In a challenging and increasingly competitive environment, UK farmers are feeling the pinch now, more than ever before.
Higher energy costs, low food prices and uncertainty around Brexit have pushed some farmers to the brink, meaning many are having to find new and imaginative ways of diversifying their business in order to survive.
What Is Meant By Agricultural Diversification?
The agricultural diversification definition as described by the UK Government: ‘adds business activities to traditional farming methods to develop new sources of income’. Agricultural diversification is not a new concept, it is, however, more commonplace and broader in nature than it was years gone by.
Today, around half of all UK farmers use some form of agricultural diversification in their farm business – statistics show this, on average brings, in £10,400 of extra revenue per farm. In previous years this amounted to over £560 million per annum.
Research carried out by NFU Mutual following the December 2019 General Election, found that nearly half of farmers surveyed were planning to set up or expand a diversification on their farm. The main driver was to support farm income (40%) and a quarter wanted to create opportunities for family members.
Diversification comes in many forms, and farmers take a differing approach depending on their geographical location, consumer demand, the physical resources of the farm in question, the agricultural finance options available and each farmer’s individual skills, knowledge, interest and confidence in branching out into new specialisms.
Why Do Farmers Choose To Diversify?
Diversification can offer additional income streams and add variety to current business models.
As well as making better use of a farm’s physical resources and characteristics; by branching out successfully, farmers can secure the long-term health and prosperity of their farm – and their income. This adds stability to a business in times of uncertainty and can also optimise assets and unlock entrepreneurial skills.
Other benefits include:
- spreading farmers’ economic risk
- exploiting profitable niche markets
- creating new industries based on agriculture
- aiding the domestic economy
Farm Diversification Ideas
There are many routes a farmer can take which can bring in additional income. Some of the most popular include:
- experience days (wine tasting, adrenaline-fuelled sports, living off the land, foraging and farmhouse cooking)
- glamping, camping and bed & breakfast
- weddings and special occasions
- breweries and distilleries
- festivals and additional outdoor events
- farm shops, cafes and other specialist outlets (florists, day spas, arts and crafts)
- flower farming and alternative crops (energy crops, industrial fibre crops)
- speciality livestock (ostriches, alpacas, llamas, deer)
Whilst agricultural diversification can be lucrative, there are many factors that farms need to consider before ‘taking the plunge’. The process can be long, complex and there are limits for farmers in terms of planning permission and available funding. That is why many farmers explore the agriculture finance options available from specialists such as Evangate Financial Services.
Before deciding to diversify, farmers should carry out a detailed assessment of their current business and how diversification could affect turnover in the short and long term.
What Do Farmers Need To Consider?
When talking to professional advisers before taking the plunge and deciding to proceed with agricultural diversification, the UK Government suggest that farmers need to consider:
- why you want to diversify
- the implications on your time, your core farm business activities, cashflow, staffing, potential liabilities etc
- information about skills, resources and market conditions that you have gained from other local farmers who have diversified
- how much the diversified business will cost to set up
- how you will finance it
- how profitable it will be
- how to market it
- legal requirements, tax and national insurance issues
- what your farm offers that is unique and different
Alongside this, looking at the current market and the skills, demand and resources available is also a crucial factor for farmers looking to branch out.
For example, many farms that successfully diversify are able to put their existing farm assets to use and maximise the impact of their under-utilised resources (farm buildings, land, machinery, etc). It is also important that farmers ‘tap into’ the unfilled demand in that local area, which can help broaden a farm’s horizons whilst offering a viable and valuable public service that the community are crying out for.
In terms of utilising existing skills and expertise, diversification can also be an opportunity for farmers to get creative whilst playing to their strengths. As well as creating jobs and securing long-term employment, many successful farmers find that the transition is made easier when they have existing knowledge and skills in a particular area of diversification.
Following on from this, farmers should ensure that they pursue additional revenue streams that are interesting and enjoyable, rather than purely lucrative.
Agricultural Diversification Finance
The main issue with financing a farm diversification project is that this type of business venture often falls outside what traditional lenders (banks and building societies) are comfortable with. This is typically because agricultural diversification is often classed as a new venture and the lender is worried about the project failing entirely or making a loss in the first five years, rather than a profit.
However, farmers looking to diversify with an existing farm business in place, often find accessing finance easier than those starting from scratch.
Specialist lenders can assist in this case, often offering bespoke loans and mortgages to farmers who are looking to diversify and have a solid business and repayment plan in place.
