Mixed outlook for farmers on ag-inflation

Many farmers face a tough harvest because input costs remain stubbornly high, suggest the latest ag-inflation figures from the AF Group.

Average farm input costs fell by 3.17% in the six months to 31 March – the first decrease in more than three years, according to the group’s  interim Aginflation Index. But farmers still face contrasting trends.

Two out of nine input categories saw double digit negative deflation with the cost of fertiliser and fuel falling by 30% and 23% respectively. Three other categories – machinery, contract hire and animal feed and medicine – fell by 2.3%, 1.9% and 1.7%.

Mixed picture

But some other input costs continued to rise. Agrochemical costs were up by almost 13%. Rent and other business operating expenses increased by more than 7% with labour costs rising by 6.6%.

Farm enterprise types are also experiencing contrasting fortunes.

“The significant drop in fertiliser prices is, of course, welcome but many farmers bought their fertiliser when prices were still sky high and now output values are falling, so this could be a very difficult harvest,” said AF chief executive David Horton-Fawkes.

“It’s alarming that crop protection prices are continuing to rise, and we are encouraging our members to look beyond brand names and focus on active ingredients. If previous patterns continue, we should see these prices begin to ease next year.”

Enterprise types

Sectors experiencing lower costs include dairy (-4.84%), potatoes (-3.71%) and beef and lamb (-2.68%). But sugar beet production costs have increased by 4.75%, with cereals and oilseed rape seeing input costs rise by 0.56%.

“The dip in aginflation is very good news but it is too variable across different types of farm business to give much cause for relief,” said Mr Horton-Fawkes.

“The gap between the cost of production and the value of sales is still too wide and too variable.”

The total food Retail Price Index rose by 14.3% over the same six months. Retail milk prices saw a 44% increase with beef and lamb prices rising 16.3%. But these rises were still too low to offset higher farm input costs.