Cost control crucial in UK agriculture

Heady grain prices may grab the national headlines, but they only tell half the story.

Inflation

New figures from Anglia Farmers’ AgInflation Index show farm input price inflation rising far faster than food price inflation.

This has been the case since the index was launched in 2006 and the gap between the two has widened significantly in the last year.

Fertiliser, fuel, seed, machinery and feed have all seen price inflation in double figures in the past 12 months, while general inflation continues to push up other costs including wages.

UK agriculture’s fuel and fertiliser prices are driven by those on world markets, so there’s little doubt that we’re probably in for another bumpy ride on the input/output rollercoaster for 2012.

Efficient buying

Being largely price takers for both inputs and outputs is not a comfortable position for farmers, although the effects of this can be mitigated by efficient buying groups and a competitive supply industry.

It’s a familiar message but producers need to know all possible costs and to take every opportunity to reduce risk.

Harvest 2012 could be an expensive crop to produce and if world crop acreage expands, prices could look very different to those at harvest this year.

Opportunities

But there are some opportunities. Recent developments in the agricultural fuel market have brought producers the opportunity to offset risk by forward buying. However, with no global future market in fertiliser, the openings are limited in this area.

In the meantime, the AF AgInflation figures will be very valuable to growers negotiating crop contract prices and rents. They’ll also provide ammunition in the battle for public understanding of food production costs. It’s important, after all, that people get the full story, rather than just the headlines.

Editorial by FW Business Editor Suzie Horne