Farm Diversification - National Rural Network

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RURAL NETWORK
NRN Case Study
Farm Diversification

1. Introduction
The quality of life in rural areas and diversification of the rural economy is the main focus of measures
contained in Axis 3 (delivered through the LEADER programme by local development companies) of
the Rural Development Programme 2007-2013. The diversification of mainstream farm activities into
non-agricultural activities is an Axis 3 measure with the objective of stimulating and supporting the
diversification of farm assets. At farm level this translates into the mobilisation of farm fixed assets into nonagricultural
economic activity for economic gain by a member of the farm household.
This case study is prepared on behalf of the National Rural Network (NRN). The objective of this study is
to analyse farm diversification projects grant aided by Sligo Rural Development Partnership (SRDP) for the
purpose of highlighting and disseminating good practice within the Rural Development Programme.
2. Farm Diversification in Context
Farm diversification is concerned with improving the capacity of the farm, or farm resources, to meet
the immediate and future needs of the farm household 1 . This is achieved by widening the base of a
farm business to include all the non-agricultural uses that available resources can be put to, or through
any major changes in land use or level of production other than those related solely to agriculture.
Diversification may be further defined as the entrepreneurial use of farm resources for a non-agricultural
purpose for commercial gain 2 . This definition introduces the concept of entrepreneurship in diversification.
Historically the production base of most Irish farms was diversified, producing everything from a range of
cereals and root crops to livestock, pigs and poultry. Furthermore value was added to many products
inside the farm gate and the marketing function was performed by the farm family who were involved in
selling products such as potatoes, vegetables, butter and eggs to a local market. While these activities
were generally confined to agricultural produce, they still required the farmer to engage in entrepreneurial
activities and farm families possessed significant entrepreneurial skills.
When Ireland joined the EEC in 1973 the Common Agricultural Policy (CAP) shaped a rapid change in
farming practices from one of producing a range of diversified products to one of specialisation. With
specialisation came structured markets and farmers became highly specialised producers, often at the
cost of developing marketing and other entrepreneurial skills. While specialisation, linked to scale, is the
way forward for many farm businesses, farm families will need to explore new income sources outside of
mainstream agricultural production. The percentage of farm households with an off-farm job declined
from 58% in 2007 to 51% in 2010 3 . The data also indicates that the value of off-farm work to farm
households has also declined over the 2007-2009 period. This reflects both the loss of employment and
cuts to the salaries of those with off-farm jobs. As all economic indications are that these trends are likely
to continue for some time, an increasing number of farm households will need to examine internal farm
and personal resources with a view to generating the income needed to meet future household needs.
1
Meredith, D. 2011, Farm Diversification in Ireland, Research Volume 6: Number 1, Spring 2011, ISSN 1649-8917, Teagasc, Ashdown, Dublin 15.
2
Department of Environment, Food and Rural Affairs, UK.
3
National Farm Survey, 2011, Teagasc.

