With the exception of dairy farms and lowland grazing livestock farms, the average farm business income is expected to fall in 2025/26, according to Defra’s latest forecast.
Although the dairy sector is forecast to record an increase of 45%, this is largely due to the period of higher milk prices seen in the early part of last year. Those conditions have since shifted, with milk prices falling steadily since autumn, meaning the headline forecast does not reflect the pressure many dairy farmers are currently experiencing.
Defra has identified lower cereal prices, compounded by extremely variable yields as the main drivers of the fall in income, alongside reduced delinked BPS payments and, in some cases, lower agri-environment payments. Small increases to total input costs are thought to have also been a contributory factor for some farm types.
NFU President Tom Bradshaw said the predicted squeeze on farm incomes in the latest FBI (Farm Business Income) forecast figures “reflects the increasing volatility we’ve seen in recent years”.
“There is so much out of farm businesses’ control, from extreme weather to erratic global markets. And, with the reduction of Basic Payments – which provided a layer of resilience for many – we are more exposed than ever.”
Peaks and falls
The data follows a period of considerable fluctuation, continuing the trend towards significant variability seen in incomes in recent years. The stronger 2024/25 figures came after a sharp fall in incomes for several farm types in 2023/24, underlining the instability that many farm businesses have been navigating.
Income for cereal farms is expected to fall by two thirds to £17,000, the lowest level since records began in 2004/05.
“We only need to turn on the news to see why resilience matters to our food security.”
NFU President Tom Bradshaw
The drought seen over the summer caused significant stress, particularly for crops on lighter soils. Average outputs for wheat fell by 6%, while barley fell by 22%, the latter of which was compounded by a 10% reduction in crop area. While oilseed rape output increased on these farms, it was not enough to offset the larger reduction for cereals, leaving total crop output at 9% lower than the previous year.
Delinked BPS income is forecast to fall by 72% for cereal farms, while the net income from agri-environment payments is expected to fall by around 11%.
General cropping farms are also predicted to see their average incomes halved in comparison to 2024/25 figures, due to lower crop output.
Lowland grazing farms, however, are expected to see a modest 9% uptick due to increased output from cattle and ‘exceptionally strong prices’. LFA (less favoured area) grazing livestock farms are predicted to see an 8% drop in income, compared to 2024/25 when it was at its highest peak since records began.
No figures were given for specialist poultry or horticulture farms, which would be subject to a ‘considerable degree of uncertainty’, Defra has said, due to the small sample of these farms and their structure.
Build resilience into supply chains
NFU President Tom Bradshaw pointed to global events as key drivers of volatility: “We only need to turn on the news to see why resilience matters to our food security. War, whether in the Middle East or Europe, increases volatility and makes it more expensive to produce food, with farmers and growers shouldering a huge amount of risk.
“If we are to avoid further food price inflation, we must build resilience in our food supply chains. This isn’t just about farm profitability, which is important, but having a clear ambition for UK food production, an enabling regulatory framework and a supply chain which shares risk and reward.”
