A NEW study has painted a bleak picture of the financial pressures many farmers are facing.

The Princes Countryside Fund commissioned the report in March and warns the wider rural economy is now being affected.

The report was commissioned following growing concerns about serious cash flow issues affecting an increasing number of farm businesses.

This is the third year of declining farm gate prices and is putting a huge strain on suppliers, affecting the health and wellbeing of farmers, and affecting the prospects of the wider rural economy.

The research found:

n farm borrowing almost doubled in the past ten years and will continue to increase as all sectors face a continued decline in commodity prices. The worst affected are cereals, milk and pigs;

n 17 per cent of farms face major financial problems as they do not have the ability to pay off their short term debt;

n half of UK farms no longer make a living from farming alone, and 20 per cent generated a loss even before accounting for family labour and capital;

n businesses surveyed said that on average more than half their farming customers had cash flow issues.

Lord Curry, chairman of The Prince’s Countryside Fund, said: "The research presents a very bleak picture not only for farmers; but also for the wider rural economy.

"Volatile commodity markets are not just affecting farmers. Decreased cash flow is affecting the industry as a whole, from vets to feed and machinery suppliers to auction marts. The full extent of the crisis is not yet fully understood.

"As a result, we are witnessing a trend towards increased and sometimes risky borrowing by farmers. Distressingly, the outlook does not look set to change in the short-term and the degree of uncertainty about the future is affecting everyone. This in turn is causing suppliers to consider making job redundancies and think about coming out of agriculture."

He said it was essential for farm businesses to seek professional advice, to have all the support they need to cope, and that they are equipped with risk and business management tools.

"Confidence, better cooperation and communication throughout the supply chain are needed if they are to survive," he said.

The Andersons Centre carried out the snapshot research, which analysed recent data and involved a series of telephone interviews with 21 agricultural businesses.

Meanwhile, the NFU said profitability of UK farming fell by 29 per cent in 2015 – down more than £1.5 billion.

It was the biggest year-on-year fall since 2000. Official statistics show farming profitability at its lowest since 2007.

It has been hit by high world production, subdued demand due to slowing economies, the strength of sterling, and falling farm gate prices.

Gail Soutar, NFU chief economist and international affairs adviser, said: "The numbers must serve as a wakeup call to others in the supply chain and government. We need everyone in the food supply chain to intensify their efforts to back British farmers.

"We need longer-term relationships that deliver some certainty on pricing and give farmers confidence that food production can be profitable. And we need government to do all it can including making sure that farmers don’t face the same crippling delays to farm payments that they have in 2015, with immediate action for those still waiting for 2015 payments to arrive."