Strong demand for the right dairy farms

The market for dairy farms and good pasture is as tight as it has ever been.

However, dairy land values fall into a wide price range – from £6,000-10,000/acre – even within the same parish. Where a farm falls in this range depends on location and potential buyers, said James Prewett, regional farm sales manager at Knight Frank.

In Shropshire, Barbers has agreed for Park Farm at Adderley, which was on the market for £3.25m, to include a period farmhouse on 287 acres. There was a good level of interest from local dairy farmers, and a buoyant market with a continued trend towards fewer, bigger herds. About 250 cows is standard for the region, and 500 or more cows not unusual.

“We see enormous variation of cost structures, output and efficiencies, with the best doing very well and the bottom quartile really struggling,” said Mike Taylor of Barbers.

Cashflow has been temporarily bolstered by the single payment, and confidence boosted by prospects for the new Basic Payment Scheme. Freehold sales are arising mainly through death and retirement, or family business reorganisation.

“Milk quota hasn’t really featured for quite a few years now – a decent contract with a good milk buyer is much more important,” said Mr Taylor.

Ashley Lilley of Savills in Cheltenham, Gloucestershire, said while prices of up to £10,000-12,000/acre were being paid by farmers looking to expand – often for the next generation – on to land capable of growing arable crops, permanent pasture could struggle to find a buyer at £5,000/acre. “Banks will support good, well-structured units with sound plans for the future,” he said.

In Yorkshire, the industry is emerging strongly from a tough 12 months, says Tom Watson of Cundalls. A continued lack of supply of well-equipped units will keep prices high, he said.

Over-capitalisation can be an issue, however. “We are finding there might be plenty of kit and a good parlour, but not enough land,” said Mr Prewett. “This can affect loan-to-value ratios. Finance is still competitive, but some farmers seem to be getting burned by short-term finance arrangements for live- and deadstock purchase.”

Independent adviser Gwilym Richards, who works with Knight Frank on sales of dairy property in west Wales, said while many producers were enjoying high profitability, many were still struggling – and banks were keeping a close eye on them.

Weather disrupts Scots sales

The Scottish market has run unusually late, said James Butler of Strutt & Parker, Edinburgh, with most farms not appearing on the market until close to Highland Show time in June.

All 18 farms handled by the firm this year have averaged a 17% premium in excess of the asking price and a marketing period of less than two months.

A key change is the swing in farm type offered, from dairy/stock farms in the South West to predominantly arable farms down the east coast.

In the past, the former have been snapped up by buyers from Northern Ireland, whose interest is now relatively muted. The demand from England, meanwhile, is focusing on arable, given the potential for a grower to move north of the border and double or triple the number of good arable acres farmed.

This is increasing the gap between average pasture and arable values. “From a dairy/beef point of view we have seen buyers coming up from England to take advantage of this, and also the higher heard health status in Scotland,” said Mr Butler.

The number of dairy farms offered in Scotland has been restricted to single figures for the past two years. Buyers are often looking for at least 300 acres offering well-equipped units and land quality – something that has been brought sharply into focus after the heavy rainfall last year.

A quick Cornish sale

Axford Farm in Callington, billed as one of the finest farms in south-east Cornwall, was sold by Stags to a farming family from Worcestershire in just 21 days this autumn.

The 219-acre dairy holding was very well equipped with a completely refurbished 16:32 herringbone milking parlour, cubicles for 238 cows and more than 40,000sq ft of modern farm buildings.

It included a four-bedroom bungalow and detailed planning consent for a second dwelling.

The guide price was £1.95m and the farm immediately created a stir, attracting several offers above the guide price.

Gordon Millar, who sold Axford to the vendors some 15 years ago and acted on their behalf in this sale, said quality dairy farms had been scarce this year and the sale left a number of underbidders seeking similar farms.