AF’s latest October Aginflation Index has revealed the relentless upward trajectory in the cost of farming inputs which have jumped by an eye-watering 34.15% from September 2021 to end of September 2022.
This annual increase is way higher than the almost 22% increase recorded in the previous annual Index recorded in the year to September 2021.
Seven out of the nine categories of inputs have seen double digit inflation with animal feed and medicine, fuel and fertiliser seeing greatest increases at 36%, 42.8% and 133.8% respectively.
All farming enterprises measured take a hit
The figures in the latest AF Aginflation Index show no farming enterprise has avoided double digit inflation. Cereals and OSR production show the highest increases in costs at just over 40%, but potato production shows just under 40%, dairying is next at 37%, beef and lamb only a little lower at 35% and sugar beet growing as the lowest, but still with costs up, at almost 30%.
Shop shelf prices not up enough to compensate for higher farm costs
The total food Retail Price Index for a basket of foodstuffs has risen over the same one-year period by an average of 13.1%. While this is the steepest annual rise since AF Aginflation Index monitoring began in 2006 and is beginning to follow the sharp upward curve of Aginflation, it is still far below the rate to supply prices that cover the increased costs being borne by most farmers.
The exception to this is for pasteurised milk which has seen an increase in retail price of 44.2% which is a little above the Aginflation for dairy farming of 36.94%.
By comparison, the gap between the increased costs to consumers of other foods and the actual costs of production is widening with serious shortfalls for beef and lamb (18.1%) granulated sugar, bread and margarine (all about 20%) and, worst of all, potatoes (29.1%).
Monitoring aginflation by category helps farming business
In the AF Aginflation data, some categories show lower than overall average price rises for the period including labour (6%), contract and hire (almost 9%), crop protection products (just over 13%) and machinery and hire (25.4%).
As ever, this latest October Aginflation Index from AF is eagerly anticipated by many in the farming sector. We hear from Members how they use the facts in our report in their business planning and negotiations with buyers and what they are doing and how they are using AF to withstand the current aginflationary pressures.
“We don’t carry anything in stock we don’t have to, to ease cashflow. Producing our own energy from solar has slashed our electricity bill. We have changed to organic fertiliser and direct drilling to cut costs. AF is our guardian angel watching out for us for the best prices for inputs we need.” Andrew Shackell, Penlyn Estate, Wales.
“We are getting feed cover for our three dairy herds to March ’24, buying fertiliser forward, and our electricity is from a renewable source and is fixed for 4 years from 2021 (that was good move!). We’re going to up the number of cows to lower costs of production and do anything our buyers ask to get a premium. Being an AF Member is so handy as we don’t have to have multiple accounts all over the country for our three different sites. One call or email and it all goes on one account. That’s good.” Charlie Crotty, Evolution Farming Ltd, three dairy herds in West Yorkshire and East Anglia.
“We have soil mapped every field. Now using variable rate. Should have been doing that before, probably, but that is meaning that we are not going to need to apply P and K. Yes, dairy prices have tracked up with a six-week lag after input prices started increasing dramatically because processors needed to be sure of supply. David Campbell, JR &T Campbell, arable and dairy farmer in North Ayshire, Scotland.
“We measure our costs as being up 40%. So, this AF Aginflation Index is no surprise to us and it’s something we’ve had to manage. The biggest one for us and the 18 other farms we support is to pass on the costs. The main thing for us is to spend time with our buyers, really educating them on our costs. This year we put through four price increases to customers. In the past five years we had only put in one price increase. The AF report is really useful because it’s data that is not from us, but from validated third party, that we can use to show this is the reality. Martin Glinski, St Ewe Free Range Eggs Ltd, over 200,000 birds from 17 producer farms, Cornwall.
AF Chief Executive David Horton-Fawkes says, “The results of our latest Aginflation index can only be described as alarming. The spiralling costs of farm inputs exceeds anything we have seen since we first published our index in 2006. These findings are an existential threat to many farmers and we are seeing signs that some businesses are beginning to struggle and the consequences will be felt by all of us. We are urging our Members to plan their cash flows and use our index to work with processors and advisors to confront these brutal facts because business as usual in 2023 is not going to be an option. The energy price cap will provide only temporary respite because the cap is limited and is not an open-ended commitment. Farmers are tough and resourceful, and we’ve all had our fill of doom and gloom, but no one can afford to ignore these results.
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