FARMERS are earning virtually nothing from food production - but income from non-farming activities has risen.

These findings were published in this week's annual Deloitte & Touche Food and Agriculture Group farm survey which, for the third year running, showed low incomes although there was a small increase in some profits.

Net farm income for the average lowland farming client rose from £5 to £18/acre. This does not, however, herald a recovery of farming fortunes as Deloitte & Touche forecasts that average profit will fall back to £12/acre next year, still below the five- year average of £23/acre.

The survey is based on aggregated accounts of the company's farming clients with account year-ends up to June 2002. It reflects the 2001 harvest return and 2001-02 milk year on about 250,000 acres of lowland farming, including areas in the North of England.

"Our Northern clients have experienced similar fortunes to the rest of the country this year, returning a profit of £19 an acre," said James Craddock. "As expected, yields were lower than the previous year, owing to a wet planting season for the 2001 harvest, and consequently a larger area of land set aside.

"The average net farm income figure is a real mixed bag of results, with quite noticeable variances in profitability across the various farm businesses."

On these results, even a well-structured 1,000 acre farm generates just £15-20,000 for drawings and much-needed expan- sion. Six years ago, returns would have been almost ten times higher.

This year's results are slightly better than expected, largely through an increase in earnings from activities beyond normal food production.

"Our figures show that this year, despite some increases in milk and wheat prices, the majority of farmers have earned nothing from producing food," said Mr Craddock. "Five years ago, 70pc of income was derived from food production and most of the rest was EU support.

"The latest figures show that farmers now accept these low levels of return as the norm for the foreseeable future. They are responding by cutting costs and generating new sources of income."

Labour continued to be cut back. The minimum agricultural wage was increased by 4.4pc, while the actual labour costs in the survey fell by 3.6pc.

Mr Craddock said that, while the average result seemed untenable, many individual businesses were doing well despite low commodity prices and rising input costs. The top 25pc of farmers in the sample achieved profits of £116/acre, but many relied on non-farming income.

"Farming businesses are evolving but successful food production will have to be large-scale; heavily capitalised to buffer seasonal swings in commodity prices; well managed; cost competitive and market led," said Mr Craddock.

"UK food production has to be underpinned, not just for those who produce the raw materials, but also for the businesses employing large numbers further up the food chain.

"Government can help by supporting and providing incentives to encourage producers to pool resources and enable investment in the process beyond the farm gate.

"The UK has a highly developed and profitable food retail sector, but producers must co-operate to secure greater value from this."

Next year Deloitte & Touche expect a slight reduction in the average net farm income. "Improved yields will unfortunately be offset by falling commodity prices," said Mr Craddock