Farm enterprise diversification promotes food security

Farm enterprise diversification is one of the responsive approaches to sustainable agriculture, and is a mechanism of promoting food security and food self-sufficiency.

According to Agribank’s technical advisor Erastus Ngaruka, agricultural production involves growing crops and rearing livestock to produce a range of commodities or end-products.

He said farm enterprise diversification is simply the practice of producing a range of commodities as opposed to a single commodity on farmland.

“Diversification constitutes the process of allocating farm resources or the factors of production such as land, labour and capital to different enterprises.”

This process identifies valuable or alternative enterprises that are expected to have a significant contribution to extra income generation, cost reduction or risk minimisation on the farm, amongst other benefits.

Ngaruka added that diversification is not only the introduction of another enterprise on the farm, but can also entail the production of different commodities from the existing enterprise.

For example, the options of diversification on one hand can be a combination of enterprises such as crop, cattle, chickens, wood, charcoal, aquaculture, horticulture, and/or agro-processing, whereas it could also be a combination of commodities from a single enterprise - for example, a cattle enterprise producing milk, beef, cheese, cream and butter.



Effective implementation

“Diversification is driven by factors such as climate change, changing consumer demand, technology, government policies and developmental activities, amongst others.”

According to Ngaruka, these factors exert pressure on agricultural productivity, thus influencing farmers to adjust or adopt responsive production systems or practices to ensure sustainability of their farm businesses.

During the decision-making process, a farmer should consider certain aspects and undertake important tasks required for the effective implementation of the proposed enterprise.

“It is important to base the decision on the type of contribution the enterprise will make to the existing farm business operations, the market opportunity and the potential and capacity of the available land or farm resources to support the additional enterprise.”

According to him, diversification starts with the identification of the need or market for the alternative enterprise or commodity. This is where a farmer should understand consumer demand.

This involves conducting market research, interacting with existing producers, institutions or role-players to understand the enterprise value chain, the production needs, and any other relevant information concerning the enterprise.

In the process, one should establish strong networks within that industry, he said.



Financing

Ngaruka highlighted that another important aspect to consider is the financing of the enterprise, the starting capital and all other costs associated with production operations.

“It is crucial to develop a realistic business plan, identifying financing options and to secure funding for the enterprise.”

A critical question to consider is whether the new enterprise will generate extra income at lower costs and risks when compared to the existing enterprise on the farm, he said.

“Introducing a new enterprise or commodity on the farm will be a challenging task since it may be a new experience for the farmer.”

Ngaruka added that adoption and adaptation may be slower in the beginning due to limited skills or technological challenges and there may be errors, while some of the objectives may take a long time to be achieved.

“It is therefore important to prepare for such and to explore appropriate corrective measures.”

He stressed that diversification should be an economic decision for the purpose of expanding income streams and spreading the risk of the farm business.