As interest in agricultural diversification increases, so too has the number of specialist lenders and products on the market. This is fantastic news for farmers, who have more opportunity and choice, as well as a more competitive market to choose from.
Case Studies Of Diversification
Over the past few years, the number of farms offering wedding ceremonies and receptions has increased exponentially.
With engaged couples and wedding guests looking for a more affordable, quirky and innovative setting for a wedding; farmers have responded, renovating once unused farm buildings, fields and machinery and converting the space into a rustic paradise – often complete with animals and hay bales.
Wedding venue consultant Kelly Chandler featured in Farmer’s Guardian, she stated what farmers should consider before venturing into this kind of diversification project:
“Today, the UK wedding market is a £10 billion industry and with more and more imaginative couples looking to make their special day just that little bit different, the thought of tying the knot in a countryside barn or in an independent rural location that houses a marquee is not exactly what you would call ordinary,” says Kelly.
“During the last 18 months, I’ve advised and helped farm owners who have large barns over 300 years old to convert them into stylish wedding venues, which offer unique and picturesque settings for the bride and groom’s big day.”
“Farm weddings can be fun and they can be stylish, with couples being able to choose a converted livestock barn, beautifully restored, or a historic farmhouse dating back to the 15th century for the ceremony.”
“We live in a beautiful part of the world and I’ve always said that the beauty of a place is inversely proportionate to its earning potential,” Jamie said. “We needed to make up the shortfall from the reassessed subsidy system and find another source of income.”
“Of course there are drawbacks. We have to cope with 20,000 people over a single weekend and spend a lot of time planning to make it work. The neighbours aren’t happy about the noise and it does impact on the farm. But the advantage is that it is just one weekend and doesn’t affect the farm for the rest of the year.”
Sadly, after the death of Jamie Gilroy in 2014, the Wickerman Festival is no longer running. However, it does leave behind an incredible 14-year legacy and a great example of how farmers diversifying left millions of people with fond memories.
Often described as the number one choice for agricultural diversification, camping – and now, its’ ever-popular middle-class cousin, glamping – offers a relatively quick return on investment for farmers looking to branch out.
Increasingly trendy for those looking for a staycation, a holiday with a difference or a fun way to leave the confines of the city, glamping can transform an unused piece of land into a money-spinner if the facilities are right.
Many sites have popped up on farm land, such as “Barnutopia“, a glamping, camping and event business which is located on the English Welsh border.
Speaking to The Business Barn, Steve and Katrina explained that since opening Barnutopia they have built three yurts and a cabin, converted two stables and a room over the old coach house.
“For us, maximising occupancy of the glamping units and the event venue is a must, and to achieve this I’ve very much focused the marketing of the business across digital platforms.”
“The success of our business to date has been down to the relentless marketing. During the first year with three yurts, we enjoyed 92% occupancy in August. This year we were at 99% occupancy with seven units.
When establishing any business there are always going to be lessons you learn along the way. Katrina explains what they have learnt on their journey so far.
“We started the business offering short breaks for individual families but found group bookings easier to manage. During the summer, weekends are taken up almost completely with whole site bookings.”
“Pricing has evolved. I researched the prices of other glamping sites, but I also completed careful cost analyses to be sure that I didn’t under-price (or overprice) our offering. It’s vital that guests get good value for money, but it has to work for us, too.”
In an interview with Countryfile Magazine, Mary and David Pryse discussed how diversifying into offering unique animal experiences give them the confidence to broaden their horizons and keep building their business.
Mary and David, who bought an arable smallholding back in 1992, commented:
“We only had 38 acres and spent the first five years turning it into woodland and pasture so we could graze Highland cattle and angora goats,” says Mary.
“The first llama, Henry, was bought as a guard dog to protect the goats.”
The llama herd continued to grow and they now offer adventure treks through the woods.
They sold their cattle and goats to free up their grazing land and to allow them to breed llamas. Their income is now generated by breeding llamas, which they sell for pets and to other trekking companies and by offering trekking services themselves.
Later on, they secured planning permission to build a log cabin, so that they could live on site, and also create a new visitor centre.
Overall, farming diversification is seen as one of the Great British success stories when it comes to business. By adapting, moving with the times and expanding their remit, farmers are guaranteeing that both the UK economy and the next generation have more certainty and stability.
As long as farming continues to be flexible and innovative, the benefits agricultural diversification can bring to our farmers, communities and the economy should be celebrated at a domestic and international level.