Up to date figures of the economic impact of this are not publically available, however, DEFRA have previously estimated that diversified farms see an average increase in revenue of £10,400 per farm3. More recent studies have shown that higher amounts of diversification activity will lead to an increase in the likelihood of a business being economically viable4. However, variation in the success of diversification ventures on farm can be variable and before investing several aspects need to be considered (location, resources, current business economics etc.). There are three main diversification options5:
- Structural diversification- farm resources are redeployed or restructured into new non-agricultural products or services. (such as Bed and Breakfasts)
- Agricultural diversification- a new activity still situated within agricultural production. Involves the introduction of new or non-traditional crops. (such as bioenergy crops)
- Income diversification- includes all possibilities where non-specific household assets are used for non-agricultural activities unconnected to the farm. (such as a job in the local community)
A resource based approach
At ADAS we have visited many farms with different diversification activities. Success is often associated with farms that have taken into account both the external environment alongside internal resources6. Importantly farm diversification should be bespoke with individual farms having individual resources and needs which need to be identified and fully understood before the appropriate diversification can be selected. Mc Fadden and Gorman comment in their recent paper7: “there is a clear suggestion from this study that to be successful, farm households need to be supported differently in their business endeavours. Different households have different needs which are not always identifiable by them.”
Bioenergy crops: an example of agricultural diversification8.
David Sargent and his brother, Chris, manage 734ha of land at Friars Farm in Norfolk. While the majority of the land is arable, the farm also comprises around 80ha of grassland, 80ha of woodland, as well as land for duck and pig farming. On the arable land, an area of the farm suffers from difficult soils (heavy clays and gravel) and a rabbit problem, which has hampered past efforts to produce both arable crops and grass, making the land uneconomic to farm.
After learning about Miscanthus at the Cereals event (an annual farming event to promote new technologies and ideas), the Sargents planted two fields with Miscanthus in 2010, with a further three fields planted in 2011, totalling 18.4ha. They obtained a grant for 50% of the establishment costs under the Energy Crop Scheme (ECS).
Based on yields to date, and an expected future yield profile, the Miscanthus crop is expected to payback after 7 years. It is estimated that, over the 23-year lifetime of the crop, the equivalent annual net margin of the land will be £403/ha/yr higher than if the land had continued under an arable rotation. There has been little impact on food production because the Miscanthus was planted on the poorest yielding arable land which was uneconomic to farm without subsidies.
ADAS’s core strengths in both public and private sector markets are in the provision of informed, independent and impartial research and consultancy to provide:
- Robust evidence for policy development and position statements
- Impact assessments and feasibility studies
- Monitoring and evaluation
- Industry intelligence and insights
At ADAS, we can help our clients to ask the right questions – and make the right decisions.
If you would like to discuss business or policy implications in light of Brexit please contact us at firstname.lastname@example.org.
For more Brexit related information please see the ADAS Brexit Policy Group Service page and our recent Brexit news articles.
 Johnson, G., Scholes, K., Whittington, R,. 2008, Exploring corporate strategy. 8th edition. FT Prentice Hall: London
 National Farmers Union, 2017. How agriculture is changing: The importance of diversification. [Online]
 DEFRA , 2014. Guidance: Diversifying farming businesses. [Online] Available at: https://www.gov.uk/guidance/diversifying-farming-businesses [Accessed 15 August 2017].
 Barnes, A. et al., 2015. The influence of diversification on long-term viability of the agricultural sector. Land Use Policy, Volume 49, pp. 404-412.
 Meert, H. et al., 2005. Farm household survival strategies and diversification on marginal farms. Journal of Rural Studies, 21(1), pp. 81-97.
 Walley, K., Custance, P. & Smith, F., 2015. Farm diversification: A resource based approach. Journal of Farm Management, 14(4), pp. 275-290.
 Mc Fadden, T. & Gorman, M., 2016. Exploring the concept of farm household innovation capacity in relation to farm diversification in policy context. Journal of Rural Studies, Volume 46, pp. 60-70.
 ETI, 2017, Bioenergy crops in the UK: Case studies on successful whole farm integration evidence pack.