FARM DIVERSIFICATION LECTURE NOTES 2015

The Business of Farm Diversifica4on BAM313: Rural Tourism

Learning Outcomes Aims § To assess pressures facing the farming industry, and encouraging

farmers to diversify

§ To examine/evaluate the terminology used when discussing farm

diversifica;on

§ To evaluate the opportuni;es and challenges facing farm diversifica;on § To discuss key policy ini;a;ves suppor;ng farm diversifica;on

Farm Tourism and Farm Diversifica4on Ac4vity 1: •

What is farm diversifica;on?

Farm Diversifica4on Bed and Breakfast Self-catering Camping/Caravan Sites

Activity Holidays

Fuel Timber Amenity/Recreation Wildlife/Conservation

[Source: Ilbery, 1992]

Farmhouse Teas/Cafe Demonstrations Opendays Farm Attractions Horseyculture

Leasing of Land Leasing of Buildings

For other Farmers For Non-agricultural organisation

PYO Schemes Farm Gates Sales Farm Shop Delivery Round

Linseed Teasels Evening Primrose Fennel

Wool Skins Hides

Cheese Ice Cream/Yoghurt Flour Milling Jams/Preserves

Sheep Meat Fish Deer Goats

Structural Diversifica4on Tredethick Farm, Lostwithiel

Structural Diversifica4on

Quay Quarters, Chichester

Structural Diversifica4on Pennywell Farm, Devon

Structural Diversifica4on

Dairyland, Cornwall

Fishers Farm, West Sussex

Structural Diversifica4on

Adding Value

Educa4on

Farm Diversifica4on Bed and Breakfast Self-catering Camping/Caravan Sites

Activity Holidays

Fuel Timber Amenity/Recreation Wildlife/Conservation

[Source: Ilbery, 1992]

Farmhouse Teas/Cafe Demonstrations Opendays Farm Attractions Horseyculture

Leasing of Land Leasing of Buildings

For other Farmers For Non-agricultural organisation

PYO Schemes Farm Gates Sales Farm Shop Delivery Round

Linseed Teasels Evening Primrose Fennel

Wool Skins Hides

Cheese Ice Cream/Yoghurt Flour Milling Jams/Preserves

Sheep Meat Fish Deer Goats

Farm ABrac4ons

[Visit England, 2014]

The Farm Tourism Market Key Facts: § Visitors are socio-­‐economic group

AB, age group 35-­‐44, travel with wife/spouse and children

§ Visitors staying at self-­‐catering

accommoda;on, have similar characteris;cs, though with a larger propor;on of families

[Morrison, 2002]

Farm Diversifica4on: Key Sta4s4cs Farm Business Survey 2013/2014 § 58% of all farms have diversified in one form or another, including

37% that have diversified into businesses other than leIng buildings

§ Income from diversifica;on was £490 million in 2013/2014 compared

to £450m in 2012/2013

§ For 36% of businesses with diversifica;on ac;vity, diversifica;on

accounted for 25% of total farm income

§ 22% of diversified farms derive more income from their diversified

business than from farming

§ Larger farms are more likely to diversify than smaller ones

Approximately 27% of farms in the East of England and South East regions were carrying out diver activities in 2010, the highest proportion amongst the regions. The most popular type of diversification ac in each of these regions was agricultural contracting and haulage. More figures on types of diversific activity are shown in tables 7 and 8 and an accompanying workbook with further breakdowns is availab our website at https://www.gov.uk/government/organisations/department-for-environment-foodaffairs/series/structure-of-the-agricultural-industry.

Farm Diversifica4on: Key Sta4s4cs § Holdings with tourism as a

Figure 1: Holdings with tourism as a proportion of all diversifying holdings by English region: 2010

propor;on of all diversifying holdings by English region

Tourism includes accommodation and spor leisure activities. Figure 1 shows that the hi proportion of holdings running tourism diversified activity is in the South West re The lowest proportions are in Yorkshire an Humber, East Midlands and the East of En where there are large numbers of arable f These regions have a much higher proporti diversifying holdings with contracting haulage activities than the other region figures are available in the accompa workbook on the website.

