A NEW report shows many farms are still having to rely on support payments to keep them afloat.

Business advisers say that during 2006-07 the payments averaged £45,000 per farm - 97 per cent of the £46,300 average net profit.

The annual farm profit survey by the Institute of Chartered Accountants' Farming & Rural Business Group (FRBG) was based on the 2006 harvest.

Andrew Ayre, FRBG North-East spokesman, said: "It serves to remind us that farms and rural businesses are still being supported by subsidies and that profits are still not at a level where earnings can be retained."

The profit - which coincided with average drawings - was from an average farm turnover of £312,600.

Mr Ayre said: "Better cereal prices currently give rise to some optimism though livestock farmers continue to have a difficult time."

Grain and milk prices have improved but rising feed, fuel, fertiliser and seed costs are causing problems.

"It remains to be seen how much the margin - and hence the profit for the farmer - will actually increase," he said.

A spokeswoman for the NFU North-East region was not surprised by the report.

Common Agricultural Policy reform, which will see support payments phased out in 2012, is designed to give farmers time to make a proper return from the marketplace.

But she said: "This has proved virtually impossible, with farmgate prices consistently below the cost of production.

"Better grain prices have been well publicised but higher feed prices have hit the livestock sector hard, and increasing costs do not stop there."

Last year's outbreaks of foot and mouth and bluetongue disease had brought many livestock farmers to their knees financially.

The Farm Crisis Network has reported spiralling farm debt, some at very worrying levels.

The spokeswoman said: "The need for higher farmgate prices, that not only cover the cost of production and allow farm investment but also deliver a modest profit, are more urgent than ever if farmers are to break their reliance on support payments - especially as these will reduce to very low levels by 2012."