Farm input costs fall overall

Lower fertiliser, seed, feed and fuel costs contributed to a 1.77% fall in average farm input costs in the year to the end of August.

Buying group AF’s six-monthly AgInflation Index tracks the cost of more than 130 farm inputs and has shown its first overall fall since 2008-9.

“The fall in the cost of fuel in particular reflects the continual reduction in fuel prices, with the price of a barrel now well below US$100 and predicted to fall further in the coming months,” said AF chief executive Clarke Willis.

Fuel prices fell 8.1% compared with an increase of 8.5% in the previous 12-month period, while seed prices dropped 14.1% after a 3.8% increase in 2012-13.

Fertiliser was down 6.2%, but chemical costs rose by 1.4% on high demand and increased production costs.

The Retail Price Index has fallen by 0.5% in the same period, marking the first time the cost of buying food has fallen since the AgInflation Index was first calculated in 2006.

However, there is still a significant differential between the rate at which the cost of farm inputs is changing and that at which the Retail Prices Index (RPI) moves.

Both were given an index of 100 when AF AgInflation figures were first calculated in October 2006 and the figures now stand at 169 (AgInflation) and 140 (RPI).

Hire and labour costs rose 4.3%, with the average craftsman wage up by 5%, while a 4% increase in contract and hire costs was driven by prices for tractor hire, which peaked last winter.

While input costs fell overall in the year to the end of August, these reductions are dwarfed by the huge falls in most farmgate commodity prices through 2014 – feed wheat has lost almost 40% of its value since January, deadweight steers have lost 11% or about 44p/kg deadweight, milk prices have tumbled about 16% and potatoes are worth about £20/t less than at the start of the year.

The AgInflation figures by enterprise show that production costs have fallen for all cropping, with potatoes down by 1.55%, combinable crops by 1.52%, dairy by 1.47% and sugar beet by 0.87%.

Prices paid by consumers have also dropped for many products – bread and margarine are down by 4.4%, potatoes by 14.7% and granulated sugar by 3.3%.

“Figures by farm enterprise have largely followed the market trends, with beef and lamb production costs down only 0.31%. While retail sale prices have increased very slightly (0.3%), livestock producers continue to be under significant pressure.”

Using information from AF’s buying office, the index is intended to reflect the changing expenditure of farming and is a weighted average of nine cost centres and 132 cost items. Weightings within cost centres and between them are based on average farm and grower expenditure.

See also: Farmers told to seek cover as prices ease