TOTAL deductions from single farm payments could be as much as 27pc by 2012, the end of the transitional period, a farmers' meeting at Thirsk Racecourse was told.

Richard Taylor, head of the Yorkshire and North-East farming department of Strutt and Parker, added, however, that deductions were more likely to be about 14pc.

He gave his forecast at the joint meeting on CAP reform, organised by Strutt and Parker with the Yorkshire Bank and intitally reported here last week.

Deductions will be made to fund the national reserve and modulation, but there is also the threat of financial discipline which will be imposed if the CAP budget looks likely to be exceeded.

Farming organisations have put forward a three-tier system of payments, as opposed to Defra's two. It is believed the payments would be about £40 a hectare (16/acre) for moorland; £110/ha (£45 an acre) for severely disadvantaged land up to the moorland line; and £220/ha (£89/acre) for non-SDA land.

Mr Taylor said the payments would help beef farmers more than earlier proposals. "But £45 an acre is nothing like what some of them have been earning, so there is still likely to be hardship in some of these areas," he said.

Those annual payments are before deductions are made and will depend on the £/euro exchange rate.

"We could see total deductions rising from 11.5pc in 2005 to 27pc by 2012, but we think they are most likely to be 14pc," said Mr Taylor.

The top 25pc of farmers could expect to see a 10-15pc reduction in profits before rent and interest, while arable men could see a potential 20pc drop.

Mr Taylor said each business must look to see how it could claw some income back - the entry level scheme was one obvious method, offering £12 an acre.

Some might look at altering their crop rotation. Mr Taylor said some farmers in Northumberland were considering 50pc wheat and 50pc fallow rotations. Labour and machinery costs should be studied to get them to the equivalent of a contractor.

"It is very important to know your costs and try and see where you can take action," he said.

He expected demand for arable commodities would remain firm, but prices would be currency dependent. It would remain one of the main factors.

There was a question over whether marginal land should be in production; it would not make sense if costs were higher than the price received.

"It may be time to look for something else to do on that land," said Mr Taylor.

He added his voice to others who had warned about the cashflow implications, particularly for some livestock farmers, caused by the payment timescale being spread from December 31 to June 30 of the following year.

Paul Dennison, Strutt and Parker farm consultant, said the intensive dairy farmer would be harder hit than the extensive producer, as payments would be based on the area of land and not production.

The milk price was expected to fall over the eight years of transition and intensive producers could see an £18,000 drop in income, compared with today.

He expected there to be fewer dairy farmers - some might see SFP as a golden handshake - with the potential for quota not being met. Other impacts on the dairy industry could be lower farmgate prices; the polarisation of the industry with smaller farmers going for niche markets, and more co-operation and cost sharing.

Mr Dennison believed the sheep industry would be net winners and intensive beef producers the net losers. Both sectors would face a volatile future, with prices linked to demand.

Beef intensive systems would become more extensive and bull beef output could fall dramatically. He predicted a likely increase in the national flock as farmers moved out of dairy and beef