Competitiveness of diversification strategies in agricultural dairy farms: Empirical findings for rural regions in Switzerland

Abstract

Compared to all other branches of Swiss agriculture, milk production has the largest economic significance. The price pressure on Swiss dairy farms is growing even though the market is heavily protected by tariff barriers in relation to Europe and the rest of the world. Against this background, the question arises for dairy farms as to which strategic orientation for their own farm is most profitable. The options are specialization in milk production, diversification such as with direct marketing or agritourism or an exit from milk production. However, the latter is not possible for farms with a high capital lockup in the dairy industry. Diversification into a complementary branch of farming such as direct marketing or agritourism can, in contrast, be linked to existing milk production. The present study examines three different strategies for dairy farms – highly specialized milk production, diversification into direct marketing and diversification into agritourism.Based on the analysis of a Kruskal–Wallis Tests on accounting data from over 3500 specialized dairy farms and those with direct marketing and agritourism in Switzerland, a pattern can be identified of the biggest competitive advantage for the group of diversified dairy farms with agritourism. For Switzerland as a whole, the farm income as well as the labour productivity of dairy farms with agritourism perform best in this comparison. Because it is a niche market, however, only a small percentage of farms will be able to go into agritourism; most will have to resort to other options to meet the challenges of the dairy market.