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The Role of Diversification in Sustainable Farming

Douglas BellSenior Agricultural Policy Consultant

Rural Law ConferenceAberdeen, 1st September 2011

Contents

• Overview of the role diversification plays in farming businesses

• Some thoughts about future developments

22

Definitions

• Diversification - the entrepreneurial use of farm resources for the purpose of producing non-agricultural commodities (Scottish Government)

• Sustainable Farming - sufficient profit to:– provide a living– meet loan repayments– maintain farm infrastructure– leave a surplus to reinvest (DB)

33

Scottish Farm Diversification - Headlines

• 5-10% of Scottish agricultural output (5% in England)

44

Share of Scottish Agricultural Output by Sector 2010

55

22%

1 1 %

9%

6%3%4%

26%

7%

2%1 0%

Beef

Dairy

Sh eep

Poultry & Eggs

Pigs

O th er Livestock

Cropping

H orticulture

Cap ital Form ation

O th er

£2.43 billion(ex subs)

Source: Scottish Government, Economic Report on Scottish Agriculture 2011

Scottish Farm Diversification - Headlines

• 5-10% of Scottish agricultural output (5% in England) • 46% of Scottish farm businesses diversified (England

50%)

• Majority (78%) engage in only one diversified activity - only 3% with three or more

• £3,676 average income from diversification - (£7,916 if undiversified businesses excluded)

66

Diversified Activity by Farm Type

Farm Type % Diversified Ave. Income (£)Specialist Sheep (LFA) 59 8403Specialist Beef (LFA) 33 5047Cattle & Sheep (LFA) 49 9937Cereals 65 9931General Cropping 54 8723Dairy 41 6058Lowland Cattle & Sheep 41 6810Mixed 51 6285

77Source: Scottish Government, Economic

Report on Scottish Agriculture 2011

Regional Variation (England)

England NW NE & Y&H

EM WM EE SE SW

% of farms diversified

50 41 55 51 46 47 73 49

Percentage of all farms which have:

Letting buildings (non- tourism)

36 23 28 41 33 37 57 31

Processing & retailing farm produce

7 8 6 4 5 7 14 6

Sport & recreation 11 9 11 11 5 10 19 11

Tourist accommodation & catering

5 6 2 4 4 4 10 8

Other diversified activity

7 9 10 3 8 6 7 5

88Source Defra Farm Business Survey

FAS Farmer & Spouse Income

Diversification £3,676Off-farm employment/self-employment £5,700Investments, pensions, etc £3,800Support Payments £49,200Farming -£18,511Total Income £43,865

99Source: Scottish Government, Economic Report on Scottish Agriculture 2011

Sources of Diversified Income

1010

7 4 %

9 %8 %3 %6 %

Le ttin g Bu ild in g s (No n -to uris m )

Re c re a tio n

To u ris t Ac c o m o d a tio n & Ca te rin g

Pro c e s s in g & Re ta ilin g Fa rm Pro d uc e

Oth e rs

Source: Scottish Government, Economic Report on Scottish Agriculture 2011

Farm Accounts Scheme (FAS) 2009/10

6 3 %

7 %

6 %3 %2 1 %

Le ttin g Bu ild in g s (No n -to u ris m )

Re c re a tio n

To u ris t Ac c o m o d a tio n & Ca te rin g

Pro c e s s in g & Re ta ilin g Fa rm Pro d u c e

Oth e rs

Sources of Diversified Income

1111

7 4 %

9 %8 %3 %6 %

Le ttin g Bu ild in g s (No n -to uris m )

Re c re a tio n

To u ris t Ac c o m o d a tio n & Ca te rin g

Pro c e s s in g & Re ta ilin g Fa rm Pro d uc e

Oth e rs

Source: Scottish Government, Economic Report on Scottish Agriculture 2011

Farm Accounts Scheme (FAS) 2009/10

6 3 %

7 %

6 %3 %2 1 %

Le ttin g Bu ild in g s (No n -to u ris m )

Re c re a tio n

To u ris t Ac c o m o d a tio n & Ca te rin g

Pro c e s s in g & Re ta ilin g Fa rm Pro d u c e

Oth e rs

£3,091

£1,266

£2,826

£5,761

£11,355

Income Levels

1212Source: Scottish Government, Economic Report on Scottish Agriculture 2011

Farm Accounts Scheme (FAS) 2009/10

Range of Income

1313Source: Scottish Government, Economic

Report on Scottish Agriculture 2011

Diversified Activity Trends (England)

1414Source: Defra Farm Business Survey

Start-ups & Discontinuations (England)

No. of Enterprises 2008/09

Discontinued during 2009/10

New in 2009/10

No. of Enterprises 2009/10

Letting buildings (non- tourism)

28,500 3,100 2,500 27,900

Processing & retailing farm produce

20,600 1,900 1,800 20,500

Sport & recreation 5,200 1,000 700 4,800

Tourist accommodation & catering

3,400 500 500 3,400

Other diversified activity 4,600 1,900 1,600 4,400

1515Source: Defra Farm Business Survey

1616

Grant Aid – Rural Priorities

• Competitive programme

• Replaced the majority of SEERAD, FC and SNH grant schemes

5 8 .0

1 2 1 .0

1 6 .0 3 .9 6 .9

2 4 .7

1 .2

2 5 .2

6 .2 0

20

40

60

80

1 00

1 20

1 40

£m

Rural Priorities – Approvals by Priority (£m)

1717

Position at 31 March 2010

1 9 .81 3 .5

2 6 .18 .8

4 0 .0

2 5 .46 3 .8

5 5 .9

1 7 .8

5 .22 7 .4

Arg yll

Ayrs h ire

Bo rd e rs

Clyd e Va lle y

Dum frie s a n d Ga llo w a y

Fo rth

Gra m p ia n

Hig h la n d

No rt h e rn Is le s

Oute r He b rid e s

Ta ys id e

Rural Priorities Contracts (£m)

1818

£303.8m

Source: Scottish Government 31/8/10

Future/Current Interest Levels

1919

SAC Farm Diversification Website 2010/11

2020

www.sac.co.uk/farmdiversification

Summary & Conclusions

• Overall contribution to sustainable farming limited but important to some

• Level of activity fairly static despite encouragement (financial & otherwise)

• Renewable energy looks likely to be the exception• Like farming, diversification often depends on

external support• Future developments in Brussels and budgetary

constraints in general will be crucial• Could be a chicken & egg effect

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Thank You

2222douglas.bell@sac.co.uk