The cost of farm inputs is on the increase once more after a short period of respite.


A report published twice a year by buying group Anglia Farmers, shows that in the last six months overall costs have risen by some 2%.

The Agricultural Inflation Index suggests that much of this rise is driven by spiralling fertiliser prices and it is the dairy sector that has been hit worst, where costs have risen by nearly 4%.

Since Anglia Farmers started to index farm inputs prices in October 2006, the group has seen the industry’s overall costs rise by almost a third and the dairy sector suffer hikes of 34% over that three-and-half-year period.

Speaking at the Norfolk Farming Conference on 25 February, Anglia Farmers chief executive Clarke Willis explained: “The fertiliser market is volatile and will have a significant effect on overall costs whatever the enterprise. We have seen a rise in costs for every sector with the exception of sugar beet, which has remained more or less static.

“Where arable input costs are heading depends directly on fertiliser. World demand, production capacity and exchange rate will be key.”

He expresses concern that the inflation of the last three years is taking its toll on the balance sheets of many dairy herds across the country.

“The rise in livestock sector costs – dairy at nearly 4% and beef and lamb at 3% – has been lead by increased protein and labour costs. While energy prices are likely to fall for the livestock farm, this will be counteracted to some extent by the changes in cost of feed ingredients.

“Volatility in the fuel market seems inevitable too and chemical pricing for this year has not yet settled. Added to this, with an election on the way and problems in the economy, interest rates are an unknown factor.”

INPUTS PRICES ON THE UP

Input

Inflation

Weighted contribution to overall inflation

Index since Oct 06

Seed

-2.3%

-0.14%

125

Fertiliser

18.2%

2.01%

165

Chemicals

-1.8%

-0.2%

120

Animal Costs*

6.3%

0.76%

168

Contracting and hire

-0.1%

0.01%

114

Machinery

-2.1%

-0.31%

128

Fuel

-11.7%

0.59%

125

Labour

1.7%

0.24%

115

Rent, Interest, Property, Office

2%

0.35%

104

Ag inflation for Sept 09 to Feb 10

2.1%

   

* includes feed, veterinary, utilities, buildings, field maintenance and finance

 

HOW IT’S CALCULATED

The Anglia Farmers’ Agricultural Inflation Index is based on actual changes in the prices of 100 selected products handled by the group’s purchasing office. The method is similar to that used for the retail price index (RPI) where products are grouped and then weighted.

Overall agricultural inflation calculations include nine input streams cost and the impact of these is then weighted according to usage across five enterprise types covering combinable crops, potatoes, sugar beet, dairy, and beef and lamb.