Diversify and prosper

July 2019

Ikageng Maluleke, Junior Economist, Grain SA. Send an email to Ikageng@grainsa.co.za

This article highlights the importance of diversifying your farming enterprise in order to spread risk and to have an income throughout the year.

WHAT IS DIVERSIFICATION?
Globally, farmers are met with so many challenges and decreasing farm income has been a major driver encouraging farming families to investigate diversification. Looking at grain farmers for instance, if you are only engaged in one enterprise (for example growing maize) and have a crop failure, it will be more devastating than if you grew more crops.

Most of us have heard the term ‘don't put all of your eggs in one basket.’ One meaning suggests that the basket will be too heavy to carry while another is that if you slip or fall, you may break more eggs if they are all in one basket. For the purpose of agriculture and business, I would say the second meaning is more suitable.

Diversification on a farm is when a farm branches out from traditional farming by adding new money making activities. This can be in place of or in addition to its traditional farming activities. Farm diversification involves anything, from adding free range poultry and livestock production to starting a bed and breakfast in the out buildings or setting up a local tourist attraction. This all depends on the size of your farm. 

Generally, diversification simply refers to an increase in the number of enterprises operated on the farm. In practical terms, this can be done in many different ways and not necessarily limited to the list below: 

• You may grow more than one field crop to spread the work over a longer planting and harvesting season. (You might even produce two crops on the same land within a twelve month period).
• You may spread the risk over more than one enterprise (such as livestock to provide income for months in which no grain is sold, thus producing better cash flow for the business). 
• You may add value to a crop you currently produce, i.e. niximalization. 
• You can engage in the same farm enterprise in different physical locations. 
• You can generate income from off-farm activities, e.g. renting out your bakkie.

WORD OF CAUTION! 
It is never a good idea to start something new if you currently struggle with your cash flow demands. Many new enterprises may not be profitable the first year and learning new crops and production methods may stretch your management abilities. You will need to learn all of the new practices and methods while trying to be profitable. Start small, i.e. one hectare or less the first year and grow the enterprise as you develop the new skills. Remember to develop your marketing plan while starting the small enterprise.

CONCLUSION 
Globally, developed countries view farm diversification as a valuable strategy to deal with some of the current problems facing agriculture, together with the desire to keep their land and to maintain a steady income, these form part of the reasons they diversify from their traditional activities. Diversification can be seen to have both financial and environmental benefits for the farmer. Looking at the current climatic and economic conditions that farmers in developing countries like South Africa are faced with, my take is that farm diversification is not just an optional extra any more, but rather an essential part of a farmer’s future all over the world.

Publication: July 2019

Section: Pula/Imvula