A number of farming clients have diversified or introduced new enterprises to their main business.  This has normally taken place to create an alternative income stream and perhaps utilize staff, buildings and machinery.

A number of the diversification activities, such as holiday lets, wedding venues and livery yards have been a success and, perhaps in some areas, there is still a market for this type of diversification.  There is still an opportunity for businesses to research other income streams and this is something we are getting more and more involved with for our farming clients.

Contract rearing has become a popular enterprise.  Examples of this would include free range chickens, broilers, contract calf, beef and pig rearing.  These contracts can be arranged in many ways, sometimes with the farmer purchasing and rearing the livestock or alternatively the farmer only paying for equipment and food.

By way of an example, I recently visited Bowler Eggs to investigate their offering to new customers and the returns available.  In summary, the chicken flock produce laying eggs over a period of 14 months and generate an estimated gross margin of £7.67 per bird. Water, electric, insurance, bedding and sundries are estimated at £1.80 per bird and labour of £2 per bird.  When taking these costs from the gross margin, this generates a profit of £3.87 per bird for a 14 month period, (£3.32 per bird over 12 months).

A 12,000 bird system would cost £400,000 and it is estimated that a 16,000 bird system would cost £520,000.  Based on £3.32 per bird profit per annum, a 16,000 bird system will create an overall profit of £53,000 per annum (before finance), which will create a return on capital of 10% and payback of almost 10 years.

The above enterprise has a high investment cost, but alternatively, a calf rearing enterprise, where the calves are contract reared and not owned by the rearer, would have a minimal investment cost especially if the buildings were already available.

The manure provided by a number of these systems has benefits, especially if the business is mainly arable.  This can have long term benefits from improved soil nutrients and organic matter and as a result the potential to increase yield.

With commodity prices continuing to remain low, it is important businesses consider their overall profitability and now may be the time to consider alternative income streams, which could utilise labour, cereals or buildings and generate a regular income to support the business.

For further information or for help and guidance with diversification potential for your business please contact George at georgedrewett@fcgagric.com or your local FCG office.