Scottish farm incomes have increased in 2017-18 but the industry was still dependent on farm subsidies to be profitable.
The average farm income has risen 19 per cent year on year reaching £35,400, according to the latest Scottish Farm Business Income figures.
But 60 per cent of farms in the survey were making a loss without subsidy, with the average business making a loss of £7,400 without support.
40 per cent of farms were unable to pay the minimum agricultural wage of £7.43 per hour for unpaid labour from farming income.
Dairy farms had the largest increase of average income, due to a 22 per cent increase in the average price of milk. However, there were huge differences of income for high and low performers.
Low performing dairy farms were losing on average £31,800 while high performers had an average income of around £181,000.
NFU Scotland director of policy Jonnie Hall said while it was based on data from 500 commercial farms, the figures provided a good barometer of how well Scottish agriculture was faring.
He said the headline figure was welcome news.
“However, scratch the surface, and the vulnerability of many farm types, notably beef and sheep producers in our Less Favoured Areas, remains a significant concern and underlines the fact that the Scottish agricultural industry continues to find itself in a dark corridor of uncertainty.
“Reliance on support payments, together with increasing diversification, are symptomatic of farming enterprises that cannot rely on adequate and stable returns from the marketplace to offset costs that continually creep upwards.”
Contract farming and diversification have helped offset losses, with incomes around £19,600 higher on diversified farms.
Mr Hall added increased farm debt was likely to be feeding working capital and cashflow, not investment, raising questions of the resilience of many farms in the future.
“These FBI figures are also another clear indicator that all sectors of Scottish agriculture require a more certain and much fairer margin as the first and most important link in the supply chain to a food and drink sector that continues to grow steadily in value.”
“What is unequivocal is that Scottish agriculture is in clear need of a new policy settlement that enables every farm business to adapt to a new operating environment, through innovation and investment, to deliver the highest quality food as well as a flourishing environment and thriving rural communities.”