3. Rural Development Policy
From a policy perspective the stimulation and support of farm diversification is clearly enshrined in the
Rural Development Programme under the Axis 3 measure ‘Diversification into Non-Agricultural Activities’. A
total of €16.7 million of public funding has been allocated under this measure for the period 2007-2013.
When matched by 50% private funding it will represent an investment of €33 million. The main objective of
the measure is to “significantly increase the percentage of holdings where the fixed assets of the farm are
utilised in any non-agricultural activity by the farm household”.
Anecdotal evidence suggests that uptake under this measure is falling short of the targets outlined in the
RDP. According to Meredith (2011), 5,000 farms in Ireland had some form of on-farm diversified enterprise
in 2007 which equates to slightly less than 4% of farms in the country. This compares to 51% of English
farms with a diversified enterprise in the same year. While extraneous factors such as farm structure,
population densities and the availability or otherwise of industrial/commercial workspace in rural areas
may contribute to this variance, it may not be the full answer. Restriction on the availability of credit for
matching funding is also quoted anecdotally as a factor in the current climate.
4. Description of Case Studies
This study examines diversification on three farms across County Sligo (Drumcliff, Corballa, and Ballymote).
The families on these farms all demonstrated entrepreneurial initiative in the mobilisation of land, buildings,
labour, capital and individual enterprise.
The Branley family has been farming 81 acres in Drumcliffe since 1996. The farmhouse, (featured in
“Heritage Houses of Sligo”) and traditional out-buildings are of local stone. Michael worked as a carpenter
before coming home to join his father Chris in the business. Traditionally a suckler and sheep farm they
now keep a ewe flock, which Chris says is more suited to the soil type on the farm. Michael and Chris have
converted the traditional stone outhouses into 25 craft units operating under the brand name of ‘Branley’s
Yard’. The businesses in these units currently employ approximately thirty people. Michael and Chris plan to
open a coffee shop in 2012 and have planning permission for a farmers’ market and large car park. They
are also developing a nature walk from the yard down to the sea; the walk incorporates a ring fort and
geological feature. Michael and Chris were granted aid under the LEADER programme for converting the
buildings and hope to apply for a marketing grant in 2012.

Jonathan Reape and his father John farm 120 acres in Corbala. The Reapes traditionally farmed beef
cattle, sheep and horses. They gradually increased horse numbers dropping the beef enterprise but
retaining the sheep flock. According to Jonathan “sheep and horses go very well together, the sheep
clean up grassland after the horses”. Jonathan buys young horses, breaks and trains them and sells them
on, mostly to international customers in the show jumping market. John built an indoor arena to facilitate
working on the horses on a year-round basis and Jonathan joined his father in the business when he
finished secondary school. Jonathan identified a gap in the market for an outdoor show-jumping arena
built to international standards together with a clubhouse and associated facilities. “There is nowhere with
these facilities in the north-west; we have to go to places like Barnadown in Wexford to take part in events
and show our horses at this level”. Jonathan was grant-aided under the LEADER programme for the clubhouse,
viewing area and shower/toilet facilities.
Lothar Muschketat and his wife moved from Germany to Corbala where he purchased 67 acres of land
and set up the Irish Raptor Research Centre in 1999. Lothar, formally a zoology lecturer, keeps 350 birds
and animals including 75 species and specialising in birds of prey. The family welcomes visitors to the
centre where a live educational show is put on
twice a day from March to October. The centre,
with outdoor seating for 500 people (indoor 250),
operates under the brand name ‘Eagles Flying’
and received the accreditation of EU ZOO in
2007. The centre co-operates with international
zoos breeding endangered species for reintroduction
programmes and offers placements
to students in the discipline. Lothar received
funding under the LEADER programme on two
occasions for bird housing and toilet facilities.
All three examples have diversified the utilisation
of farm based resources for non-agricultural
commercial use. Lessons can be learned from
the experiences of all these families which
are relevant to a wider target group of farm
households.

