Farm input prices fall…but not enough

Falling input prices have cut farm production costs across all enterprises by an average of more than 4% in the past year.

However the steep farmgate output price drops seen in most sectors far outweigh the cost cuts.

For example the cost of producing combinable crops has fallen by 5.01% but grain prices have dropped by an average of 14.9% over the past 12 months.

Key arable inputs such as fuel and fertiliser saw the biggest reductions, according to the latest AF AgInflation Index for January 2015 to January 2016.

See also: Livestock farmers missing out on profit due to high fixed costs

Produced by buying group Anglia Farmers, the index shows fuel prices down by 20.7% and fertiliser by 13.6%.

While some of the reduction in the gas price had fed through to fertiliser prices, it could be argued that given the significant fall in gas prices, not enough of a drop in fertiliser prices has been seen, said AF chief executive Clarke Willis.

“Seed costs [overall] have not seen much change because while we have seen a reduction in cereal seed prices, the cost of potato seed has risen significantly.

“While grain prices have driven down the price of animal feed, the overall deflation in that sector of -7.7% masks increases in medicine and vet costs.”

 Direct costs such as labour and rent continued to increase.

The AF AgInflation Index figure of -4.35% is the largest drop in production costs seen since 2009, when deflation of -6.3% was recorded.