Diversification of Farm Enterprises in the United States: Legal Incentives and Legal Obstacles
prof. dr. Margaret Rosso Grossman*
Farming in the United States, as in other nations, is
inherently risky. US agricultural operations face production
risks from the vagaries of weather, disease and pests, as well
as financial risks from changing economic conditions,
including market prices and cost of production. In
addition, government policies, enacted in laws and
regulations, affect farmers and influence their business
decisions. Producers often adopt management strategies to
reduce their risks. Among these strategies is diversification
of the farm enterprise.
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Diversification offers advantages
because ‘incomes from different crops and livestock
activities do not move up and down in perfect correlation,
so that low income from some activities would likely be
offset by higher income from others.’1
Though the term ‘diversification’ is not defined by statute
in the US, it encompasses nontraditional agricultural
products, activities, or land uses. Diversification includes
production that targets niche markets or satisfies a growing
demand for organic products, land uses that mitigate
environmental impact, and other activities that allow the
farmer to earn income from a nontraditional source. Valueadded
processing and packaging of traditional products,
production of nontraditional crops or livestock, new
methods of marketing (eg, direct or internet), and many
types of agritourism are common ways that farmers
diversify.2 In a 2009 speech, the US Secretary of Agriculture
encouraged diversification. Noting that federal farm
program payments have been criticized both globally and
nationally and may therefore be at risk, he recommended
that producers consider supplementing their income by
other activities – eg, organic production, biofuels, or
windmills.3
The complexities and costs associated with changes in
production have prompted federal and state governments to
create programs that assist or encourage some types of
diversification. In addition, producers have access to
significant resources to facilitate diversification. The US
Department of Agriculture (USDA), for example, identifies
sources of information about diversification, accompanied
by an extensive list of possible crops, livestock, and farm
enterprises.4 The Sustainable Agriculture Network suggests
economical ways to diversify cropping systems.5 Some states
also provide helpful information.6 These programs and
information sources help to advance and promote socially
desirable activities, including organic production,
conservation, recreation, and community supported
marketing arrangements.
This article focuses on legal incentives and legal obstacles to
diversification in the US. It first outlines some farm
characteristics that may influence diversification. It then
turns to the possible impact of the agricultural tenancy
relationship on diversification and the relevance of land-use
restrictions and other laws for the producer who plans to
undertake a new activity. The article then discusses a
number of activities that are typical of farm diversification
in the US, with an emphasis on federal government
programs that support diversification. These activities
include organic production, alternative crops and livestock,
marketing strategies, agritourism, conservation, and
production of renewable energy.
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