Rating Manual section 6 part 3: valuation of all property classes

Section 410: flour and provender mills

This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.

1. Scope

This section applies to both Flour and Provender Mills which reflects the fact that, historically, they were often linked, and that the two types of hereditament contain a number of similar features.

Both types of hereditament are similar in that they contain storage facilities for the raw products they use; mill buildings where the raw product is ground, mixed and prepared into the finished format; storage facilities for that finished product; and administration offices.

However developments in the industries have indicated the need for the two types of mill to be considered quite separately.

1.1. Flour mills

1.1.1–General description

Flour mills provide milled product for human consumption, the functions of a flour mill can be broken down into:-

a. to store a reserve of raw material (usually wheat)

b. to eliminate all the impurities from wheat prepared for milling;

c. to mill wheat and separate flour from the bran and skins of the wheat;

d. to store the milled products before despatch.

1.1.2 Storage and initial cleaning

On arrival at the mill each load of wheat is tested against a contract specification for variety, moisture content, specific weight, impurities, enzyme activity associated with sprouting, protein content and quality. It may be passed through a preliminary cleaning process to remove coarse impurities, such as nails and stones before being stored in the silos. The wheat store or silo is usually a tall building housing a number of large cylindrical bins (often constructed in ferro-concrete). These are frequently 20-30 metres high and may each hold 250 tons of grain.

1.1.3 Cleaning, conditioning and blending

When wheat is drawn from the silos prior to milling, it is thoroughly cleaned. Machines, which separate by shape, remove barley, oats and small seeds, and magnets extract any remaining ferrous metal objects. Gravity separation removes stones and, throughout the cleaning process, air currents lift off dust and chaff.

The wheat is then conditioned to a suitable moisture content by tempering it with water and leaving it in conditioning bins for up to 24 hours. This conditioning softens the bran and enhances the release of the inner white endosperm during milling.

Cleaned and conditioned wheat is then blended in a process known as gristing. This combines different wheats to produce a mix capable of yielding the required quality of flour.

1.1.4 The roller milling system

The grist is passed through a series of ‘break’ rolls rotating at different speeds. These rolls do not crush the wheat but split it open, in order to cause the inner white floury portions of the wheat to come away from their brown outer skin.

There are normally four stages of “breaks” in the system and after each break the endosperm is sifted from the torn open wheat grains by plansifters or centrifugals. This process is known as scalping. The first sieves of the plansifter remove the bran skins, which may still have flour particles adhering to them, and these are returned to another milling machine for re-treatment.

The various fragments of wheat grain are separated by a complex arrangement of sieves. White endosperm particles, known as semolina, are channelled into a series of smooth ‘reduction’ rolls for final milling into white flour.

The whitest flours are produced from the early reduction rolls, with the flour getting less white on later rolls as the proportion of bran particles increases. Brown flour is a mixture of white flour and a portion of the other streams. To produce wholemeal flour, all the streams must be blended back together in their original proportions.

In a typical mill, there may be up to four break rolls and 12 reduction rolls, leading to 16 flour streams, a bran stream, a germ stream and a bran/flour/germ wheat feed stream.

1.1.5 Storage and dispatch

The various grades of flour and coarse bran are collected and are brought either to bulk storage bins or to a packing floor where they are filled into sacks and weighed. The packed products are sent to the mill warehouse and stacked ready for dispatch.

1.2 Provender mills

1.2.1 General description

Provender mills provide animal feed stuffs. Historically some provender mills have formed part of a flour mill but today the two categories tend to be separate. Notwithstanding this the physical characteristics of the hereditament and the valuation approach are similar.

Whilst many of the supporting items will be similar to those found in Flour Mills, it is likely that a wider range of process buildings will be encountered. These can include simple general purpose buildings at one end of the range and, at the other, high eaves buildings utilising sophisticated computerised plant.

The functions of a basic provender mill can be broken down into:-

a. to store a reserve of raw material (usually wheat) and to eliminate impurities prior to processing

b. to grind, micronize, flake or roll the raw material

c. to blend ground raw materials together and to produce a pellet feed,

d. to store the finished product before despatch.

1.2.2 Storage and initial cleaning

On arrival at the mill each load of raw material is tested against a contract specification for variety, moisture content, specific weight, impurities protein content and quality. The store or silo is can either be a tall building housing a number of large cylindrical bins (often constructed in ferro-concrete), or flat on floor grain storage with thrust walls. Prior to processing the raw material is cleaned normally all that is required is some form of scalper to remove gross oversize pieces; stalks, cobs, clods, stones, and the like. Magnetic protection ahead of the mill will insure a minimum amount of metal enters the process.