5. Analysis of Outcomes
While several recurring themes emerged, individual practices were varied and reflected previous
behaviour and attitudes.
5.1 Motivation for Diversifying
Increasing income was a factor but
it was not the sole motivator; in fact
lifestyle preferences and previous
experiences were the main drivers. In
both Michael and Jonathan’s case
diversification was not a ‘major event’
but rather a gradual move from
traditional mainstream production
towards “something different”. In
Michael’s case his father Chris had
converted two of the outhouses into
accommodation units many years
previously. So as Michael put it, “the
seed had been sown”. Jonathan
had grown up around horses, had
developed a keen interest in the
business and had acquired relevant
knowledge and skills before any major
investment was undertaken. Both
businesses grew organically which
would suggest that previous knowledge and experience is a key success factor. While Lothar’s motivation
was primarily a lifestyle choice - “I’m not stressed out any more” - he did not perceive the venture to be a
hobby and displayed a keen sense of commercial awareness.
5.2 Entrepreneurship and Innovation
The French economist J.B. Say stated that ‘the entrepreneur shifts economic resources out of an area
of lower and into an area of higher productivity and greater yield’ 4 . In the examples presented, the
physical resources such as land and buildings were redeployed into the new ventures. All of the 25
craft units in Branley’s Yard were converted from existing outhouses and the plans to develop a nature
walk incorporating natural archaeological and geological features is further evidence of resource
redeployment. As stated by the Branleys, “the income from the units may be low but it’s still ten times
better than cattle”. All of Lothar’s land is employed in the business and a converted building is now an
indoor educational centre. From a resource employment perspective, all of the families involved were
behaving in an entrepreneurial fashion.
The concept of innovation and innovative behaviour is embedded in the guiding principles of the LEADER
approach. Innovation requires a unique product offering in a geographical area relevant to the market
for that product. All of the participants were offering a unique product mix in Sligo “we have clients in the
units from different parts of the country and some from other countries” and “there’s nothing in this part of
the country to attract international show jumpers”.
5.3 Marketing & Management
Word of mouth and understanding the needs of the clients (in the craft units) are both critical marketing
tools for Branleys; “the craft community is relatively small and word gets around, we treat our clients well
and make it as easy as possible for them…we always had a waiting list”. The market for the coffee shop
4
Drucker, P.F., (1996) Innovation and Entrepreneurship, Pubs. Butterworth-Heinemann, Linacre House, Jordan Hill, Oxford, OX2 8DP,
ISBN 0 7506 1908 2.

will be drawn from a passing trade and the proximity of Branley’s yard to Drumcliff (Yeats Visitor Centre) is
a major marketing advantage. Jonathan’s market is based on personal contacts and networking within
the industry but he is planning to apply for LEADER funding to draw up a marketing plan for the new facility.
The ‘Eagles Flying’ web site, a brochure and direct communication with incoming tour operators were
the tools Lothar used to communicate with the market. Management was not perceived as an issue as
numbers employed were low. Time management was, however, of some concern. All stress the important
role family members play in the management of their businesses.
5.4 Business Growth
All the participants anticipated business growth even in the current economic climate. Eagles Flying
employs six people full-time during the season. There are currently 30 people (mostly self-employed) in
Branley’s yard. Jonathan expects to generate significant economic activity in the local area on weekends
when events are taking place; “we expect to have up to 150 families at events here and that will generate
a lot of activity locally”.
5.5 Role of LEADER and the Rural Development Programme
Michael and Jonathan agreed that LEADER support was critical to the development of their businesses
and all stressed that the personnel they were dealing with were extremely helpful and informative.
However all found ‘the level of paperwork heavy going’. There was a belief that those evaluating projects
should have specialist knowledge of the project area or have the facility to consult with an advisor with
specific expertise. It can be a challenge for board members to understand the complexities of some
new innovations. Raising matching funding is an issue and some felt caught between the bank and the
agency; the bank will not approve a loan until grant approval is received and the agency will not approve
the grant until bank loan approval. Young farmers who might have good ideas may not have the tenacity
to cross funding hurdles and funding may be more accessible to business people who are experienced in
these processes.

6. Critical Success Factors
and Barriers
Personal characteristics of individual promoters contribute to the capacity of the household to redeploy
resources; these range from having a positive attitude, a strong work ethic, relevant previous
work experience and a ‘love of the work’. The fact that all participants had relevant experience outside
mainstream agricultural production is evidence of the role of such previous experience in the successful
establishment of a business of this nature.
Innovative aspects of the business enable a promoter to serve a gap in the market and avoid direct
competition. Innovation does not mean a brand new technology, product or service but some aspect of
the product or service must be new to the market in a geographic area.
Appropriate marketing and effective management is an important factor. Where the service is delivered
to a local market, location and proximity to a widely publicised visitor centre will contribute to the success.
Understanding customer needs as evidenced in the relationship with the craft clients is also a factor.
Understanding the nature and importance of marketing is critical to any new rural business. Effective
management is also important to long-term sustainability.
Institutional support is a significant success factor. Two participants cited the LEADER grant as a critical
factor in the establishment of the business while the third participant cited this as important but not critical.
This is evidence that seed funding such as LEADER funding is critical to the success of new diversified farm
businesses.
The main barriers to success identified were:
● The level of paperwork and bureaucracy involved in the grant application process. This was highlighted
as a particular barrier for many farmers.
● The lack of awareness of the importance of and knowledge of good marketing.
● The availability of bank credit for matching funding.
● In general terms the mindset of many farmers, fuelled by a lack of experience outside of mainstream
agricultural production, is a barrier to the establishment of diversified farm based enterprises.
● Increasing local authority charges as evidenced in relation to increased water rates.

