Diversify to thrive

Diversification is a strategy where farms develop extra sources of income that are broader than their traditional agricultural production. This extra income can come from agri- and food-related sources, such as developing on-site processing or direct sales, or from sources outside of agriculture, such as energy production. Another option for farm diversification is multifunctional agriculture, where new income streams are generated by on-farm activities in the areas of social care, education, agritourism or nature conservation. However, multifunctional agriculture is not just about an economic strategy – it is also about demonstrating the societal impact of farming, and reconnecting farmers with society (and vice versa).

Global drivers such as climate change, geopolitical tensions, increasing production costs, fluctuating prices, global competition, and animal and plant diseases are major concerns for the economic vulnerability of European farming. Diversification is therefore a possible answer for farms still dependent on a single crop or on intensive livestock systems.

Exact percentages of farms engaging in diversification vary by country and statistics are not easily found. According to the briefing on ‘Farm diversification in the EU' produced by the European Parliament in early 2016, in 2010, 10-15% of EU farms engaged in some form of diversification, with higher shares in countries like Austria, Italy and France, where agri-tourism and on-farm processing are popular.

Overall, according to Eurostat's farm structure survey of 2010, approximately one in three farmers in Europe undertake ‘gainful activities other than farm work’; and Copa-Cogeca specifies that 77% of these farms spend more time on these ‘other’ activities than on their agricultural work.

Data from Eurostat suggest that between 2016 and 2025, the average output of non-agricultural activities in EU farms has been about 5% of that from agricultural activities, although that percentage will vary greatly by country and by type of farm.

According to the same source, in recent years, about a quarter of EU farms (fewer than a decade ago) engage in ‘other gainful activities’. Non-agricultural activities are prevalent among small family farms in marginal areas as a strategy to stabilise income and create employment for family members, while they are less relevant for bigger farms. This suggests that the smaller farms engage in those activities by necessity and the second one by opportunity – a consideration explored by the EU CAP Network Thematic Group on Farm Diversification.

An analysis of the situation in the Netherlands reveals that 37% of farmers and growers have diversified their activities, and this number is growing every year. The real turnover of these activities may be even larger, however, once diversified activities mature, they may change their legal status and be considered under a different statistical category, making it difficult to follow the evolution. This gap in data availability applies to most EU countries.

Anecdotally, diversified operations tend to align with a more future-oriented mindset, allowing farms to cope better with a wide range of unforeseen events, from climate change to market fluctuations. Thematic work by the EU CAP Network has shown that young farmers and new entrants are more likely to engage in diversification activities, while women often emerge as leaders of good practices in diversification.

Farm diversification presents inherent challenges and requires careful organisation and management. For example, investing in multiple farm activities can create internal conflicts, particularly when roles and priorities are not clearly defined or regularly reviewed. Another challenge is that diversified farms –by definition not specialised – may struggle to remain competitive if they lack the capacity to develop a solid business plan and an effective marketing strategy that highlights the added value of their products. In such cases, they often fall behind the quality levels achieved by specialised producers. In addition, national legislation governing farmers’ professional rights (such as social security obligations, taxation frameworks, and related regulations) can also act as a barrier, discouraging farmers from engaging in diversified activities.

When possible challenges are taken into account, farm diversification can provide opportunities and solutions to cope with economic vulnerabilities, as explored by the EU CAP Network’s Thematic Group on Farm Diversification. Farmers may opt for broader diversification, and even multifunctional agriculture, where farms provide more diverse benefits like environmental stewardship (biodiversity and landscape management), social services such as education or care farming, combined with ensuring economic viability.

Agritourism is a widespread example of farm diversification. A case in point is Italy, where agritourism has evolved from a niche activity into a structured industry, supported by comprehensive legislation at the national and regional levels.

The Law on Agritourism (2006) provides a comprehensive definition of agritourism and sets criteria for its classification and operation, including accommodation, catering, educational and recreational services. The key principle is that agritourism must remain supplementary to farming, meaning that hospitality and tourism activities can be offered only by working farms and must complement, not replace, agricultural production.

Agritourism supports farm incomes whilst preserving rural traditions, and provides additional benefits such as the authenticity and sustainability of the products. Agritourism is therefore different from other rural hospitality businesses, which are not necessarily so intimately related to the land.

An inspiring example (selected as a finalist in the Rural Inspiration Awards 2022) comes from Sardinia, Italy, where two young sisters took over the family farm and expanded its activities to agritourism and educational activities, and developed a brand of traditional products and new sales channels.

Agriculture is often a separate category in spatial planning, and diversification-related activities are not always allowed, especially if there is no meaningful link with agriculture and food.

Conversely, changes at the territorial level can open up new opportunities for farm diversification, as recently happened in the Netherlands.

Since 1 January 2024, the new Omgevingswet (Environment and Planning Act) coordinates the protection and use of the physical environment in the Netherlands. Until then, side activities on farms were permitted only within the designated agricultural zone; on-farm processing and hospitality, such as restaurants or accommodation, were often not permitted.

In the new system, diversified activities can take place if they contribute to the regional goals (as described in the Omgevingswet). Farm diversification is now allowed as long as farmers show how this impacts the environment and have the appropriate licences. Guidelines are provided in a handbook developed by the multifunctional agriculture working group of the Dutch farmers’ union in collaboration with the national association of municipalities.

In recent years, the Netherlands have also experienced fundamental changes in the real estate market. Societal changes have increased the demand for affordable housing as well as an appetite for living and teleworking in rural areas. Farmers can provide spaces for working and living in a green environment, which, in turn, can generate additional income to maintain and improve their land and buildings.

This change marks a shift from the old ideas of separating specialised farming from residential areas and nature reserves to avoid conflicts, to a forward-looking idea of mutual support among nature-based farming, farm-based nature, citizen-supported agriculture and urban agriculture. Together, they can contribute to a more liveable and more diversified countryside.

An interesting example is the experience of the family farm BI-JOVIRA. In 2006, the farm owner – the seventh generation of the family – decided to stop milking cows and converted to regenerative agriculture. Additionally, he developed a pilot project with the local municipality to develop a community of 10 tiny houses on the farmland. Community members are attracted by the possibility to live a simple, natural life, strive for self-sufficiency and share time, knowledge and talents, contributing to work on the farm and to maintain the bordering forest area.

The CAP can play a role in supporting diversification through productive and non-productive farm investments and networking and knowledge sharing are once again key to identifying replicable models and new opportunities. There is much to learn from successful, even experimental, examples across multiple EU Member States, where diverse forms of diversification have been explored and adapted to local markets and needs.