By Nick Dunn
With the latest trends in the agricultural industry, awareness towards diversification has been increasing amongst producers. Diversification is a risk management tool used in many industries that involves investing in different assets to minimize the overall risk of the investment portfolio. As the saying goes, “don’t put all your eggs in one basket” is a clear defining reason as to why diversification can help improve the economic prosperity of the operation. Having all your eggs in one basket can make your business vulnerable to risks and market disruptions that can affect a particular product or service that you may be marketing. Diversifying into many markets will help farming operations achieve long-term sustainability. One of the main reasons we see farms diversifying today in my opinion is to generate more revenue streams. Especially with the latest trends, we are starting to see fewer but much larger farms, which has led to increased competition and land prices.
For the producers, one common diversification method used is growing specialty crops within their crop rotation. Some of the specialty crops in our area have been hemp, triticale, beans, silage corn, peas, and lentils. During my time at Olds College, we went on a farm tour to a carrot farm near Bowden. They had a great succession story when they took over their family’s grain and oilseed farm and diversified it into producing carrots and other specialty crops typically not grown in Alberta on a large scale. The farm wasn’t big enough to support their families’ financial needs and they couldn’t afford to purchase more land. So, they had to better utilize their main asset. They invested in some new equipment and now have over 30 years of producing sweet carrots and other crops including cole crops, beets, dill, parsnips, peppers, eggplant, and other produce. Another common way we see diversification within farming operations is value added marketing like organic production. Value added can be anything that will add value to your product through production, processing, packaging, and even branding. It has been proven that consumers are willing to pay more for products if they know how, where, and when it was produced. Consumers are also willing to pay more if they know who has produced it, which opens doors to another diversifying opportunity and that is direct marketing. We are very fortunate that we have many producers in Flagstaff County that have chosen to market their products directly as a way of diversifying. Many local products can be found on the Flagstaff Crafted website at www.flagstaffcrafted.ca.
In local cattle production, diversification has been very important because of a poor return on beef livestock sold at auction. Prices of inputs have risen exponentially, while the dollar-per-pound figure has stayed relatively constant. Some diversification strategies include value added and direct marketing including changing/adding different types of livestock to production, a change in production entirely (cow-calf, backgrounding stock, feedlot production, etc.), and organic or grass-fed beef.
Diversification can also open opportunities to be a service provider. There are many farming operations that offer custom services with their equipment to generate more revenue to help pay for the high costs of equipment needed to operate on their own farm. This can include anything from being an agronomist to offering transportation services once the crop is off. Of course, this needs to be balanced so it doesn’t affect your own operations. For some producers, unfortunately, our economy has led them to find a source of off-farm income, which is not diversification. There are many ways that farms can diversify, and this can help offset the trend of fewer but larger farms and competition that comes with it.
Nick Dunn is Flagstaff County’s Agricultural Fieldman. He can be reached via email at: email@example.com or by phone at: 780-384-4138.