7. Links to Rural Development
Programme
It is evident that linkages and complementarities do exist both vertically and horizontally at Axis level. While
some of these linkages are explicit others may be implied across the axes. All of the participants benefited
under the Farm Waste Management Scheme (or its predecessors). “The business opportunity here kind of
came about by accident; as a result of building the slatted shed, the old out-buildings became obsolete
and we wanted to do something with them. I had the idea for a long time but couldn’t do anything while
the cattle were in the yard”. When Jonathan Reape decided to join his dad in the equine business he
first completed the Teagasc Green Cert. “This was great because it helped me to realise that we had to
develop the horses if I was to make a living on this farm; a lot of the other lads on the course wanted to
carry on farming as usual”.
While Lothar Muschketat didn’t avail of any funding under the agri-environmental measure his organic
‘back to nature’ land management system is contributing to the objectives under this measure. “We’re
completely sustainable here, the sheep are our lawnmowers”. The Branleys hope to be eligible for some
funding for the development of the nature walk on their farm and this development will also support the
objectives of this measure. All participants are in the REPS scheme. It is valid to infer that farmers who
move into market led businesses will, by nature and necessity, become more competitive both in their
mainstream activities and in their diversified businesses and as these ventures increase it will significantly
increase overall competitiveness.
Horizontal complementarities were also identified within the Axis 3 measures. The main objective of the
Farm Diversification Measure is to increase the number of holdings where the farm assets are utilised in
non-agricultural activity for economic gain. The three diversification businesses examined in the study
comply directly with this objective as redeployment of resources is a requirement of diversification.
There are also direct linkages and complementarities between the diversification and business creation
measures.
There are opportunities for further linking farm diversification participants with, for example, County
Enterprise Boards (CEB) for follow-up small business management and marketing training and with
Chambers of Commerce. Anecdotal evidence would suggest that farmers who set up diversified
businesses feel isolated from both business networks and farming networks. All of the participant ventures
also display direct links with the rural tourism measure. Branley’s Yard is directly linked into the local
tourism market and contributes significantly to the ‘bundle of tourism services’ available to tourists in that
geographic area. ‘Eagles Flying’ and Jonathan Reape’s show jumping facility are also both contributing
to the tourist market in their respective areas. Unlike Branley’s Yard both of these businesses are operating
in remote areas away from any tourist ‘hot spot’. This implies that more intensive efforts will be required to
communicate with their target market. The study also identified direct links between Branley’s Yard, with
its sensitively restored farm buildings and the objectives set out under the rural heritage measure. The
proposed nature walk will further feed into this objective.
It is evident from this study that there are both internal and external linkages and complementarities at
Axes level. This in turn confirms that there are potential synergies within the programme.

