Drought pressures and soaring costs could 'force people out of farming'

One of the driest summers on record has prompted an early grain harvest but left farmers desperate for rain as irrigation supplies run out for potatoes, vegetables and salad crops.

Andrew Francis, farms director at the Elveden Estate near Thetford, said the lack of rainfall has emptied reservoirs and sparked "difficult decisions" over which crops get the vital remaining water from dwindling borehole licences.

Meanwhile, the industry has been battling months of rising costs for inputs such as fuel, fertiliser and animal feed, with analysts at Andersons estimating that "agflation" currently stands at 23.5pc.

Mr Francis said this combination created a "really difficult commercial environment to try and diversify in".

Although farmers may want to make long-term changes, he said the cost of transition can be expensive - particularly when resilience funds have been spent coping with the immediate financial situation of rain-starved yields and high production costs.

He urged farmers to "exhaust every avenue for help" and seek inspiration and practical advice from industry groups and "knowledge exchange" networks.

"I can understand why people would (leave farming), and I can understand that there are a lot of barriers out there that make it difficult to look positively on the future," said Mr Francis.

"I think that is the problem, and that will force people out of farming.

"We all need to think about doing things differently but the problem is that a change of market place or a production system quite often requires commercial investment, and the commercial backdrop at the moment is eating into resilience funds so cash to facilitate wholesale change is really difficult to come by. That is a major barrier to change.

"It is important to look for support. Look at the knowledge exchange networks to see what other farmers are doing differently."

At the nearby Euston Estate on the Norfolk-Suffolk border, director Andrew Blenkiron outlined the twin financial challenges of rising energy costs and dry weather.

He said he would usually budget £80,000 to pump water around 1,200 acres of irrigated root crops - but this figure was raised to £250,000 due to a three-fold increase in electricity prices.

Now, with 25pc more water being pumped around due to the lack of rainfall, he hopes to cap it at £350,000.

"It's a massive, massive increase, which we are really challenged in terms of being able to pass on to the market place because our contracts this year are fixed price contracts," he said.

Figures show 'squeeze' on farm profits

The cost of farming is outpacing food inflation, according to industry analysts - illustrating the squeeze on agricultural profit margins.

The latest estimates from farm consultancy Andersons show annual "Agflation" at 23.5pc - more than double its index of agricultural outputs (10.1pc).

When plotted against the Consumer Price Index for food at 9.8pc, the firm says "it becomes apparent that there is a cost of farming squeeze taking place".

The report says: "In the months preceding June 2022, agricultural output prices generally rose in parallel with Agflation, albeit at a slightly lower rate. However, since then, these indexes have diverged considerably.

"Whilst recent falls in commodity grain prices have been the main driver, it also suggests that consumers are struggling to afford rising food prices and, that retailers and food service providers are reluctant to pass on further increases."