Aginflation slows, but still outstrips rises in the cost of food

Agricultural input cost rises appear to be slowing down, but still outstrip increases in the price consumers are paying for food, and the value of produce as it leaves the farm gate.

On the day when a Daily Express headline referred to a “Staggering 16.7% rise in food prices”, the latest figures from farm business consultants Andersons put the annual aginflation figure at 18.7%.

See also: 2022 – a  year of better returns, but ag-inflation casts a shadow

“There is still a gap between the food price inflation consumers face and the increased input costs farmers must manage,” said senior research consultant Michael Haverty.

“Therefore, UK agriculture continues to experience a cost-of-farming squeeze.”

This squeeze is exacerbated by the fact that farm output values – based on Defra price indices and actual commodity values – have only gone up by 11.1% over the same 12 months to January 2023.

“Throughout 2022, agricultural input cost inflation generally surpassed price rises for agricultural outputs,” said Mr Haverty.

Slowdown

The good news, however, is that the aginflation figure is declining, having peaked at 26.3% in July 2022 and now standing at 18.7%, according to Andersons’ data.

But output inflation is falling faster, having peaked at 22.9% in October, but now down by half to 11.1%.

“This signifies a challenging period ahead for farmers as the gap between input cost rises on the one hand and output prices on the other continues to widen,” warned Mr Haverty.

“Global Dairy Trade auction prices, taken as a proxy for global milk prices, have declined by 6% in the past month.

“Feed wheat prices [£213/t] are also down by 6% versus December and are returning to levels seen this time last year. The implications of these trends will require careful consideration.”

Mr Haverty also noted that, while aginflation may be slowing, general food prices for consumers are still on the up, due to a six-month lag effect.

Given the cost-of-living crisis, this is expected to maintain the pressure on supply chain margins.