1.2.3 Milling

Pelleting – The purpose of pelleting is to take finely divided, sometimes dusty, unpalatable and difficult to handle feed material and by using heat, moisture and pressure form it into larger particles. Those ingredients which are of a coarse texture, such as whole grains, are ground into a fine material to aid the mixing process. Weighed quantities of each ingredient are thoroughly mixed and conveyed to a bin above the pellet mill. The mix is conditioned (softened) by the addition of heat and water in the form of steam. When sufficient controlled compression is applied to the “conditioned” feed they form a dense mass that is passed through a die to form pellets. The pellets are cooled and either stored or passed through crumb rollers to produce a relatively fine product.

Micronizing - is the name given to a cooking process that uses infrared rays to cook cereals and pulses at lower temperatures and for shorter times than other heating methods. Gas burners are used to generate the infrared rays that are absorbed by the products. The raw materials are passed under the burners on variable speed belts to achieve the desired level of “cook”. The product is then passed through a roller mill to create flakes. These flakes can be used whole or ground into a meal.

Flaking and rolling – Rather than grinding using a hammer mill the grain may be crushed or flaked using a rolling mill or flaking mill. The raw cereals may be steam cooked or micronized (see above) prior to them being rolled and flaked. Flaking and/or rolling improves the taste, texture and visual appeal making it attractive to livestock and the finished product is easily digestible thus enhancing the nutritional value in the diet.

1.2.4 Storage

Once the feed is finished it is stored in bulk containers either in the form of silos (larger mills) or tote bins. Any of the products produced at the mill may be blended together to form various coarse mixes. Mills may either supply feed in bulk or may bag certain products. The requirement to supply bagged product will have an impact on the amount of warehousing space required at the mill.

2. List descriptions and special category codes

2.1 Flour mills

List Description: Mill and Premises IF1

SCAT code: 103 Suffix V for NSU properties and S for group specialist properties

2.2 Provender mills

List Description: Mill and Premises IF1

SCAT code: 222 Suffix V for NSU properties and S for group specialist properties

3. Responsible teams

Responsibility for the valuation of these classes of property is split as follows:

  • The larger more complex flour and provender mills valued by reference to the contractor’s basis are dealt with by the Industrial and Crown Team within the National Specialists’ Unit (NSU)

  • Other flour and provender mills including all of those valued by reference to a rentals approach are dealt with by specialists within the NDR Business units

Each individual Unit is responsible for inspecting grain silos and stores in their areas. Due to the complexity of the task it is recommended that this task be allocated to a specialist referencer.

4. Co-ordination

The Grain class co-ordination team has overall responsibility for the co-ordination of this class. Contact details can be found here. The team is responsible for the approach to and accuracy and consistency of flour and provender mill valuations. The team will deliver Practice Notes describing the valuation basis for revaluation and provide advice as necessary during the life of the rating lists. Caseworkers have a responsibility to:

  • follow the advice given at all times – Practice Notes are mandatory

  • not depart from the guidance given on appeals or maintenance work, without approval from the co-ordination team via the NSU lead valuer

  • seek advice from the NSU lead valuer before starting on any new work.

There are no separate legal considerations for this class.

6. Survey requirements

All flour and provender mills should be measured to GIA in accordance with the VOA code of measuring practice.

The survey should be undertaken on the assumption a full contractors test valuation will be carried out. Comprehensive details of Plant and Machinery will be required.

The survey should contain detailed notes as to the construction, age, height and services of any structures on site together with any refurbishment details.

All site works should be individually surveyed and detailed separately.

The diameter is a factor in the cost of a bin, so it is important to obtain full size details. Information regarding the capacity of bins is often given in wheat or barley tonnes. As a rough guide, conversion to m3 (all costs in the RCG for bins are in m3) is as follows:

  • Wheat - 1 tonne of wheat takes up 1.30 m3

  • Barley - 1 tonne of barley takes up 1.45 m3

Steel silos sometimes comprise a number (nest) of bins enclosed by a roof and cladding to the elevations giving the appearance of a building. The section, volume and number of bins need detailing as well as supporting features including cladding, cat walks and ladders etc.

