draw was Stoneybrook Farm near Brampton, Cumbria.

The farm is a 338-acre dairy unit with an extensive greenfield dairy complex, including 415 cubicles and 24/48 Fullwood parlour, plus a new farmhouse, with a guide price of over £2.8m.

Berrys’ Chris Jones said dairy units in north Shropshire were worth £9,000-10,000/acre and those in the south £10,000-11,000/acre, depending on location, equipment and land quality.

Arable farmers and lifestyle buyers were vying with milk producers for land. “Anything within a ring fence is attractive, but supply is very short. Land is such a valuable asset in terms of investment and tax planning, farmers do not part with it lightly. Only if needs must does it come to the market.

“With milk prices as they are, you may begin to see some smaller farms for sale. But I think most will weather this storm.”

David Hebditch of Humberts’ Taunton, Somerset office said the dairy farm market was generally strong, especially for efficient, well-equipped units with adequate acreage for the cow accommodation. “We often receive interest in any holding over 200 acres for potential conversion to dairying.”

Dairy values were generally at £12,000/acre plus, depending on location, land quality and the efficiency and remaining life of buildings or suitability to construct a new unit, he added.

“There is some cash-flow pressure and some highly geared businesses,” said Mr Hebditch. “However, most efficient businesses can manage costs in a volatile market, and the banks continue to be supportive of agriculture as a whole.”

Dairy farm sales were scarce in the south-west of England, said Alex Rew of Stags. “There is demand from dairy farmers, particularly the low-input, low-output fraternity, for land or uncapitalised farms to create new units. However, if more dairy farms come to the market I still expect good demand.”

Let units were also creating plenty of interest, said Mr Rew. Over the course of two viewing days, 41 separate parties visited 180-acre Larkbeare Court, Whimple, Devon (pictured) – a ring-fenced dairy unit with 150 cubicles and a 12:24 parlour offered on an eight-year FBT.

“We had 12 tenders ranging from £250-360/acre, though most were within 15% of each other. The tenant has been chosen and is due to start on 1 November.”

David Cross of Savills said smaller units tended to be swallowed up by arable and livestock farms and he saw no change in the trend. “Historically, probably two out of three I’ve sold have gone out of milk.”

However, specialist dairy farms with a good acreage able to support 300-400 cows would always sell well.

Sales of some units were not being helped by low milk prices, he said. “And dairy farming is not attractive to investors – there are lots of issues with high depreciation of buildings and other infrastructures.”

Manor Farm Dairy at Downhead, Somerset, is testing the ultra-commercial end of the market. Launched in June at over £4m, the 223-acre holding carries 1,300 cows in extensive and well-equipped buildings, including a 64-point rotary parlour. There are no dwellings.

It is farmed alongside rented land and contract-grown forage crops. “This is an exciting opportunity without a heavy land cost,” said Mr Cross. “There’s been a great deal of interest – it remains to be seen what the market says.”

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