Total income from farming fell by £721 million, or 13 per cent, between 2011 and 2012, according to new Defra figures.
The figure is in real terms after adjustment for the effect of inflation.
Two main contributors to the drop were poor weather that affected volume and quality of harvested crops, and a fall in the value of direct payments to farmers due to changes in the pound to euro exchange rate.
Total income from farming per annual work unit (AWU) of labour is estimated to have fallen by 14 per cent to £24,570 in 2012.
The report said that income from farming is higher than it was in the late 1990s and early 2000s, although it is lower than the peak seen in the mid-1990s.
Total income from farming was £4.8 billion in 2012, compared to £8.1 billion in 1995.
The value of potatoes fell by £91 million (a drop of 13 per cent) as poor weather interrupted planting in the spring and led to low yielding potato crops and increased wastage.
Vegetables, plant and flowers rose in value by £39 million (1.7 per cent) while fruit fell by £40 million (6.7 per cent) due to bad weather.
Total income from farming is created by production within the agri-industries, including subsidies. It excludes changes in the values of assets, including stocks, but includes some non-agricultural activities such as processing or tourist activities.
