‘Cost of farming crisis’ is emerging, farmers warned

British farmers are facing “one of the most challenging margin environments in years” as the gap between rising input costs and falling output widens, suggesting that a “cost of farming crisis” is emerging.

That is the stark warning from farm business consultant Andersons.

It notes that farm input costs are now running some 8.4% higher than they were a year ago, at the same time as prices for agricultural outputs have fallen by 5.8%, “tightening the vice on farm profitability”.

The figures also show that “agflation” is also now running well ahead of the general consumer prices index (CPI), which currently stands at 3.3%, as well as the CPI for food, which is 3.5%.

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“Agflation is being driven primarily by continued disruption linked to the Iran conflict and the threat this poses to shipping through the Strait of Hormuz, through which about 20% of global oil and gas flows,” said senior research consultant Michael Haverty.

“Around 30% of global urea supply passes through the same chokepoint, pushing UK farmgate urea nitrogen fertiliser prices to around £650-£700/t.

“Ammonium nitrate prices are following closely given their linkage to gas markets.”

Immediate exposure

According to Mr Haverty, dairy farmers face the most immediate exposure, given their need for spring and summer fertiliser.

But global fertiliser shortages will also start to impact on UK farmers in all sectors in the latter half of 2026.

“What makes the current situation particularly difficult is the absence of any compensating uplift in output prices, in sharp contrast to 2022,” said Mr Haverty.

Milk prices are now about 25% lower than they were a year ago, while pig prices are 12% lower.

Beef prices are also around 10% lower than last year, though these were at near record levels in 2025.

And while cereal prices are improving as the Middle East conflict gives rise to supply concerns globally, UK farmers are increasingly concerned about yield, given recent dry weather in several areas.

Lower profitability

“This would also lower profitability at a time when the costs of purchasing fertiliser for next year’s crop will be much higher than last autumn,” Mr Haverty warned.

The Iranian conflict is also leading to cost pressures in other areas, such as fuel, electricity and machinery, with these effects expected to linger for some time yet.

Mr Haverty is urging farmers to keep a close eye on their costs and margins.

He suggests the firm’s Agricultural Budgeting and Costing (ABC) book can help in this endeavour.

“It is an indispensable reference for farm managers, consultants and lenders working to stress-test budgets and plan purchasing strategies in a volatile cost environment,” he said.