Defra’s Farm Business Income forecasts for the year ending February 2013 predict a decline in the profitability of farming across the majority of farming sectors.

Weather-impacted output coupled with increased input costs have hit farming over the last year, and these figures are the first to indicate the financial impact on farmers. The NFU says they serve as a timely reminder that single farm payments act as a lifeline for many farm businesses and play a vital role when it comes to adapting to increasingly-volatile agricultural markets.

Livestock producers are among the hardest hit, with a double whammy of higher feed costs and an increased feed use hitting margins. The forecasts show profitability for the pig and dairy sectors falling by 50 per cent and 42 per cent respectively.

For beef and sheep producers, falls of 44 per cent are predicted for lowland producers, while their uplands counterparts have fared worse with income falling by 52 per cent. Only the poultry sector remains unchanged, according to the Defra forecast.

NFU chief economist Phil Bicknell said: “The figures make sobering reading but will be no surprise for many in the industry. Wheat yield and quality were hit by the weather, while it’s been well documented that rising costs outstripped farmgate price changes for dairy and pork producers at times over the last year. More recently, we can add the plummeting lamb price to the list of challenges the industry faces.

“The weather caused chaos across the board and has laid bare the importance of CAP payments. With profits squeezed, a larger number of farmers will again be forced to rely on CAP’s direct payments to underpin their business in the year ahead.

“Falling farm income data shatters the myth that high commodity prices would mean high profits. Farmers cannot produce at little or no profit indefinitely; they need to turn a profit and they need to re-invest. The reality is that price volatility, low profitability and falling confidence does not provide a secure framework for a sustainable food industry.

"These figures should be a wake-up call for us all. Managing risk and volatility are key and that must be recognised by both the government in its CAP negotiations and in pricing decisions taken by the food chain.“