FARMERS URGE MINISTER TO PROVIDE EXTREME WEATHER INSURANCE

UK: National Farmers Union estimates rains in 2012 cost the industry £1.3bn from poor harvests and higher food bills for cattle

Last year's record rainfall has cost British farmers £1.3bn, prompting calls for government to provide insurance against extreme weather if it wants to preserve national food security.

The National Farmers Union (NFU) estimates the extreme levels of rainfall in 2012 has cost the industry £600m in lost output, especially from poor wheat and potato harvests, and another £700m in extra costs such as feed for cattle, which could not graze in water-logged fields.

The figures are being published on Tuesday, ahead of the first major speech to the industry by Owen Paterson, environment secretary, on Thursday at the Oxford Farming Conference. The NFU president, Peter Kendall, said they would be used to press Paterson to soften his expressed desire to axe European "Pillar 1" subsidies, which pay farmers a set amount for owning land in production. The UK gets about €3.65bn (£2.97bn) a year under the EU scheme.

The NFU supported ending the subsidy, but only if it was done across Europe and ideally elsewhere in the world, so farmers in other countries did not have an advantage. It needed to be replaced by a form of extreme weather payment or insurance to protect farmers from going out of business during the most difficult years, said Kendall.

"All we seem to get out of the Treasury and Defra [the Department for Environment, Food and Rural Affairs] these days is 'Pillar 1 is worthless'," Kendall said. "If they are determined to move away from Pillar 1, we need a debate about income insurance or protection when we have got years like 2012. It's not the same as producing nuts and bolts in a factory – we can't farm under water or when we don't get any rain."

The EU is locked in negotiations over dramatic cuts to farm subsidies but they are expected to take years because of strong resistance, especially from France.

Farmers are likely to face scepticism about calls for financial support after decades of headlines about fat subsidy payments, and – before they were replaced by the acreage payments – food "mountains" and milk "lakes" caused by paying farmers to produce food regardless of demand.

The global decline in production of wheat, maize, dairy products and many other foodstuffs in 2012 caused steep rises in prices, with the UN warning in October that wheat prices had already risen by 25%, with the prospect of more to come.

In the longer term, analysts expect farming to enjoy a global boom as expanding populations and rising wealth and consumption continue to outpace supply.

The investment guru Jim Rogers, who co-founded the Quantum Fund with George Soros, urged business students to learn to drive a tractor instead. "There are many things happening in agriculture, which mean agriculture is going to be fabulous for another 10 to 30 years," Rogers said in a video blog .

Paterson, who was moved to Defra in the September reshuffle, will try to capitalise on that optimism to launch the Future Farming Group on Thursday, a campaign to attract more people to consider farming as a career.

The NFU says the 2012 "black hole" in farmers' finances is the worst situation for 10-15 years, not part of the normal ups and downs of the industry.

Kendall argues that governments have been supporting agriculture for centuries, and today most, if not all, countries have some form of insurance, even states which are proudly subsidy-free.

He said the renewed focus on national food security – as climate change is prediccted to bring more extreme weather and disrupt agriculture and transport around the world – made the issue more urgent.

"In years like 2012 it is very clear to see that the support farming receives from the CAP [EU common agricultural policy] is an absolute lifeline to many farmers," said Kendall in a statement accompanying the new financial estimate.

"Recently, we have heard government representatives refer to these support payments as 'worthless', arguing that payments should only go to environmental goals. With the possible exception of Sweden, the UK government is the only one out of 27 member-state countries in the EU arguing in this way.

"I firmly believe the only likely outcome of this strategy is further discrimination against English farmers. What is more, this ideologically driven approach is outdated given the increasing volatility in global prices and the challenging global climate," he said.

Defra told the Guardian that it had responded to the tough conditions by relaxing regulations such as restrictions on when slurry can be spread on fields and deadlines for applications for funds.

"We recognise the impact the wet weather has had on farmers and that is why we have relaxed some of our restrictions to help them," said an official.

"We have also made it clear that direct payments under CAP should not be phased out in the next financial period, but that businesses should have time to adjust."