Observatory of agricultural business evaluation practices CER Aura

Because valuing a farm is as important to its conveyance as it is complex, it is essential to provide standards to transferors. Example in Auvergne-Rhône-Alpes, in milk production, with the observatory of CER France according to territories and assets and their limitations.

How much can I sell my farm for? This is one or even the main question that farmers ask themselves when they consider it transmit their exploitation. bear estimate the value of a farm it is not easy between what is attributed by the transferor, influenced by many parameters, what is really worth in absolute terms and the reality of the market, which is not always easy to know. However, this figure is crucial to the success of the sale. So for two years, REC France conducted an observatory of agricultural business evaluation practices.

The objective is to provide farmers with standards to help them evaluate the value of their operation so that they “devote themselves fully to them broadcast project “, insists Marie-Françoise Vernet, representative of CER France and president in Loire. If this work is about dairy cattle in Auvergne-Rhône-Alpesit can serve as an example for other products and regions.

Presented at the Livestock Summit, the analysis in the preamble says: “In Aura, 55% of farmers are over 50 years old. 23% are over the age of 60 and most have not yet thought of a solution for it transmission of their farm : 35% do not know what they will do, 33% do not plan to immediately stop the activity and 8% of the structures may disappear, leave for expansion or for non-agricultural uses. »

In the Aura region, 23% of farmers are over 60 years old.
And few are thinking of a solution to move to their farm.

Very different inheritance values
according to farms

“Any assessment of the value of a company is necessarily based on a preliminary diagnosis and requires the combination of several economic and heritage methods (according to the normative framework of the DGFIP), in order to approach a level of risk according to the context”, indicate these authors, giving details on:

economic method used : the common approach of the average profit on the statistical sample of 4,900 dairy farms, on average four years (2017 to 2020) after labor remuneration with 1.5 net Smic/UTHF and a capitalization rate between 7 and 11% (is equal to the investment return period, profitability is relatively long in the studied sector);

method of inheritance used : comes from the observatory averages of CER France farm evaluation studies in Auvergne-Rhône-Alpes (a total of 400 carried out over five years by 70 advisers).

In terms of results, we generally observe:

  • or distribution of heritage values (see chart below) but “be careful not to be fooled by simplistic charts,” nuances Vincent Prévost, management and heritage advisor at CER France Haute-Loire.
  • in 86% of cases: a inheritance value > of net worth.
  • and at 50%: an asset value between 1.1 and 1.9 times equity.

(©CER France)

To better understand:

Diagram of a farm's balance sheet and value of assets
Valuing a farm with what the heritage value represents. (©CER France)

“Thus, for €100,000 of capital, the value of assets varies between €100,000 and €300,000. Hence the need to have a more individualized vision, because the value of the asset is not only equal to the capital multiplied by a factor”, continues the specialist.

Changing economic values
by territories

Six terroirs have been identified to carry out a more in-depth diagnosis with the support of fidocl (Interdepartmental Federation of Livestock Consultancy Companies in the Southeast in charge of milk registration in particular).

  • plain milk (Ain and Isère especially, then Drôme)

economic value of Aura lowland dairy farms
(©CER France)

Some indications: the level of risk appears on the yellow curve; an economic value of 7% is equivalent to a return on investment of 14 years.

Average economic value of properties : €79,000.

Por 25% of farms (displacement of the upper standard): economic value > €256 k (€115 k/UTHF).

For 39%: negative economic value. “This means there is no return on capital to invest in transmission,” explains Romain Lecomte, head of consulting activities at CER France Auvergne-Rhône-Alpes.

Return on investment: 14 years on average.

+ : modern and attractive farmoften located near urban economic zones.

: decline in occupations and milk density eventually.

  • Auvergne mountain milk (Haute-Loire above all, then Puy-de-Dome and Cantal)

economic value of the dairy farms of Mount Aura in Auvergne
(©CER France)

Average economic value of properties : close to 0 k€.

3/4 of the farms are concerned. “It is difficult to give an average economic value as they are scattered”, notes the expert.

For 25% of farms (displacement of the upper standard): economic value > €26 k (€14 k/UTHF).

