Historic wheat prices struggle to keep up with rising costs

Analysis carried out by farm business analytics company Yagro show how, after accounting for inflation, ex-farm prices for wheat have fallen in recent decades.

Industry figures show 1t of wheat 50 years ago would be worth the equivalent to roughly £600/t today when factoring in inflation, putting it at more than three times current ex-farm prices.

The impact of this on farm businesses has been compounded by a significant increase in the cost of machinery, labour, and other agricultural inputs, which has left margins much tighter.

See also: Larger UK wheat crop forecast as prices remain under pressure

Data included in the graph (below) show inflation adjusted US wheat prices alongside relative tractor prices, with tractor prices surging by 66% in the past two decades alone.

Rupert Harlow, marketing manager at Yagro, said the cost of machinery used to be comparatively cheap to wheat both in the US and the UK.

“Back in the 1980s you could easily justify [buying new machinery] based off the returns for wheat, however that has changed.

“It is now essential to be able to justify investing in machinery, if you can’t justify the investment, you need to look at what other options are available to you.

“Can you afford to replace your combine or should you be having contractors come in?”

He added that improvements in productivity are no longer happening at the same rate as before the turn of the century and the cost of repairs and maintenance have also got comparatively more expensive.

Mr Harlow said: “Monitoring input and grain prices is going to become ever more important.

“You need to understand your true cost of production. Everything from your machinery, to what your fuel is costing you, because inputs are all rising.

“It is essential to know at least your break even point on a crop. In a particular year, what to do you need to sell it for to make money and where will you be losing money.”