This is the blunt warning delivered by Australian Farm Institute director Mick Keogh who has urged farming leaders to stand up and play a pro-active role in the rapidly evolving carbon debate.

His figures show that farming gross margins may be reduced by as much as 30pc from their present state as not only will fertiliser, fuel and transport costs go up but paying for carbon emissions from livestock and cropping may also add to farming costs.

The old problem of farmers being unable to pass on their costs unfortunately rings true again.

Carbon trading is a looming challenge for farmers and the sooner it is placed on the political agenda the better according, to Mr Keogh.

"The truth is that agriculture is the only sector of the Australian economy to actually reduce its emissions in recent years and the potential for farming to provide carbon sinks also needs to be recognised."

One example to learn from comes from across the Tasman.

According to Mr Keogh, New Zealand may have "bitten off more than it can chew" by including agriculture in its ETS, due to start in 2013.

"In NZ, agriculture is responsible for half of that country's net emissions and it is already forecast to overshoot its Kyoto Protocol emissions target which means the NZ Government needs to find ways to reduce agriculture sector emissions. If not, it will be forced to buy international emission offsets to ensure its target is met, at a cost currently estimated at $NZ500 million."

Recently published NZ Ministry of Agriculture figures estimate that the ETS effect to the average dairy farmer could be a reduction of farm returns by up to 160pc.

NZ authorities are now in a dilemma about how to minimize the damage to its economy whilst reducing its carbon footprint.