Your AF CEO November update

Last month’s Aginflation report revealed a 34.1% increase in the cost of farm inputs over the 12 months from Sept ‘21.  This eye-watering number exceeded even our own estimations and the disparity between Aginflation at 34.1% and RPI at 14.4% is the widest gap we’ve seen since our records began in 2006.  

The same but different times

It’s not quite the highest rate of inflation we’ve ever reported. In 2008, at the height of the financial crisis, Aginflation rose to 35.5%. It then plummeted to -6.6% in 2009.  However, we believe current aginflation is not going to abate any time soon.

Back in 2008 we were dealing with just one crisis but now, in 2022, we are confronted by multiple impacts from supply chain disruption, a weakened pound, the war in Ukraine, chaotic political leadership, and the legacy of money printing on a massive scale.

As in previous years, the impact or pain from Aginflation is unequally shared, with pig and poultry rearers and growers of fresh produce bearing the full brunt of higher input costs.

Power for future energy price volatility

Electricity prices still have the potential to torpedo businesses across the UK.  The price cap is welcome but it’s double previous unit costs and will expire in April ’23, with no assurance that farmers will qualify for continued support. 

It’s also worth remembering that there is a cap on the cap.  Government support is limited and might not be sufficient to cover wholesale costs if prices escalate again.  We’ve had a warm autumn and gas prices are falling but when the weather turns wintry and if there is no end to the war, I fear we could yet see another spike in energy prices.

Doing the difficult

Managing energy supplies in these extraordinary circumstances is extremely challenging. No one is immune from the impact of the rise in wholesale gas and electricity prices.  AF manages over 8,000 electricity sites and our scale and influence ensures we have daily access and dialogue with energy providers.

Electricity billing has been a source of deep frustration but the credits and rebills that Members receive are the direct result of us validating invoices and challenging suppliers to get each Member the accurate invoice for energy used.

Stronger together

So, what can your buying group do for you at a time of such seismic turbulence? The simple answer is a lot. There is so much we can and are doing for our Members and it has never been more important for farmers to stand together in the face of such relentless disruption. 

It’s logical that someone who buys a hundred million units of an input is going to have more influence – and get a better price – than someone who buys just ten thousand. There will be occasional exceptions, but they are few and far between.  Hearsay, bravado, and sales-spiel shouldn’t be confused with hard data and evidence of what a buying group can procure.

Assertively protecting your margins

Every month we respond to 125,000 emails from Members and make 25,000 phone calls a month.  We spend hours each day in conversation with suppliers so that you and other Members don’t have to and can concentrate on running your business.

We work collaboratively with suppliers but there are tensions. We wouldn’t be doing our job properly if there weren’t. Yes, we put pressure on supplier margins. Yes, we demand value and transparency. Yes, we will insist on certainty of delivery.

Not every supply partner can deal with our demands. A supplier will occasionally try to seduce a Member away from the Group with a loss-leading price.  But know this: the benefit will likely be short term and in due course prices to you soon creep up without the constant scrutiny and monitoring by our procurement teams.

Growing with certainty – with best choice and value of crop protection and fertiliser

Our biggest and most competitive input categories are Crop Protection and Fertiliser. This year our team of independent AF experts has been joined by ambitious agriprofessionals with extensive experience and qualifications in the manufacture and distribution of chemicals, seed and fertilisers. 

The team takes an independent look across the supply chain at multiple product options and prices.  We help you and other Members consider alternative options using our uniquely independent status and make the best product choices.  AF is not aligned to any distributor or manufacturer. We’re a not-for-profit business operating on a margin of less than 1%. Our only motivation is securing better value for our Members. 

What AF is and is not

AF is not a comfortable quango nor are we a rapacious corporate.  I am honoured to lead a co-operative, we’re a professional procurement business with a capable and committed team who are proud to work with the people like you who put food on our table and care for our planet.  

Everyone here at AF is acutely aware of the challenges you are confronted with. You, our Members, and your AF buying group are united in the same purpose, so we’re all on the same side. We’re not a supplier, we’re an extension of your farm office and your success is our highest priority.

David Horton-Fawkes

AF CEO

Save money. Save time.