Melton firm Andersons the Farm Business Consultants Ltd reviews the state of agriculture and horticulture in the UK as well as considering the prospects for the year ahead in its recently published Andersons Outlook 2009 document.

Andersons warn that although many businesses will record improved profits for 2008, that's likely to reverse in 2009 due to significant increases in the cost of production.

Its Outlook 2009 document states: "Better profits that some sectors have experienced in 2007 and 2008 look like being short-lived. The industry could see total income from farming falling in 2009 by up to 15 per cent compared to 2008 (in real terms). This would bring it back below the £3billion mark.

"The crystal ball gets cloudier looking into 2010. An important factor will be whether the downturn is relatively mild or persists into late 2009, and even beyond. This is likely to affect the demand and price for commodities.

"Another negative for 2009 is a probable weakening in markets. This has already been seen for combinable crops, and there are signs that other markets, including dairy, are also starting to come back from their recent highs. Whether this is partly linked to the downturn in the economy is not yet easy to say, but certainly world stocks of cereals and dairy have been rebuilt to some extent."

The document adds: "On present trends, it seems possible that total income from farming could fall by a further five to 10 per cent (in real terms) in 2010, compared to 2009. Therefore, the 2008 year looks set to be a one-off peak of profitability for the industry as a whole.

"This doesn't mean individual businesses cannot continue to grow and prosper, even in these turbulent times. Across all sectors of UK agriculture there continues to be opportunities to produce profit. Businesses need to invest for the future, ideally as part of an overall strategic business plan.

"They also need to ensure that their costs of production are the lowest possible, for example by sensible machinery replacement policies, and paying realistic rents. For these businesses, the outlook remains bright."

Outlook 2009 is sent to all Andersons' clients and contacts. Additional copies can be obtained free of charge by calling (01664) 503200. The publication is also available to download from the Andersons website www.andersons.co.uk

• New rules affecting the management of nitrates on farms are to be introduced from January 2009. Legislation passed through Parliament will see the existing Nitrate Vulnerable Zone rules (NVZ) replaced by more stringent requirements and the NVZ areas are to be extended to cover some 68 percent of England.