Input costs rising faster than inflation

Farm input costs are rising faster than food prices, the latest agricultural inflation figures have revealed.

UK inflation is running at just over 3%, but input costs rose by 5.27% over the 12 months from September 2009 to August 2010.

The Anglia Farmers Agricultural Inflation Index is based on price information covering 130 products from the buying group’s purchasing office.

The method is similar to that used for the retail price index (RPI) where products are grouped and then weighted.

Farmers’ profit margins are likely to be squeezed further, the index shows.

“Food price inflation has risen by 3.3% in the last 12 months,” said Jim Alston, who collates the information.

“This reflects the rise in cost to the consumer. However the cost increases experienced by the producer of those foods is rising at a faster rate.”

The index shows that beef and lamb production costs have risen fastest, increasing by 9.3% over the last twelve months.

This is largely due to higher feed costs driven by the uncertain market in grains and protein. This has also impacted on dairy production (+6.49%).

Anglia Farmers chief executive Clarke Willis said forward planning and risk management were key to mitigate the impact of higher prices.

“We’ve experienced incredible volatility in the marketplace,” he said.

“It is more important than ever for farmers to get together and benefit from group purchasing.”

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