Oct 1, 2017

Old MacDonald had a farm — and now he needs to diversify

Of all the entrepreneurs who worry about the impact of Brexit on their businesses, farmers could have the most to lose. About 40% of the EU’s total budget, roughly €59bn (£52bn), is devoted to the common agricultural policy, which subsidises farming. Yet many British farmers voted to leave the EU. So what are they going to do when we do depart?The obvious answer is that farmers must diversify. Producing the same things they have for decades is not guaranteed to succeed. The average English farm receives almost £25,000 in taxpayer handouts every year. Without this, many would make a net loss. The government may decide to carry on subsidising the sector, but the sums its gives are likely to diminish. So our 57,000 farms will have to evolve their businesses.

Already almost two-thirds of farms derive some revenue from non-agricultural sources. The most common activity is letting spare property or developing it for sale. The second most popular form of diversification is renewable energy, but the processing and sale of farm produce on site actually produces more profit.

Perhaps the best- known example of this in recent times is William Chase, who is based in Herefordshire, near where I have land. He created Tyrrells Crisps in 2002 using potatoes rejected by supermarkets, having gone bankrupt earlier in his career. He sold the company in 2008 for £30m. Today Chase makes Chase Vodka and Williams Gin at his own distillery, again using English spuds.

There are plenty of other ways to branch out beyond traditional arable and livestock activities. Farmers are growing more unusual hops to supply the booming craft beer industry, for example, and planting apple orchards to produce their own organic cider. They are producing unusual livestock — Catanger Farm in Northamptonshire breeds llamas for pets and for trekking. In Devon, Wilfred Emmanuel-Jones has developed the highly successful Black Farmer brand, which sells sausages, burgers, chicken and more.

Farmers must make better use of their huge land holdings. Many are asset rich but generate poor returns from their property. Alternative uses, such as leisure, tourism and hospitality, should be considered. For example, the Wickerman Festival at East Kirkcarswell Farm in Scotland ran for 14 years, regularly welcoming 20,000 people over a weekend. And, of course, the most famous music festival in Britain has been hosted by the Eavis family on their farm near Glastonbury since 1970 and now generates about £40m of revenue a year.

New Zealand’s farmers faced a similar situation to Brexit in 1973, when tariffs shut the country out of the British market after we joined the EEC. Over time, New Zealand slashed subsidies and regulations, and its farmers became much more global in their approach.

It now accounts for half the world trade in sheep and one third in dairy. The country has become highly efficient, and follows the market, using technology to increase productivity. New sectors such as wine production have boomed. New Zealand focused on quality and its relative strengths, and hugely expanded its trade with China.

The range of innovative start-ups appearing on Britain’s farms is astonishing. From caravan parks to kennels, farm shops, bed and breakfasts, cookery schools, wedding venues, shooting estates, green burial grounds, natural beauty products, niche food makers, breweries and vineyards, there are many dozens of possible sectors and uses to which farms can be put.

Some ventures will require capital and planning permissions, but not all. Of course, such undertakings are not without risk – and many farms are in isolated areas where tourism is a non-starter.

Escaping the common agricultural policy was one reason why I supported leaving the EU. By ignoring the laws of supply and demand, it leads to vast waste and the mismanagement of taxpayer and rural resources, while requiring an enormous bureaucracy to administer.

Much of the subsidy is funnelled to the biggest European landowners: about 80% of aid goes to 20% of farmers and it props up inefficient farms, which leads to higher food prices for consumers.

While visiting Italy on buying trips for restaurants I’ve owned, I saw how the system was abused by wealthy farmers. Like all massive state interventions, it produces distortions and perverse outcomes.

Most farms are traditional, family concerns and pretty conservative. It will not be easy for lots of them radically to reinvent their businesses. They are also stewards of the countryside, but even with subsidies, plenty of smallholders have been struggling for some time anyway. Reform is required.

Farmers need to emphasise their local, British credentials, their provenance and authenticity. Different crops, new foods and drinks, new business models are called for.

Let’s hope a new generation of farmers seizes the opportunities and innovates.