Farmers losing £29 on every lamb sold, figures show
Lamb prices are at their lowest in three years due to a poor summer, rising production costs and a longer finishing period.
Impacts from the new lamb-deforming disease Schmallenberg are also being felt with the spring lamb season about to get underway.
The Department for Environment, Food and Rural Affairs (Defra) warned the sector last year that Schmallenberg would return in 2013.
Reports from Europe about the effects of the disease in its second year led the National Sheep Association (NSA) to look for ways in which the UK could better equip itself to deal with the midge-borne virus.
"Anecdotal reports from France and other areas of Europe suggest Schmallenberg may be causing more problems in its second year than expected, possibly because livestock does not develop the level of immunity anticipated" said Phil Stocker, NSA Chief Executive.
The NFU has called on retailers to demonstrate 'genuine commitment' to their British suppliers and customers after a 22 percent fall in the farmgate lamb price despite an increase in price on the supermarket shelves.
"Farmers are working hard to stay on top of a really tough situation but we are now faced with really challenging conditions on the world market while seeing a considerable reduction in the price that our own retailers pay" said NFU livestock board chairman Charles Sercombe.
"This isn’t helped by more imported cheaper lamb products on supermarket shelves. What puzzles me is that prices to consumers have remained high."
"Demand from consumers has also remained strong, so what’s happening; where is the money going?"
"I want to see a thriving British lamb sector, crucial if we are to attract young people to work in our industry, so retailers have to start working more closely with their British lamb supply base to help meet some of the challenges being faced. And we need our customers - the consumer - to reap some of the benefit too."
With the EU promising to agree a CAP reform package in the coming months the NFU also stressed the importance of ensuing a fair deal to support English farmers.
"As CAP reform discussions continue we cannot ignore the fact that many sheep farmers are currently struggling to make ends meet in this new market-driven environment,| said Sercombe.
"Direct payments to farmers are currently a vital lifeline; the only way we can ride-out the volatility of world markets. If this goes, many sheep farmers and their families face a very uncertain future indeed."
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