Even if silos of a smaller size than referred to in the Regulations are found (400m3) these should be fully referenced, having regard to full details of installation to enable an accurate view to be formed as to whether they could be removed without substantial demolition of the silo or the surrounding structure.

7. Survey capture

Survey details should be recorded electronically and stored in EDRM in the property file for the appropriate hereditament.

It is recognised that this is impractical for the larger mills consisting of hundreds if individual items. Accordingly suffix V larger mills are stored in hardcopy format at NSU I&C offices in Leeds.

8. Valuation approach

8.1 Flour mills

This class of property is seldom let and most buildings are of a highly specialised nature. Valuations should be by the contractor’s basis. Reference should be made to Rating Manual Section 4: Part 3, and to the relevant practice note for this class.

8.1.1 Stage 1 – estimated replacement cost (ERC)

Buildings within this category vary considerably, from Victorian multi storey buildings to modern steel framed ones. A typical, modern mill will have considerable height, insulated profiled metal walls and roof, intermediate concrete floors with special finishes on the milling floors and a lift. As there is a potential fire risk sprinklers are not uncommon. The valuer must ensure that the specification of the mill in question is fully reflected against the beacon cost provided at stage 1.

All the buildings, civils and rateable items of plant and machinery commonly found in this type of property should be costed from the costing information provided in the Rating Cost Guide for the relevant revaluation period.

Adjustments to the costs where appropriate, are required for location, contract size and fees. These should be in accordance with the advice contained in the appropriate rating cost guide unless specifically stated in the relevant practice note for this class.

8.1.2 Stage 2 – adjusted replacement costs (ARC)

The guidance for making adjustments to reflect obsolescence and age related disabilities (not made at stage 1) is set out in the Rating Manual section 4 part 3 for R2017 and the Rating Cost Guide guidance notes for the relevant earlier Rating Lists.

8.1.3 Civils ancillary to plant items

All the civil works which are directly ancillary to plant items such as steel supports, concrete bases/foundations, bund walls and bund bases should generally follow the allowances made on the items to which they relate i.e. a concrete base for say an oil tank would receive a similar allowance to that given for the oil tank. This applies even if the item itself is not rateable because of its size.

8.1.4 Site works

Allowances for items of site works which serve the property such as yards, parking areas, landscaped areas, open storage areas, boundary fencing, underground site services and lighting should be based having regard to the following:-

  1. Where the items of site works serve a particular building the allowance should follow the allowance made on the building to which they relate.

  2. Where the items of site works serve the property as a whole the allowance should be based on the overall average allowance derived from the allowance made for all the buildings, civil works, plant and machinery items present on the site.

8.1.5 Stage 3 - estimation of cost of the land

The value to be adopted for the land should be on the basis of a cleared site with such services, as existed at the relevant date, available for connection and with planning permission for grain storage reflecting all advantages and disadvantages of the site and its location. This will normally follow general industrial value for the size of site in the locality where the provender mill is situated.

“Ebdon Discount” allowances for the land, in accordance with the findings of Imperial College of Science and Technology v Ebdon (VO) and Westminster City Council [1987] 1 EGLR 164, should be based on an overall average allowance derived from the individual allowances made at Stage 2 for the buildings, civils, and rateable items of plant and machinery situated on the site.

For further background information reference should be made to the Rating Manual section 4 part 3 - part 6.

8.1.6 Stage 4 - decapitalisation rate

The relevant Statutory Decapitalisation Rate for this class of property must be adopted.

8.1.7 Stage 5 – overall consideration

This is often referred to as the “standback and look” stage. At this stage of the valuation care must be taken to ensure that adjustments are only made for matters which have not already been allowed for at stages 2 and 3.

Typically matters to be considered at this stage concern whether or not any end adjustment to the valuation should be made to reflect matters that affect the rental value but not necessarily the costs. Such matters for consideration at this stage would be in respect of disabilities that effect the site as a whole such as layout and access. Care should also be taken to avoid double counting where disabilities are already reflected in the site value.

8.2 Provender mills

The range of buildings to be found within the industry needs to be reflected in the basis of valuation adopted. The vast majority of the hereditaments, especially the more modern specialised ones, should be valued on the contractor’s basis.

There may be some smaller, less specialised provender mills where a rental basis may be adopted through comparison with the local industrial tone. Where this is the case great care must be taken, both to distinguish from more specialised mills where such an approach could not be considered, and to fully reflect the value enhancement of any particular features that the buildings possess which are beneficial to the use as a provender mill.

