The watchdog called on ministers to allocate special benefits to farmers and develop their businesses.
The poorest 25 percent of farms have a household income of less than £20,000 a year, and a third of those failed to make a profit over the past three years, the Commission for Rural Communities (CRC) said.
The CRC said many farmers in the UK had diversified or found ways to earn money away from the farm to survive, with 17 percent of farms making more money from their additional enterprises than from traditional farming activities.
‘But some do not have the skills or opportunity to branch into new businesses such as farm shops, producing food or letting out farm buildings’, it said.
A report by the CRC also said that while farmers are able – like anyone else – to claim benefits when times are tough, the take-up of welfare payments was lower in rural areas than in towns. Around 11 percent of working-age adults in rural districts claim out-of-work benefits, compared with 16 percent in towns, the report said.
Just 23 of the 601 Jobcentre Plus offices are in rural areas and the lack of information, transport and internet access makes it hard for people in the countryside to make the most of welfare services.
Many farmers feel reluctant to take benefits because they are independent and there is a social stigma attached, the report said.
The CRC called for the Department for Work and Pensions to actively promote the take-up of benefits for farming households and for the Department for Business Innovation and Skills to support farmers to develop their businesses.
“While many farming households have successfully increased production, resilience and farm incomes, one in four are living in poverty. These struggling farms are likely to have grazing livestock and be located in upland areas. Many are left trapped in poverty without the resources or support to earn a living wage. Tackling poverty among farming households is long overdue. The Government should actively promote farm business support and the take-up of income-related benefits to eligible farming households”, said CRC chairman Stuart Burgess.