The National Farmers Union says the slump is the worst financial crisis in agriculture since before World War II and the report predicts a further 48% drop in the coming year.

The effects of a poor harvest and lower milk prices have still to be fully felt, it says.

Farmers have been protesting

The survey was carried out by accountancy firm Deloitte & Touche, which looked at more than 300 farms in England and Wales with a total area of more than 100,000 acres.

Deloitte and Touche agriculture partner Vincent Hedley-Lewis said the situation for farmers, especially those growing cereals, would be even worse were it not for EU subsidies.

The company reckons that without the EU money 82% of farmers would make no profit at all.

Average profits for farmers were now £50 an acre, a level last seen nine years ago, when the annual income survey began.

Economic disasters

British farmers have been battered in recent years by a series of economic disasters.

The BSE crisis led to the ban on beef exports and the strong pound has left other export produce uncompetitive in foreign markets.

Mr Hedley-Lewis believes that the new Working Time Directive introduced this month could harm farmers "far more than people think".

The directive means employees, including farm workers, cannot be made to work more than 48 hours a week and must be given holidays.

'Time of opportunity'

Mr Hedley-Lewis said farmers who minimised costs, kept enough cash to see them through tough times and considered innovations such as sharing equipment with neighbours, should survive.

"It sounds disastrous, but for those who restructure their businesses correctly it will be a time of opportunity," he said.

"The important thing is not to panic."

While profits are dropping sharply, they are doing so from the relatively high levels of 1994 and 1995.

Farmers are caught in a dilemma, Mr Hedley-Lewis said. They have to be competitive, but are under pressure to keep the countryside as it is and avoid pesticides.

Government tackles supermarkets

Agriculture Minister Nick Brown has already promised cash-strapped farmers that he will meet supermarket chains to discuss meat prices.

During an hour of talks at the Welsh Office in Cardiff, farmers pressed the case for a one-off windfall tax on supermarket profits to rescue their industry - similar to that levied on privatised utility companies when Labour took power.

The quarter-point interest rate cut announced on Thursday was welcomed by the NFU, but it said further action was needed.