Agricultural diversification

Last updated April 03, 2022

In the agricultural context, diversification can be regarded as the re-allocation of some of a farm's productive resources, such as land, capital, farm equipment and labour to other products and, particularly in richer countries, to non-farming activities such as restaurants and shops. Factors leading to decisions to diversify are many, but include: reducing risk, responding to changing consumer demands or changing government policy, responding to external shocks and, more recently, as a consequence of climate change.

Definitions of diversification

Agricultural diversification can involve movement of resources from low-value commodities to high-value ones. It focuses mainly on horticultural, dairy, poultry and fisheries sectors. While most definitions of diversification in developing countries do work on the assumption that diversification primarily involves a substitution of one crop or other agricultural product for another, or an increase in the number of enterprises, or activities, carried out by a particular farm, the definition used in developed countries sometimes relates more to the development of activities on the farm that do not involve agricultural production. For example, one section of the British Department for Environment, Food and Rural Affairs (DEFRA) defines diversification as “the entrepreneurial use of farm resources for a non-agricultural purpose for commercial gain”. Using this definition DEFRA found that 56% of UK farms had diversified in 2003. The great majority of diversification activities simply involved the renting out of farm buildings for non-farming use, but 9% of farms had become involved with processing or retailing, 3% with provision of tourist accommodation or catering, and 7% with sport or recreational activities.^[1] Others adopt a broader definition, which may include development of new marketing opportunities.^[2]

In developing countries such as India, which has been one of the leaders in promoting diversification, the concept is applied both to individual farmers and to different regions, with government programmes being aimed at promoting widespread diversification. The concept in India is seen as referring to the “shift from the regional dominance of one crop to regional production of a number of crops ...... (which takes into account)..... the economic returns from different value-added crops... with complementary marketing opportunities”.^[3]

Drivers of diversification

Diversification can be a response to both opportunities and threats.

Opportunities

Changing consumer demand. As consumers in developing countries have become richer, food consumption patterns have changed noticeably. People have moved away from a diet based on staples to one with a greater content of animal products (meat, eggs, and dairy) and fruits and vegetables. In turn, more dynamic farmers are able to diversify to meet these needs. There is a possibility that this trend will be reversed in future given increasing consumer concern about the environmental impact of meat production.^[4]
Changing demographics. Rapid urbanization in developing countries affects consumption patterns. Moreover, a smaller number of farmers, in percentage terms at least, has to supply a larger number of consumers. While this may not imply diversification it does require adaptation to new farming techniques to meet higher demand.
Export potential. Developing country farmers have had considerable success by diversifying into crops that can meet export market demand. While concern about food miles, as well as the cost of complying with supermarket certification requirements such as for GlobalGAP may jeopardize this success in the long run, there remains much potential to diversify to meet export markets.
Adding value. The pattern witnessed in the West, and now becoming widespread in developing countries, is for consumers to devote less and less time to food preparation. They increasingly require ready-prepared meals and labour-saving packaging, such as pre-cut salads. This provides the opportunity for farmers to diversify into value addition, particularly in countries where supermarkets play a major role in retailing.
Changing marketing opportunities. The changing of government policies that control the way in which farmers can link to markets can open up new diversification possibilities. For example, in India, policy changes to remove the monopoly of state “regulated markets” to handle all transactions made it possible for farmers to establish direct contracts with buyers for new products.^[5]
Improving nutrition. Diversifying from the monoculture of traditional staples can have important nutritional benefits for farmers in developing countries.

Threats

Urbanization. This is both an opportunity and a threat, in that the expansion of cities places pressure on land resources and puts up the value of the land. If farmers are to remain on the land they need to generate greater income from that land than they could by growing basic staples. This fact, and the proximity of markets, explains why farmers close to urban areas tend to diversify into high-value crops.
Risk. Farmers face risk from bad weather and from fluctuating prices. Diversification is a logical response to both. For example, some crops are more drought-resistant than others, but may offer poorer economic returns. A diversified portfolio of products should ensure that farmers do not suffer complete ruin when the weather is bad. Similarly, diversification can manage price risk, on the assumption that not all products will suffer low prices at the same time. In fact, farmers often do the opposite of diversification by planting products that have a high price in one year, only to see the price collapse in the next, as explained by the cobweb theory.
External threats. Farmers who are dependent on exports run the risk that conditions will change in their markets, not because of a change in consumer demand but because of policy changes. A classic example is the Caribbean banana industry, which collapsed as a result of the removal of quota protection on EU markets, necessitating diversification by the region's farmers.
Domestic policy threats. Agricultural production is sometimes undertaken as a consequence of government subsidies, rather than because it is inherently profitable. The reduction or removal of those subsidies, whether direct or indirect, can have a major effect on farmers and provide a significant incentive for diversification or, in some cases, for returning to production of crops grown prior to the introduction of subsidies.
Climate change. The type of crop that can be grown is affected by changes in temperatures and the length of the growing season. Climate change could also modify the availability of water for production. Farmers in several countries, including Canada, India, Kenya, Mozambique, and Sri Lanka have already initiated diversification as a response to climate change. Government policy in Kenya to promote crop diversification has included the removal of subsidies for some crops, encouraging land-use zoning and introducing differential land tax systems.^[6]

Opportunities for diversification

In making decisions about diversification farmers need to consider whether income generated by new farm enterprises will be greater than the existing activities, with similar or less risk. While growing new crops or raising animals may be technically possible, these may not be suitable for many farmers in terms of their land, labour and capital resources. Moreover, markets for the products may be lacking. The United Nations Food and Agriculture Organization (FAO) has been one of the development organizations promoting diversification by small farmers and has produced booklets identifying beekeeping, mushroom farming, milk production, fish ponds and sheep and goats, among others, as diversification possibilities.^[7]

Measures of diversification

Agricultural diversification is measured in a number of ways throughout the world. For example, one such measure is the index of maximum proportion, which is "defined as the ratio (proportion) of the farm's primary activity to its total activities".^[8]

Related Research Articles

Agriculture is the practice of cultivating plants and livestock. Agriculture was the key development in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that enabled people to live in cities. The history of agriculture began thousands of years ago. After gathering wild grains beginning at least 105,000 years ago, nascent farmers began to plant them around 11,500 years ago. Pigs, sheep, and cattle were domesticated over 10,000 years ago. Plants were independently cultivated in at least 11 regions of the world. Industrial agriculture based on large-scale monoculture in the twentieth century came to dominate agricultural output, though about 2 billion people still depended on subsistence agriculture.

Farmer Person engaged in agriculture, raising living organisms for food or raw materials

A farmer is a person engaged in agriculture, raising living organisms for food or raw materials. The term usually applies to people who do some combination of raising field crops, orchards, vineyards, poultry, or other livestock. A farmer might own the farmed land or might work as a laborer on land owned by others, but in most developed economies, a farmer is usually a farm owner, while employees of the farm are known as farm workers, or farmhands. However, in other older definitions a farmer was a person who promotes or improves the growth of plants, land or crops or raises animals by labor and attention.

Organic farming is an agricultural system that uses fertilizers of organic origin such as compost manure, green manure, and bone meal and places emphasis on techniques such as crop rotation and companion planting. It originated early in the 20th century in reaction to rapidly changing farming practices. Certified organic agriculture accounts for 70 million hectares globally, with over half of that total in Australia. Organic farming continues to be developed by various organizations today. Biological pest control, mixed cropping and the fostering of insect predators are encouraged. Organic standards are designed to allow the use of naturally-occurring substances while prohibiting or strictly limiting synthetic substances. For instance, naturally-occurring pesticides such as pyrethrin are permitted, while synthetic fertilizers and pesticides are generally prohibited. Synthetic substances that are allowed include, for example, copper sulfate, elemental sulfur and Ivermectin. Genetically modified organisms, nanomaterials, human sewage sludge, plant growth regulators, hormones, and antibiotic use in livestock husbandry are prohibited. Organic farming advocates claim advantages in sustainability, openness, self-sufficiency, autonomy and independence, health, food security, and food safety.

The Common Agricultural Policy (CAP) is the agricultural policy of the European Union. It implements a system of agricultural subsidies and other programmes. It was introduced in 1962 and has undergone several changes since then to reduce the cost and to also consider rural development in its aims. It has, however, been criticised on the grounds of its cost, and its environmental and humanitarian effects.

Agricultural policy describes a set of laws relating to domestic agriculture and imports of foreign agricultural products. Governments usually implement agricultural policies with the goal of achieving a specific outcome in the domestic agricultural product markets.

An agricultural subsidy is a government incentive paid to agribusinesses, agricultural organizations and farms to supplement their income, manage the supply of agricultural commodities, and influence the cost and supply of such commodities. Examples of such commodities include: wheat, feed grains, cotton, milk, rice, peanuts, sugar, tobacco, oilseeds such as soybeans and meat products such as beef, pork, and lamb and mutton.

Agricultural productivity is measured as the ratio of agricultural outputs to inputs. While individual products are usually measured by weight, which is known as crop yield, varying products make measuring overall agricultural output difficult. Therefore, agricultural productivity is usually measured as the market value of the final output. This productivity can be compared to many different types of inputs such as labour or land. Such comparisons are called partial measures of productivity.

A cash crop or profit crop is an agricultural crop which is grown to sell for profit. It is typically purchased by parties separate from a farm. The term is used to differentiate marketed crops from subsistence crops, which are those fed to the producer's own livestock or grown as food for the producer's family. In earlier times cash crops were usually only a small part of a farm's total yield, while today, especially in developed countries and among smallholders almost all crops are mainly grown for revenue. In the least developed countries, cash crops are usually crops which attract demand in more developed nations, and hence have some export value.

Trade can be a key factor in economic development. The prudent use of trade can boost a country's development and create absolute gains for the trading partners involved. Trade has been touted as an important tool in the path to development by prominent economists. However trade may not be a panacea for development as important questions surrounding how free trade really is and the harm trade can cause domestic infant industries to come into play.

Agribusiness refers to the enterprises, the industry, the system, and the field of study of the interrelated and interdependent value chains in agriculture and bio-economy. The primary goal of agribusiness is to maximize profit while sustainably satisfying the needs of consumers for products related to natural resources such as biotechnology, farms, food, forestry, fisheries, fuel, and fiber — usually with the exclusion of non-renewable resources such as mining.

The food industry is a complex, global network of diverse businesses that supplies most of the food consumed by the world's population. The term food industries covers a series of industrial activities directed at the production, distribution, processing, conversion, preparation, preservation, transport, certification and packaging of foodstuffs. The food industry today has become highly diversified, with manufacturing ranging from small, traditional, family-run activities that are highly labor-intensive, to large, capital-intensive and highly mechanized industrial processes. Many food industries depend almost entirely on local agriculture, produce, or fishing.

A smallholding or smallholder is a small farm operating under a small-scale agriculture model. Definitions vary widely for what constitutes a smallholder or small-scale farm, including factors such as size, food production technique or technology, involvement of family in labor and economic impact. Smallholdings are usually farms supporting a single family with a mixture of cash crops and subsistence farming. As a country becomes more affluent, smallholdings may not be self-sufficient, but may be valued for the rural lifestyle. As the sustainable food and local food movements grow in affluent countries, some of these smallholdings are gaining increased economic viability. There are an estimated 500 million smallholder farms in developing countries of the world alone, supporting almost two billion people.

Agriculture in the United Kingdom uses 69% of the country's land area, employs 1.5% of its workforce and contributes 0.6% of its gross value added. The UK produces less than 60% of the food it consumes.

The term food system describes the interconnected systems and processes that influence nutrition, food, health, community development and agriculture. A food system includes all processes and infrastructure involved in feeding a population: growing, harvesting, processing, packaging, transporting, marketing, consumption, distribution and disposal of food and food-related items. It also includes the inputs needed and outputs generated at each of these steps. Food systems fall within agrifood systems, which encompass the entire range of actors and their interlinked value-adding activities in the primary production of food and non-food agricultural products, as well as in food storage, aggregation, post-harvest handling, transportation, processing, distribution, marketing, disposal and consumption. A food system operates within and is influenced by social, political, economic, and environmental contexts. It also requires human resources that provide labor, research and education. Food systems are either conventional or alternative according to their model of food lifespan from origin to plate.

Agricultural marketing Process of moving agricultural products from the farm to the consumer

Agricultural marketing covers the services involved in moving an agricultural product from the farm to the consumer. These services involve the planning, organizing, directing and handling of agricultural produce in such a way as to satisfy farmers, intermediaries and consumers. Numerous interconnected activities are involved in doing this, such as planning production, growing and harvesting, grading, packing and packaging, transport, storage, agro- and food processing, provision of market information, distribution, advertising and sale. Effectively, the term encompasses the entire range of supply chain operations for agricultural products, whether conducted through ad hoc sales or through a more integrated chain, such as one involving contract farming.

Farm programs can be part of a concentrated effort to boost a country’s agricultural productivity in general or in specific sectors where they may have a comparative advantage. There are many different types of farm programs, with a variety of objectives and created with different economic mechanisms in mind. Some are meant to benefit farmers directly, while others seek to benefit consumers. They target food prices and quantity of food available on the market, as well as production and consumption of certain goods. Some are meant to benefit farmers directly, while others seek to benefit consumers. They target food prices and quantity of food available on the market, as well as production and consumption of certain goods.

In feminist economics, the feminization of agriculture refers to the measurable increase of women's participation in the agricultural sector, particularly in the developing world. The phenomenon started during the 1960s with increasing shares over time. In the 1990s, during liberalization, the phenomenon became more pronounced and negative effects appeared in the rural female population. Afterwards, agricultural markets became gendered institutions, affecting men and women differently. In 2009 World Bank, FAO & IFAD found that over 80 per cent of rural smallholder farmers worldwide were women, this was caused by men migrating to find work in other sectors. Out of all the women in the labor sector, the UN found 45-80% of them to be working in agriculture

Contract farming involves agricultural production being carried out on the basis of an agreement between the buyer and farm producers. Sometimes it involves the buyer specifying the quality required and the price, with the farmer agreeing to deliver at a future date. More commonly, however, contracts outline conditions for the production of farm products and for their delivery to the buyer's premises. The farmer undertakes to supply agreed quantities of a crop or livestock product, based on the quality standards and delivery requirements of the purchaser. In return, the buyer, usually a company, agrees to buy the product, often at a price that is established in advance. The company often also agrees to support the farmer through, e.g., supplying inputs, assisting with land preparation, providing production advice and transporting produce to its premises. The term "outgrower scheme" is sometimes used synonymously with contract farming, most commonly in Eastern and Southern Africa. Contract farming can be used for many agricultural products, although in developing countries it is less common for staple crops such as rice and maize.

Digital agriculture, sometimes known as smart farming or e-agriculture, is tools that digitally collect, store, analyze, and share electronic data and/or information in agriculture. The Food and Agriculture Organization of the United Nations has described the digitalization process of agriculture as the digital agricultural revolution. Other definitions, such as those from the United Nations Project Breakthrough, Cornell University, and Purdue University, also emphasize the role of digital technology in the optimization of food systems.

Climate-smart agriculture (CSA) is an integrated approach to managing landscapes to help adapt agricultural methods, livestock and crops to the effects of climate change and, where possible, counteract it by reducing greenhouse gas emissions, at the same time taking into account the growing world population to ensure food security. Thus, the emphasis is not simply on sustainable agriculture, but also on increasing agricultural productivity. "CSA ... is in line with FAO’s vision for Sustainable Food and Agriculture and supports FAO’s goal to make agriculture, forestry and fisheries more productive and more sustainable".

References

↑ Diversification in Agriculture (PDF) (Report). DEFRA. Archived from the original (PDF) on June 9, 2007.
↑ "Agricultural Diversification and Market Development Bureau". Iowa Department of Agriculture and Land Stewardship. Archived from the original on December 14, 2009.
↑ Aradhana Singh (2009). "Diversification in agriculture". In Cutler J. Cleveland (ed.). Encyclopedia of Earth. Lakhdar Boukerrou and Michelle Miller (Topic Editors). Washington, D.C.: Environmental Information Coalition, National Council for Science and the Environment. Archived from the original on June 21, 2010. [First published in the Encyclopedia of Earth November 18, 2009; Last revised November 18, 2009; Retrieved June 20, 2010]
↑ Cameron, James; Cameron, Suzy Amis. "Animal agriculture is choking the Earth and making us sick. We must act now". The Guardian. Retrieved 30 October 2019.
↑ Birthal, Pratap Singh, Joshi, P. K., Roy, Devesh, and Thorat, Amit. Diversification in Indian agriculture towards high-value crops . International Food Policy Research Institute, Washington, D.C. (2007).
↑ United Nations Framework Convention on Climate Change, Risk management approaches to address adverse effects of climate change- Economic diversification
↑ FAO
↑ Culas, Richard and Mahendrarajah Causes of Diversification in Agriculture over Time: Evidence from Norwegian Farming Sector, 2005. (Retrieved on 2011-9-27)

External links

Agricultural Research Service - contributes to maintaining agricultural diversity through research
FAO Diversification Booklets

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[1] Diversification in Agriculture (PDF) (Report). DEFRA. Archived from the original (PDF) on June 9, 2007.

[2] "Agricultural Diversification and Market Development Bureau". Iowa Department of Agriculture and Land Stewardship. Archived from the original on December 14, 2009.

[3] Aradhana Singh (2009). "Diversification in agriculture". In Cutler J. Cleveland (ed.). Encyclopedia of Earth. Lakhdar Boukerrou and Michelle Miller (Topic Editors). Washington, D.C.: Environmental Information Coalition, National Council for Science and the Environment. Archived from the original on June 21, 2010. [First published in the Encyclopedia of Earth November 18, 2009; Last revised November 18, 2009; Retrieved June 20, 2010]

[4] Cameron, James; Cameron, Suzy Amis. "Animal agriculture is choking the Earth and making us sick. We must act now". The Guardian. Retrieved 30 October 2019.

[5] Birthal, Pratap Singh, Joshi, P. K., Roy, Devesh, and Thorat, Amit. Diversification in Indian agriculture towards high-value crops . International Food Policy Research Institute, Washington, D.C. (2007).

[6] United Nations Framework Convention on Climate Change, Risk management approaches to address adverse effects of climate change- Economic diversification

[7] FAO

[8] Culas, Richard and Mahendrarajah Causes of Diversification in Agriculture over Time: Evidence from Norwegian Farming Sector, 2005. (Retrieved on 2011-9-27)

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