The party is also facing crippling legal bills following a defamation action brought against Ukip MEP Jane Collins by three Labour MPs.
Writing in the Daily Telegraph, Farage said, "Make no mistake, Ukip is collapsing. There is no point in pretending it is not.
"The basic structures of the party organisation are disappearing; branches are closing down and many of the sitting councillors in the forthcoming elections wish to run as independents.
"After more than 20 years of touring the country, addressing 1,500 public meetings at which I pushed the Ukip message and built up the party, I look on the latest twist in its 25-year history with a mixture of dismay and disbelief."
The party is currently preparing for its EGM after leader Henry Bolton lost a vote of no confidence in January.
Bolton faced calls to quit after the emergence of racist text messages about Meghan Markle sent by his 25-year-old former girlfriend Jo Marney.
If Bolton leaves his position, Ukip will be searching for its fifth leader in 18 months.
Ukip has also been hit by huge legal bills relating to a defamation case brought against MEP Jane Collins by three Labour MPs after she accused them of ignoring child sex abuse in Rotherham while speaking at a Ukip party conference.
Collins was initially ordered to pay £54,000 in damages to each MP as well as paying their costs, with an interim payment of £120,000.
However, on 15 February a High Court judge said Ukip must also contribute to the case's £660,00 legal costs. Estimates for Ukip's bill have been reported as at least £200,000.
Party sources have suggested, even before this ruling, that Ukip may not be able to afford another leadership election, if indeed Bolton is removed from his post.
"As things stand, even if Brexit is further watered down or delayed and Leave voters become angrier at the establishment's attempt to subvert democracy, Ukip will not be able to capitalise," Farage wrote. "It may be too late to save Ukip, but you never know."