AUBURN, Ala.— Farm diversification is an important farm management practice producers use to maximize profits and reduce risks.
What is Farm Diversification?
Diversification is “the attempt to capture market gains and reduce risk by having multiple enterprise opportunities as part of my business plan,” said Ken Kelley, a regional farm and agribusiness management agent with the Alabama Cooperative Extension System. Kelley said diversification is important because it spreads the risk of crop failures and market fluctuations over multiple enterprises.
Ingram began diversifying his operation when the peanut quota program dissolved. This allowed him to expand his cotton production to peanuts.
“Through diversification, producers may be able to lessen the impact of environmental and market pressures,” said Kelley.
Mitch Lazenby, a producer in Auburn, Alabama, said that diversification helps him continue to be relevant and ahead of the curve in agriculture. He has an extensive row crop program, a cow-calf operation, a bull development program and hosts different agritourism events.
Most producers have a primary enterprise, such as row crops. “Diversifying is worth careful consideration because it supplements the income generated from the primary enterprise,” Lazenby added.
Best Ways to Diversify
“Every farm is different. The different goals and needs of each farm makes choosing how to diversify different for each producer.” Kelley said.
Row crop producers will typically add different crops to their rotation and livestock producers will add complementary livestock species to reduce risk.
“It is important to remember that diversification doesn’t mean just growing different things,” said Kelley. “Diversification means reducing risk. Producers can increase profit opportunities by choosing enterprises that have different production and marketing structures in order to avoid natural disasters, disease threats, and market fluctuations.”
Lazenby suggests looking to mentors and neighbors for new ideas and to constantly look for new ways to diversify.
Too Much of a Good Thing
A producer can over diversify or under diversify their operation.
“Producers should evaluate the sustainability of their operation as it exists and consider new opportunities as they arise,” Kelley said. But Lazenby believes that it is more advantageous to improve current enterprises instead of adding too much. Diversification should be part of the business plan from the beginning.
There are opportunities for diversification of just about any agricultural operation. Kelley said each one is different and each producer has to decide what is best for the