Farm input costs rise faster than food costs

Soaring input costs have outstripped food price rises for the fifth year in succession, according to an inflation indicator.

Fertiliser prices leapt by a massive 37.8% in 12 months to the end of August theAnglia Farmers’ AgInflation Index shows.

That increase means fertiliser prices have risen by 123% in the past five years.

Seed, livestock feed, machinery and fuel prices have also shown double figure inflation over the past year (see table) with fuel costs 24.9% higher than they were a year ago.

Overall costs for producing food rose by almost 13%, almost double the rate of inflation which stands at 6.4%.

By sector, combinable crop input costs rose the most, up by 13.3%. Dairy input costs went up by 12.3%, sugar beet by 11.6%, beef and lamb by 11.2% and potatoes by 10.5%.

“Overall agricultural inflation of 13% is extremely high for an industry to absorb in one year,” said Clarke Willis, Anglia Farmers’ group chief executive.

“I’m obviously concerned at the rate of increase on fertiliser, it reflects the dominant position of a small number of manufacturers which is just one business with global parents in a world market. We have to remember that the UK represents only 1% of world fertiliser demand.”

Mr Willis was critical of the recent shift to very short term of pricing in the fertiliser market, something which the NFU has also condemned.

“Fertiliser manufacturers are pricing their products to what they think the market will stand rather than on their costs of production,” he said.

“At the moment there is no mechanism for forward pricing on fertiliser, we are looking at it and trying to put systems together but it’s very difficult if you can’t back it with manufacturers because they are not prepared to take a long term view of the market.

Agrochemical prices, in contrast, have risen by just 1.5%, with strong competition among tried and tested generic products, said Mr Willis.

Andersons’ Richard King said that prices for many ‘under the radar’ items were also rising, for example, vet and medicines, grass seed, and general consumable stocks. General inflation was affecting wage and other costs.

“Rents are also creeping up – we have seen some quite scary rent tenders.” Livestock producers would probably have to wait until the end of winter for signs of lower feed prices, said Mr King.

The AF AgInflation Index was launched in 2006, attributing a base figure of 100 to both food prices and farm inputs.