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Big Challenges Continue For Tenanted Dairy Farms

02 September 2011

UK - The Tenant Farmers Association says that tenanted dairy farms face a set of key challenges which have intensified over the last five years.

Speaking before this year’s Dairy Event and Livestock Show TFA Chief Executive George Dunn said: “Over the past five years we have lost nearly 6,000 dairy holdings in the UK. Many of these have been tenanted farms and worryingly, the trend looks set to continue”.

“A major driver behind the loss of tenanted dairy farms is a lack of any meaningful landlord investment in fixed equipment for at least a generation. This has been heightened recently by the need for new slurry stores on many tenanted holdings in order to comply with Nitrate Vulnerable Zone Regulations which come into force at the start of next year."

"With each slurry store costing tens of thousands of pounds there has been little spare capital available for investment in the business. Faced with the prospect of having to invest without sufficient profit to do so, and with landlords reluctant to dip their hands in their pockets, many dairy tenants have to struggle with tired equipment or give up altogether,” said Mr Dunn.

“In comparison to rent reviews for other sectors, most notably arable, the dairy sector is, relatively speaking, faring not too badly. However, landlords are still attempting to make the case that farmhouses should be valued separately using rents applicable for the residential sector rather than treating farmhouses as part of a wider farm holding."

"I would advise all tenants facing such arguments to take proper advice and they certainly should not agree to any rent change without having the details checked out in advance,” said Mr Dunn.

“There appears to be an almost insatiable appetite in the tender market for additional land at unsustainable rent levels over very short terms. Much of this comes from large owner-occupiers willing to pay well over the odds for additional land over which they hope they will have the benefit of spreading their fixed costs."

"The problem comes when we have landlords’ agents attempting to use these very high rents on marginal acres to justify increased rents for tenants who are wholly or predominantly reliant upon let land for their living. The two things are like comparing chalk and cheese,” said Mr Dunn.

“We need to see a major improvement in dairy farm profitability. This will only come if dairy farmers are properly rewarded for the job that they do. Certainly the appointment of an Adjudicator for the Grocery Supply Chain Code of Practice will help, particularly if it is given the powers to do its job properly."

"However, more fundamentally than that, dairy processors and retailers should understand that unless they support the supply base it will disappear. DairyCo is already suggesting that next years output will be four per cent lower than this year which is already down on previous years,” said Mr Dunn.

“Landlords too have a responsibility to be fair and reasonable in their dealings with tenants. We need longer term Farm Business Tenancies at sensible levels of rent with reasonable amounts of investment and flexibility. If the market is not going to be able to deliver that, and it would appear that it will not, we will need to find ways to influence the market to get the right balance in the future,” said Mr Dunn.

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