8. Lessons Learned and Conclusions
Due to the increasing role of economies of scale in mainstream farming combined with a reduction in
off-farm employment opportunities, many farm households will need to explore new ways of employing
farm assets if they wish to continue to operate their farms and enjoy a rural lifestyle. Funding allocated
under the Farm Diversification Measure acts as a stimulus to this type of development in rural areas and
offers significant, and often critical support to the farm household in its endeavour to diversify. Farmers who
move into market-led businesses will, by nature and necessity, become more competitive both in their
mainstream activities and in their diversified businesses and as the number of these ventures increase it will
significantly increase competitiveness in the sector and in the rural economy.
Previous experience was identified as a factor in the successful establishment and growth of a diversified
business. The study findings indicate that those with work experience, relevant to the new venture, either
inside or outside the farm are more likely to venture than those who lack this experience. The household’s
perception of risk will be heightened if no member has any experience other than mainstream production.
This risk may be moderated by targeted training, exposure to farm diversification such as field trips to
diversified farms and discussions with farm based entrepreneurs.
The study also identified the importance of entrepreneurial characteristics and abilities in the successful
establishment and growth of a diversified business. Characteristics such as having a positive attitude,
self-belief, strong work ethic, commitment and determination were all evident in the study. Abilities to be
innovative, identify market opportunities and re-deploy and mobilise the necessary resources to establish
and build a business were likewise evidenced in the study.
Word of mouth, personal contacts, location exploitation and limited use of print and web based media
were the main marketing tools employed. Market research was conducted by obtaining feedback from
clients/visitors. Two of the three promoters planned to seek funding towards the preparation of marketing
plans and materials. It is clear from discussions that more knowledge and expertise was needed in the
marketing of their businesses, though even in the current economic climate all promoters expected to
grow their business and envisage positive downstream effects on other economic activity in their areas.
While LEADER funding was a very important factor in the establishment of the businesses there was a
strong belief that the ‘level of paperwork’ involved was both onerous and time consuming and should
be simplified while still assuring accountability and good practice. All of the promoters emphasised the
helpful role played by the LEADER representatives throughout the process. It was, however, suggested that
Board members should have access to specialist knowledge in the project area when making funding
decisions.

9. Recommendations
While this study identified some of the factors that inhibit the uptake of funding under the Farm
Diversification Measure, more research should be conducted to examine: projects/promoters that received
funding but whose businesses were ultimately unsuccessful; unsuccessful funding applicants; and those
that have never applied. This research would identify barriers at both conceptual and application stages,
clarify those factors that contribute to success and contribute to building a profile of the ‘successful farmbased
entrepreneur’.
There is a need for more business and enterprise training for farm household members to encourage them
in the adoption process. Training courses and seminars contribute to the stimulation of awareness and
interest in diversifying. Field trips and discussions encourage trial and, if other factors are favourable, can
lead to adoption.
It is critical that LEADER staff and those serving on evaluation committees have, or have access to,
knowledge and expertise relating directly to the specific project being evaluated. This could minimise the
risk of failure while at the same time ensuring that innovative proposals do not slip through un-supported
due to a lack of understanding of the specific context. There is a case for facilitating project promoters,
particularly of large projects, to make a presentation to an evaluation committee or an individual with
relevant expertise in the specific sector, in order to demonstrate their capacity to deliver the project.
Farm based businesses need the same management, marketing and training support as other business
start-ups, since many promoters don’t appreciate the value of a professional marketing approach in a
competitive market environment. In this context there are opportunities for linking applicants under the
Farm Diversification Measure with, for example, County Enterprise Boards (CEBs) for follow-up small business
management and marketing training to sharpen promoter’s marketing and management skills. Links should
also be established with Chambers of Commerce as anecdotal evidence suggests that farmers who set
up diversified businesses can feel isolated from both their original farming networks and from business
networks.
There is a need for regular and consistent examination and analysis of the systems and procedures
involved in the grant application process. It is accepted that there must be complete accountability
but efforts should be made to devise a more user-friendly and paperless process while still meeting
accountability requirements. Staff that interact directly with project promoters should be involved in
consultative processes on optimising delivery of the programme
If the objectives stated in the RDP in relation to farm and rural economic diversification are to be achieved
in the longer term, then it is of great importance that this measure is replicated, even if with modifications,
in any future Rural Development Programme.
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This case study was prepared for the NRN by Ms Lily Mulhall.
Editing was undertaken by Mr Ciaran Lynch and Dr Pat Bogue, NRN.
For further information, contact nrn@lit.ie