Reflecting farming's ongoing challenges, leading agricultural supplier Mole Valley Farmers (MVF), which has retail outlets in Berkeley and Cirencester, has posted a £7.6m operating loss for its latest trading year.

Against a backdrop of sales down by just 1% (at £610m against the previous tally of £615m), the year ended September 30 2023 for the Devon-based group marked a slip into the red, with a £7.6m deficit signalling a step change on the previous year's profit of £4.5m.

Graeme Cock, chief executive, said there was little suprise in the "disappointing" experience as a reflection of agriculture's broader challenges.

Mr Cock said: "The impact of rising interest rates, increased energy costs, wage inflation and the wider cost of living pressures - against the backdrop of an agricultural sector battling falling output prices - has significantly impacted our financial performance."

He added: "Across a number of key agricultural product areas, we have seen significant deflation; however, this has lagged behind falling farmgate prices, putting further pressure on our farming customers' overall profitability."

MVF's business model requires it to work from stocked positions, he added, particularly in fertiliser and feed manufacturing: "This brings risk and complexity when raw material markets are falling and has also impacted profitability as we sought to reduce significant stockholding positions in a number of key agricultural input areas."

Against a backdrop of increasing costs, economic pressures and market volatility, the unseasonal and unpredictable weather patterns inevitably impacted the ability of customers to complete key seasonal jobs on-farm, MVF's report stated.

Mr Cock added: "This resulted in a sales decline in a number of product areas as farmers struggled to operate. The cost of living pressures, felt by most households through the year, negatively impacted consumer spending across our retail stores.

"Spend was down, the number of items per shop reduced and there has been a noticeable shift from discretionary items to consumables. Areas such as equine feed, pet food and heating fuels performed well; however, clothing, wild bird food and footwear have seen a reduction in sales."

MVF's loss lands at a time when farm incomes both for milk and cereal are significantly pressured, with farms consequently cutting back on non-essential equipment purchases.

In a government forecast conducted earlier this year, farm business income in dairy activity for 2023-2024 was predicted to be 78% lower than the "exceptional" previous year.

The report from Defra said: "A substantial fall in livestock output will be almost entirely driven by a decrease in output from milk and milk products of around 19%. This reflects lower farmgate prices (which began to fall in early 2023 as markets readjusted after the volatility of 2022) rather than a decrease in the overall volume of milk or number of animals, which are expected to be little changed compared to 2022/23."

Defra statistics indicated that, at a UK level, the average farmgate price fell from 43.59p per litre to 37.83p per litre between March and December 2023 albeit the analysis noted a wide variation in milk prices with some farmers receiving considerably more or less than the average.

Dairy giant Müller, which is headquatered in Bavaria and operates a major plant at Stonehouse, near Stroud, has told smaller dairy farms supplying it that they face being axed unless they double their milk volumes. Müller's Stonehouse operation in Oldends Lane produces butter, potted cream, FRijj milkshake, bulk cream, fresh milk and powder.

With gate prices for milk currently being below production cost, Farmers Weekly reports that Müller has told 26 farms across England and Wales that failure to meet the new target and improve animal welfare standards will result in termination of contract.

A spokesman told the magazine Müller had identified a very small number of supplying farms who, when compared with our other suppliers, are "not continually meeting our high standards of sustainability and welfare, or provide us with low volumes of milk".

Latest research from the NFU indicates that as many as one in four dairy farms wants to quit as early as this year, a figure which appears to have risen from one in three during research in the previous year.

● The most recent analysis of farm gate price for milk, for May 2024, was 37.92 pence per litre, a 1.3% drop on the previous month.