James Beamish, director of the Holkham Farming Company, said the current financial landscape was the most difficult in his ten years at the estate.

The company recently signed off an annual budget with a projected surplus one-eighth of what it was two years ago - as cost pressures, volatile markets and subsidy withdrawals take their toll.

Since then, even more cost pressures have emerged, with the government's decision to place a £100,000 cap on its Sustainable Farming Incentive (SFI), and the war in the Middle East driving up fuel and fertiliser prices.

During the last decade, Mr Beamish said three main factors had affected farm profits.

First is climate change, bringing drier, hotter summers and wetter winters. Second is domestic policy, including the phasing out of EU-era Basic Payment Scheme (BPS) subsidies in favour of the new environmental incentives.

And thirdly is geopolitics - illustrated by recent events in Iran, but also by the conflict in Ukraine which forced up fuel and fertiliser costs in 2022, but which also had the effect of "masking" the BPS transition because it also inflated grain prices.

"Farming has always been this cyclical - ups and downs, highs and lows," said Mr Beamish. "I'm sure it will come back, but it seems a challenge at the moment to see where the bounce-back is going to come from.

"I definitely think we're in a period of seismic change in agriculture, and the next three years are going to be choppy.

"Next year could be the perfect storm, because fertiliser prices could double, fuel prices could still be up there. Grain prices have not moved at all. And the climate experts say the spring droughts are going to become more and more of a problem.

"But there's always opportunity to come out of adversity. I think UK agriculture will come out of this stronger in the long term, but it's going to be a rough ride until that happens."

Mr Beamish said the loss of BPS payments totalling £700,000 had "removed the buffer to the volatility of the geopolitics and the weather".

Meanwhile, he said the new SFI cap is expected to affect two 700ha farms within the business, which have several SFI and countryside stewardship agreements due to expire in the next two years - meaning around £350,000 of current funding for environmental work will be limited to £100,000, heaping further pressure on profitability.

The mitigation strategy includes spreading risks through crop diversity. "We are growing a very wide rotation, and we've invested in water, so we can water high value crops," said Mr Beamish.

"It is about diversity within farming. We've got livestock. We grow nine or 10 different crops, and some will perform better in some years, some of them perform worse. That's all about spreading risk."

Other key factors are cost control and risk management - which is where data has become an increasingly vital tool.

Dominic Swan is data analyst with the Catalyst Farming partnership, comprising four Norfolk farming estates, including Holkham.

"A lot of what I focus on is trying to hit the economic optimum of everything we're doing," he said.

"For example, for fertiliser we want to try and hit the point where we're getting the highest return for what you put on. So for the last five years, we have done nitrogen response trials where you put different rates of fertiliser on and see how the yield responds, to find out which rate was the economic optimum rate. We do that across all four farms on each crop every year.

"Then we're doing similar work with pesticides as well, to find the economic optimum for them.

"I think facing these challenges has focused the mind into finding new opportunities."

Mr Beamish said: "We've invested a lot of money into Catalyst and the data has given us the mechanism to really push and make informed decisions on what works on our farms. It should give us the resilience to ride the choppy waters out until the brighter future comes.

"We won't solve our problems by doing the same thing over and over again. We've got to look at land management and food production in a completely different light going forward, if we want to make our businesses survive, be more resilient.

"It gives us a focus. How can we build our crop production system based on not being reliant on [government] support? The climate is changing rapidly, so are we growing the right suite of crops for the climate we are in?

"We are looking at the circular economy. Can we grow our own nutrition? How can we add more value to the things that work in our farming system at the moment?

"It is all marginal gains. There is no silver bullet that is going to get us out of this situation. But maybe there are 10 things we can change by 1pc, rather than one thing we can change by 10pc."

© Eastern Daily Press