Growers squeezed as input costs soar while grain prices lag

Arable farmers are facing tightening margins as rising input costs continue to outpace gains in grain prices, with the conflict in the Middle East having a significant impact on costs of production.

Since the start of the Iran conflict, red diesel prices have climbed by more than 50% and key fertiliser products have risen by over 30%, yet wheat prices have increased by only 5%.

Prices collected by Farmers Weekly on 22 April put ex-farm feed wheat at £172.8/t, only marginally higher than year-earlier levels.

Milling wheat averaged £185.3/t, maintaining a narrow premium over feed wheat.

See also: Farmers cut fertiliser use in response to rocketing prices

Traders say global grain supplies remain plentiful, although any adverse weather conditions could lend support to prices.

Looking further ahead, UK feed wheat futures opened at £183.50/t on 22 April for the November 2026 contract, signalling only modest price gains for next year’s crop.

Inflated red diesel prices at such a busy time of year is having the greatest impact on growers, according to NFU Combinable Crops Board chairman Jamie Burrows.

Mr Burrows said: “The supply chain is limited in how it can react to an increase in demand, with farmers understandably seeking to keep their fuel tanks refilled whilst fieldwork continues, but suppliers are often unable to commit to a price until the day of delivery.

“This will contribute significantly to reduced profitability, with higher input costs not being reflected in an increase in grain prices.”

The NFU has calculated that with red diesel prices increasing from 76p/litre to 119p/litre as a result of the conflict, typical on-farm fuel costs would increase by more than £10,000 for a medium-sized cereals farm and over £20,000 for a large cereal farm across a growing season.

“Combinable crop growers are already at their lowest level of profitability and confidence, and this only compounds the problem,” said Mr Burrows.

Farm businesses are also grappling with higher costs of fertiliser products.

Imported ammonium nitrate averaged £535/t for the week ending 10 April, according to AHDB figures, putting it up by £131/t since the start of the conflict.

A lack of availability of products is creating some issues, and while arable enterprises generally have stock for the current season, supplies for next year could prove more difficult.

Mr Burrows said: “Growers in the sector are concerned about fertiliser availability and prices for next season.

“New season prices are often released in late spring, when the impacts of the Iran conflict will still very much be being developed.”

The NFU is supporting wider industry calls for government intervention to help farm businesses facing immense input costs, such as offering bounce back loan schemes to aid cashflow.

The union has also suggested that the implementation of the UK Carbon Border Adjustment Mechanism from 1 January 2027, which imposes a carbon tax on imported fertiliser products, is postponed by a further 12 months.