5

Farm Diversifica4on: Key Sta4s4cs

[Source: Farm Business Survey 2013/2014]

Farm Diversifica4on: Key Sta4s4cs

[Source: Farm Business Survey 2013/2014]

Diversifica4on: Defini4ons

Farm Diversifica4on: A Defini4on of Terms DEFRA (2007):

‘Any ac;vity, excluding mainstream agriculture and external employment by members of the farm family, which makes use of farm assets to generate addi;onal income’

Farm Diversifica4on: A Defini4on of Terms ‘Farm Diversifica4on’ / ‘Alterna4ve Farm Enterprises’ § Focus: § Capital and land § ‘Unconven;onality’ compared to tradi;onal agricultural

ac;vi;es

§ Produc;on of alterna;ve food and fibre products § Re-­‐establishment of on-­‐farm product processing § Provision of accommoda;on and recrea;on

Farm Diversifica4on: A Defini4on of Terms ‘Farm Diversifica4on’ / ‘Alterna4ve Farm Enterprises’ § Focus:

Limita4ons:

§ ‘Unconven;onality’ compared • to Analysis tradi;onal agricultural restricted to farm-­‐ ac;vi;es centered ac;vi;es capable of genera;ng income § Produc;on of alterna;ve food and fibre products

Exclusion of off-­‐farm ac;vi;es § Re-­‐establishment of on-­‐farm p• roduct processing to preserve the image of § Provision of accommoda;on and recrea;on full-­‐;me farming professional

§ Capital and land

Farm Diversifica4on: A Defini4on of Terms ‘Part-­‐Time Farming’ § Focus: § Labour § Considera;on to the u;lisa;on of farm labour resources beyond

the farm gate

§ ‘the combina;on of farming with other paid work’ (Gasson, 1988)

Farm Diversifica4on: A Defini4on of Terms ‘Pluriac4vity’ § Focus: § Integrated/holis;c approach recognising farm-­‐centered

diversifica;on and off-­‐farm part-­‐;me farming

§ ‘the phenomenon of farming in conjunc;on with another gainful

ac;vity, whether on-­‐ or off-­‐far’ (MacKinnon, 1991)

§ Aden;on given to all aspects of agricultural and non-­‐farm work

undertaken

§ Recogni;on that agriculture is not necessarily the main

employment ac;vity thereby drawing aden;on to the impact of rural policy ini;a;ves upon the farm business

Factors Influencing Farm Diversifica4on

Factors Influencing Farm Diversifica4on

External

Internal

Farm Diversification

Factors Influencing Diversifica4on External: § Policy frameworks (ERDP/RDPE) § Poli;cal, financial and planning environments § Agency involvement § The success of other farmers’ ac;vi;es (champions) § The local environment § Changing nature of rural popula;ons § Increasing emphasis on the conserva;on of the rural environment

Factors Influencing Diversifica4on Internal: § Mo;va;ons and aspira;ons of rural diversifiers § Characteris;cs of diversifiers: §

Age, educa;on, skills and experience

§ Enterprise characteris;cs §

Size, loca;on, capital availability, type

Barriers to Diversifica4on – DEFRA (2007) § Key challenges § The technical knowledge and skills required for the diversified

business were out of scope

§ New business skills are needed: market research, marke;ng,

business planning, business management and customer rela;ons § A lack of awareness of the need for business and management

training; 67% of farmers* had had no training in the enterprises they had set up

Barriers to Diversifica4on – DEFRA (2007) § Key challenges § Barriers to skills training: cost of training and lack of effec;ve

funding provision; access to appropriate training and not knowing where to find it; ;me away from the business; relevance of training; awareness of benefits

§ The lack of conceptualisa;on of ‘farming’ as a business § Farmers’ aItudes to diversifica;on is variable; diversifica;on is

seen as a necessary evil, rather than a logical and beneficial business development

Barriers to Diversifica4on – DEFRA (2007) § Key challenges § 78% of farmers saw poor returns from farming as a key driver

compared to 8% who regarded it as a posi;ve desire to improve the farm business

Barriers to Diversifica4on DEFRA (2006) -­‐ The Effects of Public Funding on Farmers’ APtudes to Farm Diversifica4on (based on a survey of 1,000 farmers) § Key challenges (current diversified enterprises) § Planning (32%), securing grants (29%), securing finance (18%)

and marke;ng (15%). § 27% thought the grant applica;on process should be made

easier to encourage diversifica;on

Barriers to Diversifica4on § Training (current diversified enterprises) § 31% of current enterprises had undertaken training, only 1%

received training on planning (technical training 55%, other regulatory/compliance 30%, business management 25%, marke;ng 17%)

