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A Critical Time for Tenanted Dairy Holdings
16/09/08

The Tenant Farmers Association’s National Vice Chairman, Stephen Wyrill has warned landlords, Government, processors and retailers that it is a critical time for dairy tenants.

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“Having had a few years of relative stability with regard to dairy farm rents some landlords and their agents are seeking rent reviews on the back of improved output prices and a wish to capitalise on residential values. Whilst it is true that output prices have improved it is clear that there has been no real improvement in dairy margins once increased costs are factored into the equation. Coupled with that it is wrong for landlords to be looking at rents achievable in the residential letting market and then attempting to apply those in a farm setting - it is like comparing chalk with cheese and must be countered on every occasion it occurs. I cannot see that there is any scope for increases in average dairy farm rents at this time. However, if landlords decide to pursue these arguments to arbitration TFA members with our Farm Business Protector insurance will be able to protect themselves against the legal costs involved,” said Mr Wyrill.

“There is also a huge need for essential investment. It has been some 20 to 25 years since many dairy farms in the tenanted sector saw any significant investment in fixed equipment. This is particularly the case for those dairy farms within County Council Smallholding estates. If we are to meet the challenges of the future then decisions need to be made now about the investment that will be necessary for these units,” said Mr Wyrill.

“Notwithstanding the need for reinvestment, the new rules on Nitrate Vulnerable Zones and in particular the requirements of the new slurry storage capacity, present unique problems for dairy farmers in the tenanted sector. On traditional tenancies it is the landlord who is responsible for ensuring that there is sufficient fixed equipment to meet statutory standards however we are aware that on nearly all estates there will be insufficient resource available for landlords to provide the necessary fixed equipment. It is for this reason that the TFA continues to argue for sufficient grant aid for this fixed equipment from DEFRA and we will maintain the pressure on the Secretary of State to provide this,” said Mr Wyrill.

“Over the past twelve months we have seen prices for dairy commodities fall back from last year’s peak although there has been a slight recovery more recently. The nervousness amongst dairy farmers has been exacerbated by the recent retail price war on milk and dairy products and I would warn processors and retailers not to try to pass the costs associated with this on to producers or else it will hasten the number of dairy farmers already leaving the industry to the detriment of us all. What might seem in the short term interests of their shareholders will be to their long term harm,” said Mr Wyrill.

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