As with flour mills the concentration of mills with a few occupiers heightens the need for co-ordination requirements to be followed. This is particularly important at the lower end of the industry where the interface between hereditaments valued on comparison and contractor’s basis occurs.

If a full contractor’s basis is adopted. All valuations should be carried out using the ‘Generic Contractors Basis’ spreadsheet, which is available on the non-bulk server. The general advice given in paragraphs 8.1.1 to 8.1.7 above is equally applicable to provender mills valued by reference to the contractor’s basis.

If a valuation on a rentals approach is adopted all buildings should be measured to GIA and the subsequent survey data entered into the Rating Support Application using a bulk class of M and the sub location 3POV. Address-based matrices should be created, driven by sub location code and linked to scale VXFGIA1.

Care should be taken to identify all items of rateable plant and machinery which should be valued using the Non Bulk Server – see Non Bulk Server Manual Section 5 – and the resultant figure entered into the RSA valuation.

8.3 Substitute approach

When valuations are carried out on the contractor’s basis it may be necessary to have regard to a substitute building approach.

It should be noted that this approach only tests the value/cost of the actual item against that of a modern substitute. It is the actual item that has to be valued as part of the hereditament. Thus, in the case of plant and machinery, it is not correct to make any allowance if it is argued that the modern substitute for a silo in excess of 400m3 would be below 400m3, and therefore not rateable (see RM 4:3 para 7.8 for further guidance).

It is stressed that the appropriate design of a substitute must have regard to the functional needs of the actual occupier. This is particularly relevant in the size, number and type of construction of storage bins or silos.

In determining whether a concrete structure can be costed in steel, for example, in the modern substitute approach, regard must be had as to whether construction in some substitute material would be capable of providing an adequate mix of quality, durability and performance. There may be instances where it would not be possible to carry out the desired function in an alternative form of construction. In such cases it would not be appropriate to envisage a valuation based on a substitute in an alternative material.

9. Valuation support

If a full contractor’s basis is adopted. All valuations should be carried out using the ‘Generic Contractors Basis’ spreadsheet, which is available on the non-bulk server.

The non bulk server manual can be accessed here.

If a valuation on a rentals approach is adopted valuations should be carried out using RSA.Additional Plant & Machinery should be valued using the Non Bulk Server – see Non Bulk Server Manual Section 5 – and the resultant figure entered into the RSA valuation.

In cases of difficulty the class co ordination team is on hand to advise.

Practice note 1: 2017: flour mills

1. Market appraisal

1.1 April 2015

The nabim (National Association of British and Irish Millers) UK Flour Milling Industry 2014 report states that in recent years the industry has seen an expansion in capacity with several new mills being built. The industry however continues to consolidate so that there are now 30 companies operating 51 mills, the four largest companies accounting for 65% of the UK’s flour production. 6.7m tonnes of wheat were milled year ending December 2014 producing 5.1m tonnes of flour (Source DEFRA – Cereal Usage by Flour Millers in the UK dataset). 84% of wheat processed in that year was UK grown.

Although energy and transport are significant costs for the milling sector the cost of wheat is the main input cost for flour. 2014 saw high milling wheat prices which peaked in April 2014 at £194.9 te before falling back to £146.2 te in September 2014. Current Ex Farm milling wheat prices (April 2015) are £156 tonne.

1.2 Comparison with April 2008

The 2008 nabim report refers to a continued consolidation in the industry with 32 companies running 60 mills. Total wheat milled for year ending December 2014 was 5.1 m tonnes producing 4 m tonnes of flour, 78% of wheat processed in that year was UK grown. Milling wheat prices in April 2008 were £198 te.

1.3 Overview

The industry has seen a consolidation in the number of mills and a greater reliance on home grown milling wheat. Increased wheat production for harvest July 2014 has seen wheat prices fall, this is combined with the fall in crude oil over the last 3 months (April 2015), suggests favourable conditions for the flour milling industry at April 2015.

2. Changes from last practice note

No 2010 practice note was issued for this class; however the fundamental approach to valuation remains unchanged between lists.

3. Ratepayer discussions

There have been no central discussions with representatives for the industry nor are there any identified agents for the industry. Consequently you are advised, in the absence of any agreement, to adopt the basis as outlined below.

