Should I diversify my farm business?
66% of farm businesses in England have diversified in some way, but what return are they seeing for their efforts?
How does this sound?
On average farms need to invest £10,500 (fixed and variable costs) to produce an output valuing £22800. This generates a farm business income of £12,400. In other word, there is £1.18 profit for every pound invested.
Should I diversify by farm business?
With the exception of dairy and horticultural enterprises, all farms generated more income from diversification than agriculture.
If you are an arable farmer you may find diversification out of agriculture particularly appealing.
On average arable farms generate a farm business income of between £15,200-20,600 from diversification representing 22-32% of the total farm business income. This is a greater amount than that generated by agriculture (2%) on both cereal and general cropping farms.
If you are a horticultural farmer then there is less necessity to supplement your income with diversification as 56% of income comes from agriculture.
The loss of BPS will not affect you as much as cereal and general cropping farms, however, you may wish to replace this income with diversification activities.
Livestock farms (excluding dairy)
As a large proportion of the farms income comes from BPS (75-92%), you will be looking to replace this income.
You will need to identify diversification activities that fit in with your existing farming routine.
Although the income from diversification may seem small when compared to that generated on arable farms, it actually represents 10-37% of the total farm business income.
When BPS is discounted from Farm Business Income, diversification accounts for 134-150% of the farms income (remember, agriculture is a loss maker).
Dairy farmers may not feel the need to diversify. Unlike the other livestock farming enterprises dairy farms generate the greatest proportion of their income from agriculture (66%) and are less reliant on SPS (24% of Farm business Income).
On average, only 6% of the total farm business income derives from diversification.