Farm diversification accounts for one third of farm incomes, according to figures

The average income from farm diversification was £16,600 last year
The average income from farm diversification was £16,600 last year

Farm diversification now accounts for one third of farm incomes, according to the 2016 Farm Business Survey.

Income made from diversifications on farms in England totalled £580million in 2016 and represents around a third of their incomes, according to the survey.

The Department for the Environment, Food and Rural Affairs (Defra) publication shows that 62% of farms now have some form of diversification and nearly a third of total farm business income comes from diversification.

It excludes agricultural contract work, but shows that 32% of total farm business income now comes from diversification. Income from letting buildings for non-agricultural use netted £17,400 per farm.

“For over a quarter of businesses with diversification, this income actually exceeds what is being generated from the rest of the farm business. However for 4% of farms their diversification activities actually lost money,” said Rachel Lawrence from the Farm Business Survey.

“We are seeing diversification becoming an increasingly important aspect of farm income, especially as businesses look to reduce exposure to the volatility of agricultural commodities markets. We expect these trends to continue as farms want to diversify reliance away from core agricultural activities.”

For those farms generating renewable energy, it provided 9% of their total income for the year, averaging £4,400 per business.

'Never been more critical'

Director of the CLA in Wales, Rebecca Williams, said diversification has never been more critical to the sector.

“The agriculture industry has seen some difficult times of late and there are uncertain times ahead,” she said.

“For many farmers, looking for alternative sources of income is essential to the viability of the business and diversification takes many forms.

“There is always a need to plan and prepare, seek advice and understand the long-term implications for the core farming business before making any changes.”

Matthew Evans, Head of Wealth Management at Hugh James, says there are some key areas farming businesses need to consider before investing too much time or money.

“Uncertainty is, unfortunately, a way of life in the rural economy – and, with Brexit looming and the spread of commodity pricing, that doesn’t look like it’s going to change any time soon,” he said.

“So, diversification can seem like – and often is – an attractive prospect, whether that’s introducing new technology, launching tourism or retail venture or hosting renewable energy production, for example.

“With robust advice, research and planning, it can also provide lucrative solutions in challenging times for agricultural businesses."