LAST year's windfall profits of up to 400% more for arable farmers are

unlikely to be repeated this year and more careful planning is needed

for future survival, according to a new report from the Agricultural

Development and Advisory Service (ADAS).

This should involve reducing costs of production, aiming for more

environmentally friendly farming and diversifying into non-food crops,

said Dr Julia Walsh, ADAS director general, at an industry seminar in

London yesterday.

Institutional support levels had taken on a high profile on the

political agenda. This pointed towards the need to move away from

dependence on this source of income, to form closer links with the food

industry and to develop more advanced systems of business planning.

Major winners last year were top potato producers with up to 400%

increases in profits, according to the report ''The Growing Business

1995''. For a typical 200 hectare mixed arable farm this could have

boosted income by #70,000. Profits for cereal growers grew by a more

modest 12%.

But neither sector could expect this to continue. Bill Hall, head of

the ADAS business consultancy, warned that potato producers were facing

tough times ahead. ''Next season's profits could fall just as

dramatically as they rose in 1994. In future only those who target a

chosen market and meet that market's requirements will achieve good

margins.''

Jim Orson, head of cereal development, delivered a similar warning for

this sector. The fall in cereals prices over the years had been offset

by cost reductions and yield gains and even in the coming year the

expected drop of #10-#15 per tonne would be largely offset by increased

area payments.

But he added: ''Market pressures will require even further cost

reductions and yield increases to be made. To remain competitive,

farmers will need to be able to grow feed quality cereals at or below

#80 per tonne.''

The opportunities for diversification into non-food crops looked

brighter, acording to Melvyn Askew, head of alternative crops and

biotechnology. ''The potential for plant-derived oils is enormous. The

UK alone uses over 750,000 tonnes of lubricating oils and greases per

annum.

''Currently most of these are processed from crude mineral oil but

many could be substituted by oils and greases of plant origin.

Industrial use of vegetable oils in the EU is already in excess of 1.7

million tonnes a year.''

The report also concludes that the prospect for any increase in the

market for organic produce continues to look poor.