“This shows that some structures are doing despite everything. »

Long-term return on investment: 15 to 20 years.

+ : modern and modest farm to solve and/or expand.

: economic and climatic constraints strong accompanied by high production costs and one erosion of profitability. The dairy dynamic is losing momentum, therefore a reduction of objects despite the possibilities mentioned earlier.

  • Rhône-Alpes mountain milk (Loire and Rhone above allthen Ardèche and Isère)

economic value of the dairy farms of Mount Aura in the Rhone Alps
(©CER France)

Average economic value of properties : close to 0 k€.

(as in Auvergne, but we observe slightly less negative values).

For 25% of farms (displacement of the upper standard): economic value > €79 k (€41 k/UTHF).

+ : dynamic rural areas with a high milk density.

: land competition.

  • Savoie PDO and PGI milk (Savoie and Haute-Savoie)

economic value of Aura farms in PGI Savoy milk
(©CER France)

Average economic value of properties : 80 k€.

For 25% of farms (displacement of the upper standard): economic value > €258 k (€110 k/UTHF).

+ : dynamic range, attractive milk production.

: cost of land and calmness.

  • Milk from Auvergne AOP (Puy-de-Dome and Cantal above all, then Haute-Loire)

the economic value of Aura farms in PDO Auvergne milk
(©CER France)

Average economic value of properties : close to €0k (65% of negative values).

For 25% of farms (displacement of the upper standard): economic value > €56 k (€29 k/UTHF).

+ : specialized sectora dense network of modern farms, connected by a increasing the value of products (volume and price).

: big need for work (employee + volunteer), fragile money.

“Despite a good evaluation of milk, the mobilized power weighs on the economic value, which is much lower than the heritage value. These farms have invested a lot recently, which changes the economic value. Particular attention should be paid to the debt ratio and accompanying current accounts. »

  • organic milk (all departments)

economic value of Aura farms in organic milk
(©CER France)

Average economic value of properties : €39,000.

For 25% of farms (shift of the upper standard): economic value > €191 k (€93 k/UTHF).

+ : Attractive production methodassets of a growing sector.

: uncertain market.

Managing the economic/heritage value gap

It can reach a ratio of 1 to 3 (1 to 6 in beef cattle). For this, CER France advisors recommend taking into account: balance sheet of the company, ofasset AND liabilities to distinguish between two farms of the same size, recovery potential (actual and potential debt against the result)”.

“The optimal recovery value results from the negotiations, which the seller(s) and the buyer(s) have agreed on”, conclude Vincent Prévost and Romain Lecomte.

But price is not the only criterion of a task. Sellers should ask themselves 4 questions: how much, what, when, how to broadcast? “The moment of sale depends on age but also on tax parameters, such as VAT, the specialists detail. As for the goods sold, sometimes it may be wise not to sell everything at once. »

The devices exist for reduce the cost of disaster recovery : to donation (cf. The Pact of Dutreil), holding the land and/or buildings (GFA then rent for example), calling investors (GFA mutualists, Land of links, land portage, etc.). “Goods can be transmitted free of charge and others with payment”, they emphasize. They warn about constructions on other people’s land, which can be a source of problems in case of sale, and recommend “to buy back the land under the buildings before any transfer”.

Be careful to maintain the profitability of the operation.

But above all we must predict at least 10 years ago! Which means maintain profitability of the structure, and therefore its attractiveness, rationalization of investments depending specifically on the buyer’s project (more and more people are outside the family framework and not even from the agricultural environment, so production changes are more frequent), carry out legal and tax procedures is required. “Starting early offers more freedom to combine inheritance and economic value, for example by renting part of the property instead of selling it,” the experts point out. Other tips: improve EBE, optimize the system in terms of performance and work.

Therefore it is better to accompany at each key stage:

1- reflex : to know if it is possible to install a farmer? Then put one Action plan according to the age of cessation of activity;

2- the preparation : to make one operative diagnosisdefine it worthsee how integrate the buyer’s project ;

3- broadcasting : it is prepare for the arrival of the successorthrough a sponsorship course among others, then negotiate and formalize the acquisition.

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