A new virus is causing lambs to be born with deformities so severe that they die within seconds.
The foetuses of newly-pregnant ewes bitten by the insects often fail to develop properly.
At Mayfield Farm near Mildenhall in Suffolk, 75 of the 1,700 lambs born so far this year were affected.
"In a ewe that was carrying twins, she would have a job lambing it. You would have to pull it out," said farmer Clive Sleightholme.
"The legs were fused together and tucked underneath, its head was angular, not formed properly.
"They had undershot jaws and they weren't fleshed out properly but nearly every one was alive when it was pulled out but only lived seconds up to a minute."
The Schmallenberg virus, which is not thought to cause risk to humans, was first identified in Germany in November (Stuttgart: A0Z24E - news) . There have also been cases in Belgium, France and the Netherlands.
Vet Toby Kemble has already seen deformed lambs at eight out of 10 sheep farms he has been to in north Norfolk this year.
"It's concerning for the farmer, from their point of view they are losing lambs and losing productivity but it's very upsetting seeing the lambs," he said.
So far the majority of confirmed cases have been in Suffolk and Norfolk. But farms in Kent, East Sussex, Essex and Hertfordshire have also been affected.
And in West Sussex the virus has been found not just in sheep but also cattle. Most lambs and calves are born in the spring so for many farmers it is a waiting game.
"It's a new virus so we just don't know what's going to happen," said Mr Kemble.
"It may be we have seen the peak already but what we may be seeing is the tip of the iceberg and it's just going to get worse and worse."
Farmers do not even have to tell the authorities although they are advised to provide samples. At one farm, a quarter of all lambs were affected.
With healthy animals selling for £100 each it means a serious financial impact.