1st meeting of the Thematic Group on Farm Diversification

In the first meeting of the Thematic Group (TG), members explored how farm-based businesses are capitalising on the opportunities afforded by farm diversification, and discussed how Member States are supporting diversification. Members also began to consider the effectiveness of the current CAP interventions in unlocking the potential of farm diversification.

Jan-Willem Van Der Schans (EU CAP Network) provided an overview of farm diversification in the EU. Trends in diversification can be categorised as: differentiation (e.g. adding value to products, energy production), service provision (e.g. catering, care services), and experiences (e.g. tourism, well-being). In terms of business resilience and growth, diversification is viewed as a necessary income stream by small farms, whilst larger farms view diversification as an opportunity for increased revenues. The CAP supports diversification directly and indirectly, alongside national/ regional funding and support. Challenges for farm diversification include: administrative burden (especially for small farms), lack of pre-financing, long implementation timelines, difficulty building farm-level synergies, restrictive regulations on non-agricultural activities in rural areas, and the need for new ways of working.

Three TG members then shared insights into their experience of farm diversification.

Elizabeth Bogner (Bavarian Farmers Association, Germany) shared her insights into farm diversification in Bavaria. Here, 66% of family farms practise diversification, with 50% generating higher revenues from diversified income combinations than from primary agricultural production alone. The key diversification activity is energy production, followed by agricultural-related services (e.g. harvest services, snow removal), direct marketing, and gastronomy. Social agriculture is also a niche area to further develop. There are also some regional differences, with farm holidays being more prominent nearer the Alps. Farm diversification increases farm resilience through reduced market and production risks; it can also be a driver for farm succession. Success relies very heavily on having the appropriate support and expertise to manage increased workloads, as well as the complexities of diversification, the fear of failure, and generational conflicts. The definition of an active farmer and the inclusion of part-time farmers are factors to be considered in the context of the next EU policy frameworks.

Isabel Picão de Abreu (Local Action Group ADER-AL, Portugal) offered a LEADER perspective, presenting the example of the Portalegre district, an area of 65 000 inhabitants with very low population density and dependency on traditional agriculture and stock farming. Diversification is a strategic response to the decreasing number of farmers and the increasing vulnerability of traditional agriculture. Through LEADER, ADER-AL offers new opportunities for farm businesses, e.g. through agri-tourism, wine tourism, leisure, rural heritage, added value and direct selling. However, top-down programming priorities limit the wider impact of LEADER, favouring small-scale investments over farm diversification, despite strong demand for the latter.

Jacopo Goracci (Tenuta di Paganico Farm, Italy) explained how his farm has been able to successfully diversify its activities since the late 1990s. Actions include: conversion to organic, silvo-pastoralism, agri-tourism, retail, hospitality, training, research and knowledge exchange. Farmers face many practical challenges, such as excessive workload, the need to develop or acquire new and diverse skills, limited market access, cash-flow pressure, and heavy administrative and bureaucratic burden. Diversification is not necessarily about doing more activities on the farm, but about capturing value along the value chain. It should also be driven by ethical choices that contribute to the maintenance of sustainable agricultural activity. However, it is truly sustainable only when it strengthens farmers’ autonomy, without increasing dependencies or leading them into overload and self-exploitation, particularly in the case of small farms.

TG members reflected on the success factors and challenges for farm diversification. Several participants highlighted various challenges for business owners, such as a lack of entrepreneurial motivation, knowledge of food quality, food safety, food marketing, business planning, and networking skills. Related challenges entailed the ability of small farm businesses to gain market insights, adapt to specific markets, and stay up to speed with procurement rules and payment terms, alongside the maintenance of primary production. More systemic challenges include infrastructure, access to land, demographic change (particularly the difficulty of attracting workers to rural areas) and the structure of funding mechanisms and financing.

Success factors rely on many things. Location and accessibility are key, as is the passion and commitment of the farmer, who in turn has business insights into new market opportunities. Successful farm diversification involves being able to benefit from business support and peer support mechanisms that are tailored to farmers’ needs. Success also relies on good succession planning and continuing to develop, grow, and diversify the business over several years.

TG members from two Managing Authorities shared their insights into various policy approaches to farm diversification.

Sari Blonk, (Ministry of Agriculture, Fishery, Food Security and Nature, Netherlands) shared details of the policy framework for multi-functional agriculture in the Netherlands. One third of farmers in the Netherlands are engaging in Multifunctional agriculture (MFA), which is a collective term for businesses that combine agricultural production and environment whilst providing services to society. There are policy ambitions to stimulate farm diversification thanks to its social importance in revitalising rural areas and building business resilience. MFA professional groups centre on different activities and connect various actors, including municipalities, regional authorities, farmer organisations, research, and banks. Challenges to implementing MFA include spatial planning, regulatory burden (e.g. social care, food security, nature) and demand for more business support.

Michaela Kaineder (Federal Ministry Agriculture & Forestry, Climate and Environmental Protection, Regions and Water Management, Austria) set out how the CAP supports diversification in Austria, where the sector is dominated by small-scale and family farming. Here, diversification is a strategy for farm survival, offering more income streams and motivation for farm businesses (particularly for female family members) to focus on niche areas, such as quality products, to build profitability and resilience. CAP support comes as a package with multiple interventions at play. Business support was also highlighted, with various actors from across the regulatory landscape playing a role in supporting organisational development and growth. Various challenges for diversification include investment access and planning, systematic knowledge, regulatory complexities, uptake of training and shifting consumer demands.

Reflecting on the aspects of CAP implementation and the wider policy landscape that worked well or less well, TG members welcomed the fact that the CAP has the potential to work with other instruments, enabling comprehensive support for business development and growth through the various funding and support mechanisms available. They also appreciate CAP support for young farmers, generational renewal, and new entrants.

Policy coherence, alignment and integration were identified as real challenges for decision makers and practitioners alike, posing the question about where farm diversification should lie in the policy landscape. Other issues stem from a lack of appropriate support on aspects of business development, including advice, digitalisation, and the use of Artificial Intelligence. Land use and land use planning were also identified as relevant to farm diversification, but remain inadequately addressed by policy.

TG members reflected on all discussions from across the day to consider next steps for the TG work. There was a strong emphasis on policy coherence, CAP design and practical pathways for farm diversification. Key topics emerging included: