How farm diversification can hold the key to long term stability

8th August 2017

The UK farming sector is currently experiencing a great period of uncertainty, with market prices volatile against a backdrop of political discussions as we move to exit the European Union. Farmers are working harder than ever, and worried about their future and how economic and political factors will impact their business. We look into a client case study to determine how farm diversification can benefit UK farmers.

Straw Pelleting Plant

“Sustainability is the fundamental goal for all farmers currently”, explains Pip Robson, who owns an arable farm in Chathill, Alnwick with over 1,000 acres and a herd of 80 Aberdeen Angus suckler cows. Alongside the main farm business, Pip also runs a large arable and groundworks contracting business. “There is so much market instability now with beef and grain sales, and I realised just how dependent my business is on external changes outside of my control, especially farm subsidy payments. I needed another enterprise that would increase profitability and, crucially, sustainability as well as help to support an increase in employment in the local area.”

Pip’s enterprise brainwave was to install a straw pelleting plant at the farm. “The idea was to increase the value of a bi product from the arable enterprise; straw,” said Pip. “The processing line works by initially chopping the straw before shredding it further through a hammer mill. This grinds the straw into the required length for pelletising. The straw then goes through a filtration system to remove dust to leave the product completely dust free. The straw then goes through the pelletiser, before being bagged into 500kg or 15kg bags. Predominately, the pellets are marketed for horse and pet bedding, but can also be used for bio-fuel as an alternative to wood pellets.”

To get his new idea off the ground, and diversify his main farm business successfully, Pip worked with land, property and business consultancy George F. White who supported him through the entire process, step-by-step. “Pip came to us with a great idea to diversify his current farm business and we were able to help him in a number of ways. Firstly, we helped Pip secure grant funding. By managing the application process for grant funding from start to finish, which included creating a business plan for Pip, including costings to deliver the project and detailed market research, we were able to secure 40% grant funding for the project from the Government’s LEADER scheme. This also allowed us to assist in approaching his bank for the additional funds required.”

George F. White was very hands on throughout the whole project, preparing necessary budgets and cash flow projections to support the additional funding requirement from the bank. The consultancy also provided guidance and support in the planning application to Northumberland County Council for the project.

“Working closely with George F. White was vital in making this project a reality,” continued Pip. “Not only did they manage the funding process and provide additional financial guidance where needed, they also helped on the other side of the project, with securing planning permission for the straw pelleting plant. A member of the George F. White team even visited Lithuania with me to look at where the straw pelleting plant is manufactured and see how the plants work in operation. At the same time, other members of the team were liaising with the County Council to guide the planning application through to completion. I really needed a ‘one-stop-shop’ service and that’s exactly what George F. White was able to provide.”

For Pip, the new straw pelleting enterprise holds huge potential. There is great interest and demand for straw pellets, especially within the equine industry, both trading in the UK and exporting abroad. It is a renewable product which makes it highly appealing and it’s also cheaper than many other equine and pet products, such as wood pellets and shavings.

“The main aim of farm diversification is to support and increase the core business”, explained David Hume from George F. White. “Therefore, you have to be 100% committed to a project.”

“We can’t make clients diversify”, said David, who is a rural business consultant. “For it to happen, and be successful, farmers need to be willing to invest time and resources into the project, to get it up and running and to grow. This will allow diversification project to achieve what’s required to sustain the rest of the business and increase profitability.”

Sharing his thoughts on how to diversify successfully, Pip added: “Identify your idea, or dream, and get this down on paper. Once you’ve thought it through as fully as you can, speak to a professional who can provide a non-biased perspective and assessment of whether it’s a viable project and how it would work with your existing business and fit in with that, or around it. The opportunities and grant funding to diversify are there, but you need to be fully behind a new project if it’s going to work and create a sustainable new income for you and your main business.”

For more information on farm diversification, or advice on any of the aspects discussed in this article, please contact David Hume on davidhume@georgefwhite.co.uk or 01665 511986.

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