The Less Favoured Area (LFA) scheme is a major element of the EU Rural Development Policy, aimed at supporting farming in areas with natural handicaps or low soil productivity. It has been in place since 1975 and accounts for 14% of total Community funding. In 2003, the European Court of Auditors recommended that the socio-economic criteria on which the current scheme is based be replaced by biophysical criteria. Reviews of the proposals suggest that in Atlantic climates of Northwest Europe, the new criteria do not delineate adequately areas where agricultural productivity is constrained by the biophysical environment and that such areas are instead demarcated by the occurrence of excess soil moisture conditions. In this paper, we review the impact of excess soil moisture conditions on the sustainability of farming systems and their role in constraining strategic and tactical farm management practices. In particular, we review the scientific evidence on the impact of excess soil moisture conditions on herbage growth, herbage utilization, farm operations and environmental sustainability. On the basis of this, we propose an additional biophysical criterion for the new delineation of LFAs, namely the length of time that soil water is in excess of field capacity (‘field capacity days’). While there is no clear threshold for field capacity days above which agricultural sustainability is acutely constrained, the evidence reviewed in this paper suggests that the sustainability of intensive livestock farming and tillage systems is particularly challenging in scenarios where the 80 percentile of field capacity days exceeds 220–230 days.