In one of my previous blogs I talked about the power of the supermarket. The crux of this issue is if they cut their price or lose market share in this one small line it is not the end of the world but further down the supply chain it matters more. Focussing on farmers ...there has been an ongoing pressure in farms to specialise for a number of years and more recently to diversify. Diversification will generate additional income streams – often more than the farming could generate but it also manages risk. It takes income away from the volatility of commodity food production. So....whilst diversification is great (Miss Seaford and I recently holidayed in the South West in a barn conversion on a dairy farm where the income is a welcome addition to the business and was run very well) but there are also risk management tools by improving the enterprise mix. Mono-product businesses are very high risk unless they are price setters. Farmers are not. So think about your business. What happens if milk sales fall? Can another enterprise take the strain for a while?Onto diversification....how often has a holiday cottage been badly placed or constantly upset residents? What happens when the next big amusement park struggles because of the 3 miles of single track road or the horse hating livery owner upsets all his residents again?Diversification is great and can significant improve profits and risk. Match the opportunity to the asset though. If you have a great view consider visitor attractions and holiday/tourism but if access is poor avoid welcoming visitors to the farm. A very successful local equine enterprise is successful due to the farmer’s wife. She is a ‘horsey’ person so knows what is good and what is not. Similarly a peaceful easily accessed farm in East Sussex is now a fantastic camping and caravan park.Look at what your skills are, what you and your farm’s assets are and match those to an opportunity. Take advice and ensure you remain planning permission compliant!So what am I saying? Diversify YES but look at the core business and manage risk in all the ways you can.
More on diversification in the future.