The report identifies major developments in the structure of the industry over the last 10 years, and finds that compared to a 1991 study farmers are more reliant on income from diversification and there is evidence that successful diversification is associated with a distinctive market-led approach to business development.

There also appears to be a growing acceptance among farmers that their farm's resources should be used to generate income in other ways.

Professor Michael Winter, leader of the research project, said: 'We have established a clear picture of the many different ways in which farm resources are now being used to generate income. It is more than 10 years since any research on a similar scale has been done, during which time there have been many changes in the farming industry.

'This study shows what farmers are now doing differently, why they have made changes and what help or hindrance they had in doing so. It seems clear that diversification is now widely accepted as a feature of farming in the 21st century, but this is not to suggest that many of the forms of diversification we identify should be seen as appropriate to all farmers.

'Rather, the message to farmers is that they should look at their businesses in the round if they wish to improve financial viability in these difficult times.' The key aim of the study was to identify the importance of diversified enterprises to farm business viability. The existence of healthy net profits from diversification in an era when profitability in conventional agriculture is weaker than for many years provides clear evidence of the importance of diversification as a feature of the modern farming sector.

Average net margins from diversification compared favourably with mainstream agriculture at the present time and are financially attractive. Enterprises primarily connected with tourism and leisure appear to be very useful adjuncts to a farm business, often generating above average net margins.