FARMERS have been advised to use anticipated better returns to prepare for more difficult times ahead.

It is one of the main messages in Andersons, the farm business consultants, Outlook 2017 which has just been published.

The report says the coming year is likely to be reasonable for many farm sectors – but warns of "significant clouds" on the horizon.

Richard King, director and contributor, estimates farm incomes for the 2016 calendar year will be higher than in 2015.

"Then we would expect another improvement for 2017," he said. "However, by 2018, the prospects for the industry may well be deteriorating."

The latest Defra figures estimate the Total Income from Farming (TIFF) in 2015 was £3.77 billion – the lowest figure in real terms since 2007 and almost a third down on the high of 2013.

Andersons believe the aggregate farm profit for 2016 could be around £4.3bn. While output was lower in key sectors such as cereals and dairy, most market prices received a "Brexit boost" half way through the year with the weakening of sterling, which also helped boost the value of the 2016 Basic Payment. Costs were also muted.

In 2017, Andersons estimate TIFF will rise to £4.9bn – back to the good years of 2011-2014. However, that is dependent on the pound/euro rate remaining at today's level. Any strengthening of sterling will detrimentally effect farm incomes.

The decline in the pound is inflationary, making imports more expensive. Outlook says: "This will start to feed into farm costs through 2017 and perhaps take the edge off any uplift in profits.

"The process is likely to continue into 2018 when we may also see some cyclical weakening in markets. This might especially be the case if global economic growth is faltering – perhaps because of policies enacted by the Trump administration. Therefore, a very tentative forecast for 2018 suggests that TIFF will reduce compared to 2017.

"Beyond 2018, we start to enter the realm of Brexit. Forecasts on how this might affect UK agriculture are, at present, highly speculative. Much will depend on the future trading relationships with Europe and the rest of the world.

"At the moment, even the Government does not seem to have a clear idea of what they might be."

However, Andersons believe money under a British agricultural policy will be lower than under the CAP, testing businesses that rely on support for profitability.

Outlook concludes: "Farming businesses need to use the current period of better profits to prepare for the future and ensure the future business strategy is "bullet proof" to weather any future downturn.

"This includes reducing debt in times of strong output prices and taking great care over investment decisions to ensure that they are productive, worthwhile and genuinely contribute to improved future profitability."