Borrowing for a brighter future

You get to a stage in dairy farming where you either need to get bigger, or get out, says Jenny Booth, whose family now milks 300 Holsteins on 240ha (600 acres) at Penistone, on the edge of the Pennines in South Yorkshire.

To the Booths, the answer was clear – get bigger.

Renovating the milking parlour and cubicle buildings would allow them to boost their pedigree Flashouse Holstein herd from 250 to 300 head, calving all year round.

The 30-year-old 20:20 Westphalia parlour had to go in favour of a bigger one, adding 14 extra milking places.

This has allowed the Booths to milk more efficiently, reducing time spent in the parlour from three-and-a-half hours to just two.

It has also improved the work/life balance for Jenny’s son David and the farm’s two staff.

To make the change they needed to find 75,000, and having prepared a careful budget, met their NatWest agricultural manager Simon Gray.

He suggested they use the guaranteed income of their single farm payment to cover the amount they needed to borrow.

The loan repayments are annual, and set to follow their SFP receipt. Interest payments are made quarterly.

“The bank was also prepared to be flexible if the SFP did not arrive on time, which helped us manage the potential risk to cash-flow,” says David.

Once the SP5 was completed and in well before the 16 May deadline, and the family knew what their SFP would be worth, they began gauging costs for the expansion.

“Our basic SFP, excluding Entry Level Stewardship payments, is worth about 35,000 a year.

“This means we hope to clear the debt in about two years, but can extend up to three if it proves necessary,” says Mrs Booth.

The 75,000 borrowed was more than they initially budgeted for, but their bank manager advised that such projects could easily run over budget.

“It was good advice,” she says.

The family hopes to see a return on the investment in a little over two years.

“We worked on milking 45 extra cows at 8000 litres a year, our herd average.”

Milk is sold to local processor Buckley Farm Dairies and the family reckons the estimated 360,000 litres from the 45 extra cows will add about 72,000 to the books.

Tax treatment of the project was also managed carefully.

“Because the majority of the work was, essentially, repairs to existing buildings, it was quite tax-efficient,” says Mrs Booth.

“This helped strengthen our case when we approached the bank.”

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