4. Valuation scheme

Very few flour mills have ever been let in the market, and those that have will usually have been let under unusual terms. Therefore the valuation of flour mills is by reference to the contractor’s basis.

The contractor’s basis of valuation should proceed in accordance with the general advice contained in Rating Manual Section 4 Part 3 using the accepted five stages.

Reference should be made to the 2017 cost guide for costs, allowances and additions.

The appropriate statutory decapitalisation rate must be adopted at stage 4.

All valuations must be carried out using the generic contractor’s basis spreadsheet which is available on the non bulk server.

4.1 NSU advice

As in previous valuation lists the NSU lead valuer will provide a beacon valuation of a flour mill on the contractors basis to ensure consistency. This valuation will be of an actual hereditament and therefore should be treated as commercial in confidence. It should not be circulated outside the Valuation Office Agency.

Practice note 2: 2017 - provender mills

1. Market appraisal

In January 2005 the total GB retail production of animal feed was up 0.3% compared with January 2014 and the total GB integrated poultry feed production was down 3.4% compared with January 2014.

For the period October to December 2014 quarterly average prices of animal feedstuffs were as follows:-

  • Cattle and calf feed £218 te

  • Pig feed £234 te

  • Poultry feed £235 te

  • Sheep feed £210 te

With the exception of 2014 quarter two, the above prices continue to show a decrease in compound feed prices since 2013 quarter two. (Source DEFRA – Animal feed Statistics for Great Britain – January 2015 – Published 5 March 2015) For comparison purposes the total production of compound blends and other processed feeding stuffs in Great Britain as at December 2007 was 9.65 million te compared to December 2014 at £10.65 million te.

In 2012 BOCM Pauls became a wholly owned subsidiary of ForFarmers and was rebranded in October 2014. ForFarmers acquired Weyfeed in July 2014.

In late 2012 a new bioethanol plant in Hull operated by Vivergo began production. At full production it is claimed that they will produce 420 million litres of bioethanol and 500,000 te pa of animal feed, making it the UK’s largest single source supplier of feed. The Ensus bioethanol plant on Teeside is designed to produce similar figures. The plant reopened in 2012. The effect of these plants and their impact on the viability of some mills is difficult to predict particularly as ethanol prices are linked to crude oil through the biofuel’s use as an alternative to gasoline. In Europe ethanol is traded in euros and as fuel prices have fallen in recent months UK plants have also been hit by the increase in sterling against the euro. The Ensus plant again has closed (Feb 2015) due to market conditions.

2. Changes from the last practice note

No 2010 practice note was issued for this class; however the fundamental approach to valuation remains unchanged between lists.

3. Ratepayer discussions

There have been no central discussions with representatives for the industry nor are there any identified agents for the industry. Consequently you are advised, in the absence of any agreement, to adopt the basis as outlined below.

4. Valuation scheme

The range of buildings to be found within the industry needs to be reflected in the basis of valuation adopted. The vast majority of the hereditaments, especially the more modern specialised ones, should be valued on the contractor’s basis.

There may be some smaller, less specialised provender mills where comparison can be made with the local industrial tone. Where this is the case great care must be taken, both to distinguish from more specialised mills where such an approach could not be considered, and to fully reflect the value enhancement of any particular features that the buildings possess which are beneficial to the use as a provender mill.

The concentration of mills with a few occupiers heightens the need for co-ordination requirements to be followed. This is particularly important at the lower end of the industry where the interface between hereditaments valued on comparison and contractor’s basis occurs.

4.1 Contractor’s basis

If valued by reference to the contractor’s basis, valuation should proceed in accordance with the general advice contained in Rating Manual Section 4: Part 3 using the accepted five stages.

Reference should be made to the 2017 cost guide for costs, allowances and additions.

The appropriate statutory decapitalisation rate must be adopted at stage 4.

All valuations must be carried out using the generic contractor’s basis spreadsheet which is available on the non bulk server.

4.1.1 NSU advice

As in previous valuation lists the NSU lead valuer will provide a beacon valuation of a provender mill on the contractors basis to ensure consistency. This valuation will be of an actual hereditament and therefore should be treated as commercial in confidence. It should not be circulated outside the Valuation Office Agency.

4.2 Rentals basis

Where the buildings are non specialised (in terms of height and construction) and typical of those properties found in the locality on general industrial estates then comparison may be made with the local industrial tone, taking into account 4.0 above.