§ Diversified enterprises not set up -­‐ reasons for not going ahead § 21% of poten;al enterprises stated planning issues as the most

important reason given for not pursuing a business; 37% failure to secure grant aid

Barriers to Diversifica4on § Non-­‐diversified farmers considering diversifica4on § 23% stated sor;ng out planning constraints as a significant

issue/challenge

Factors Influencing Diversifica4on

Successful Farm Diversifica4on

Farm Tourism and Farm Diversifica4on Ac4vity 2: •

What are the cri;cal success factors for farm diversifica;on projects?

Successful Farm Diversifica4on § DEFRA 2012 -­‐ Cri4cal Success Factors § Integra;on with exis;ng farm enterprises -­‐ the implica;ons on

your ;me, your core farm business ac;vi;es, cashflow, staffing, poten;al liabili;es

§ Market research -­‐ informa;on about skills, resources and

market condi;ons that you have gained from other local farmers who have diversified

§ Financial planning/cash flow projec;ons § Effec;ve marke;ng/USP § Planning and legal requirements, tax and na;onal insurance

issues

External Drivers: Policy Ini4a4ves

External: Farm Diversifica4on Grant Scheme Background: § A comprehensive package of assistance to farmers thinking of

diversifying into non-­‐agricultural, profit-­‐making ac;vi;es on their farms

§ Concerned with maintaining farmers’ incomes as support prices for

farm products were reduced and further supply control measures introduced

§ 1st January 1988 to Dec 1992

External: Farm Diversifica4on Grant Scheme

Capital Grant

Marke4ng Grant

Feasibility Grant

External: Farm Diversifica4on Grant Scheme • To assist in the development of new business enterprises

Capital Grant

Marke4ng Grant

Feasibility Grant

• 25% on investments between £750 and £35,000

External: Farm Diversifica4on Grant Scheme

Capital Grant

Marke4ng Grant

Feasibility Grant

• 50% of the cost of a feasibility study up to a maximum of £3,000 for individuals and £10,000 for groups

External: Farm Diversifica4on Grant Scheme • Towards marke;ng and promo;onal ac;vi;es

Capital Grant

Marke4ng Grant

Feasibility Grant

• Paid in three consecu;ve years at 40%, 30% and 20% to a maximum of £3000 for individuals

External: Farm Diversifica4on Grant Scheme Areas of Uptake § Farm-­‐based accommoda;on § Sport and recrea;onal facili;es § Farm-­‐based educa;onal facili;es § Livery for horses § Direct marke;ng: pick your own § Processing of farm produce § Processing of ;mber products

External: Farm Diversifica4on Grant Scheme

External: Farm Diversifica4on Grant Scheme Overview: 1988 to 1992: § 3,200 applica;ons were received § 2,443 approved and 1,396 completed § A total cost of £10.4 million § Applica;ons concentrated in the south-­‐west and the urban fringe

around London and the south-­‐east

§ The demise at the end of 1992 was a response to the success of the

scheme

§ Government retreated from diversifica;on placing greater emphasis

on the environmental aspects of agricultural policy

External: England Rural Development Programme 2000-­‐2006 Key Areas: § Commitment to agri-­‐environment schemes § Environmentally Sensi;ve Areas (ESAs) § Countryside Stewardship § Organic Farming Schemes § Farm Woodland Premium Scheme § Woodland Grant Scheme

External: ERDP 2000-­‐2006 Key Areas: § Processing and Marke;ng Grant Scheme § The Rural Enterprise Scheme § Voca;onal training for people in farming and

forestry

§ An Energy Crops Scheme

External: ERDP 2000-­‐2006 Processing and Marke4ng Grant Scheme § Project Objec4ves § Improve agricultural processing and marke;ng

infrastructure in England

§ Guide produc;on in line with foreseeable

market trends

§ Improve/ra;onalise marke;ng channels § Improve presenta;on and prepara;on of

products

§ Apply new technologies and innova;on

External: ERDP 2000-­‐2006 Processing and Marke4ng Grant Scheme § Project Size and Funding § 30% of eligible project costs, subject to a

maximum of £1.2million for any one project; minimum size of project £70,000

External: ERDP 2000-­‐2006 Processing and Marke4ng Grant Scheme § Outcomes § £46.6 million grant commitment between

