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Firm grows niche in selling dairies

iStock/GettyImages Aerial image of modern dairy confinement operation
California-based real estate firm markets dairy operations throughout United States.

Schuil & Associates continues to grow its dairy-focused business.

The real estate firm is based in California's central valley, which is located approximately halfway between San Francisco and Los Angeles. Although their core business is in the central valley, the firm has found a nationwide niche in the dairy real estate business, said co-owner Marc Schuil.

Marc's father, Elmer, started the firm in 1983 with his sons, Marc, Michael and Rick. Now, the three brothers along with three second-generation owners and three non-related people own the business that specializes in marketing agricultural properties. The firm has 14 licensed agents or brokers.

Marketing dairy operations

Schuil and Associates specializes in marketing large dairies, from 1,500 cows on up to 10,000 cows. They started operating in this national niche market about a decade ago and Marc is licensed in 11 states. He cooperates with licensed brokers in states where he is not licensed.

The margins in the dairy industry are small, but efficient, low-cost producers are able to make money and store away funds to expand or buy an additional dairy, he said. It's typically more affordable to purchase an additional dairy than build a new facility.

The buyers of dairies are typically other dairy farmers, Schuil said. Dairy farming is a capital-intensive, low-margin, risky business. There's been a couple profitable years over the past decade and more consolidation as 1,200- to 1,500-cow dairies consolidate to 3,000-cow dairies to achieve more efficiencies around cow health and management.

"Right now . . . the cheese market, pizza apparently, pizza delivery in particular, is very hot," Schuil said. "Markets around the country that are cheese-centric are doing quite well and currently quite profitable. There's dairy families with a pretty good line of credit at their local bank . . . so when they get profitable they pay down (what they owe) and they create in essence the war chest to be able to expand."

The majority of the buyers he works with are domestic, with international buyers making up less than 1% of his buyers.

Farmland markets

Schuil and Associates is also active in the agricultural land market in California's Central Valley, particularly the market for land that grows "permanent" crops, such as almonds, pistachios, table, wine and raisin grapes and citrus.

Water availability is a key factor in land values in the region, Schuil said. In 2014, the state of California adopted the Sustainable Groundwater Management Act to help manage its groundwater. Those properties with surface water availability have increased in value while those without surface water availability have decreased in value.  Land values range from $10,000 to. $20,000 depending primarily on water resources.

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