Farm input costs continue to outstrip output returns

Farm input costs are rising at more than double the rate of consumer price increases, with so-called “agflation” estimated at 7.8% in September, according to consultants Andersons.

This is the highest rate since early 2023, says the firm, with the rises being driven by the most volatile items in the farm cost base.

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Fertiliser prices, for example, were up 35% on year-ago levels, while energy and lubricants were up by more than a quarter.

In contrast, agricultural output prices were estimated to be 1.3% lower in September, effectively widening the gap between what farmers pay for inputs and what they receive to more than 9%.

With costs across the board well above where they stood five years ago, and little sign of any return to previous levels, UK agriculture is in its most “consequential” period in a generation, says Andersons.

This has combined with the phasing out of delinked payments, the reshaping of environmental schemes, climate change and disease pressures.

Andersons senior research consultant Michael Haverty says inflation has permanently reset the cost base of many farm businesses, and output prices have not reliably kept pace.

“When margins are this tight, the gap between the best and the average business is determined as much by the quality of decisions as the quality of farming.”

Retail pressure

Pressure on the food chain is also apparent from the latest analysis by the Association of Independent Meat Suppliers (Aims), whose monthly analysis of retail meat prices shows a slight downturn in September.

Chicken breast portions, for example, were 5.5% cheaper, while thigh fillets dropped 11.4%.

The one exception was lamb, which was up 71p/kg (4.25%).

Overall, however, retail meat prices were 0.74% lower in September than in August.

“I suggest that whilst British farmers and poultry processors have been battling the never ending rise in input costs, their overall cost of production is not being adequately remunerated at the supermarket checkout,” said Aims head of communications, Tony Goodger.

•  Andersons has recently launched a new service called Andersons Pro, providing access to the firm’s independent research and analysis in a single package.