Rising food prices ‘won’t reach farmgate’, farmers warned

Farmers will miss out on rising food prices this year, as new evidence shows supermarket inflation is unlikely to translate into higher farmgate returns.

New intelligence from the Bank of England suggests food price inflation will climb to 6-7% through 2026.

This is fuelled largely by higher energy, fuel and fertiliser costs linked to ongoing instability in the Middle East.

However, because these increases are cost-led rather than demand-driven, the uplift is unlikely to be passed back to the farmgate, leaving many producers facing tightening margins.

See also: Middle East turmoil sparks renewed food security fears

A new Bank of England report has identified agriculture as a sector under “elevated financial stress”.

It warns that rising oil prices are feeding rapidly into input costs, particularly fuel and transport, with additional pressure from fertiliser and energy markets.

The NFU said the findings reflect what farmers are already experiencing on the ground, with costs continuing to climb while returns remain uncertain.

NFU deputy president Paul Tompkins said the disconnect between retail prices and farmgate returns is becoming increasingly acute.

“This report will come as no surprise to farmers and growers,” he said.

“We have been seeing higher electricity, fuel and fertiliser costs adding further strain to already stretched farm budgets.

“Now, this report suggests food price inflation is expected to reach 6-7% through the year due to rising costs, yet farmers are unlikely to see much of that return.

“This is something that needs to be taken very seriously – farmers and growers cannot absorb additional increases in costs.”

In contrast to previous inflationary periods, when stronger prices helped offset rising costs, current market conditions are limiting the ability of the supply chain to pass value back to producers.

With consumers remaining highly price-sensitive and retailers under pressure, farmgate prices are expected to lag behind increases seen on supermarket shelves.

Livestock and dairy producers remain highly exposed to feed, fertiliser and energy costs, but arable farms are also under pressure, as rising input costs outpace often volatile or weakening crop prices.

50% food prices spike

Separate analysis from the Energy and Climate Intelligence Unit (ECIU) think tank highlights the longer-term scale of the challenge.

It projects that food prices could be 50% higher by late 2026 compared with levels at the start of the cost-of-living crisis in mid-2021.

The increase is being driven by a combination of energy shocks, climate impacts and ongoing global instability.

With rural households also facing rising energy and transport bills, the Bank of England has warned that financial pressures are extending beyond farm businesses and into the wider rural economy.