2000-­‐2006; 429 applica;ons -­‐ 250 approved

§ Assisted 150 projects, created and safeguarded

8,300 jobs and introduced 383 new products to the market

§ Voca;onal training for people in farming and

forestry

External: ERDP 2000-­‐2006 Rural Enterprise Scheme § Assistance for projects to develop more sustainable

and diversified rural economies

§ Help farmers adapt to changing markets and develop

new business opportuni;es

External: ERDP 2000-­‐2006 Rural Enterprise Scheme § Project Objec4ves § Farm relief and farm management services § Marke;ng of quality agricultural products § Basic services for rural economy and popula;on § Renova;on and development of villages and protec;on and

conserva;on of rural heritage

§ Diversifica;on of agricultural ac;vi;es to provide alterna;ve/

mul;ple incomes

§ Encouragement for tourist and cras ac;vi;es

External: ERDP 2000-­‐2006 Rural Enterprise Scheme § Outcomes § Total budget of £145 million, assis;ng 3,034 projects, crea;ng

or safeguarding 14,500 jobs § Support to 1,200 diversified farm enterprises and the marke;ng

of 3,800 agricultural products

§ 25% (over 3,500) of agreements linked to encouragement for

tourist and cras ac;vi;es

External: ERDP 2000-­‐2006 Voca4onal Training Scheme § Training that contributes to an improvement in

the occupa;onal skills of those involved in farming and forestry

§ Informa;on and communica;on technology § Business development and diversifica;on § Marke;ng § Conserva;on and the environment

External: ERDP 2000-­‐2006 Voca4onal Training Scheme § Payments § 75% of eligible costs

§ Outcomes § Total grant commitment of £21.5 million; 1,261 applica;ons -­‐ 825

approved

§ Support to 156,000 training days, nearly 19,000 courses and

funded training leading to over 17,000 qualifica;ons

External: Rural Development Programme for England 2007-­‐2013 § Budget of £3.9bn between 2007 and 2013 § The RDPE provides a wide range support for capital projects and

training for farmers, growers, foresters, food businesses and rural communi;es.

§ Regional delivery via Regional Implementa;on Plans § SEEDA awarded £27 million Leader funding distributed directly to

13 Local Ac;on Groups (LAG)

§ LAGs will receive delegated funding of between £1.6 million and

£2.6 million for the period 2008 to 2013

External: RDPE 2007-­‐2013 § LAGs will decide where the share of the money goes -­‐ linking to

local priori;es. Each project can receive a grant of up to £50,000

§ The funding will cover a wide range of ac;vi;es such as farm

diversifica;on, tourism ac;vi;es, renewable energy projects and collabora;ng to develop new products and services

External: England Rural Development Programme 2014-­‐2020 § Budget Alloca;on: § €2,900 million allocated for Measure 10: Agri-­‐Environment

Climate

§ €323 million allocated for Measure 4: Produc;ve and non-­‐

produc;ve investments § €218 million allocated for Measure 8: Forestry § €174 million allocated for Measure 19: Leader § €107 million allocated for Measure 6: Farm and business

development

External: Â

External: Planning and Business Support

Farm Div ersificati A Plannin on g Guid

in Lewes

e for Farm ers District

External: Planning and Business Support

External: Sector Support

External: Sector Support

External: Sector Support

External: Sector Support

External: Sector Support

External: Sector Support

External: Sector Support

External: Sector Support

External: Sector Support

External: Sector Support

External: Sector Support

Learning Outcomes By the end of this session, you should be able to: § Assess pressures facing the farming industry, and encouraging farmers

to diversify

§ Examine/evaluate the terminology used when discussing farm

diversifica;on

§ Evaluate the opportuni;es and challenges facing farm diversifica;on § Discuss the key policy ini;a;ves suppor;ng farm diversifica;on