Soaring production costs over the past two years have pushed some leading UK horticulture businesses to shelve growth plans, putting the future of the industry at risk, a new report commissioned by the NFU has found.
The report, published today and compiled for the NFU by agrifood consultancy Promar International, found production costs had increased by as much as 39% in the past two years.
Key hikes contributing to this rise were energy costs which rose by 218%, fertiliser by 47% and labour costs by 24%.
NFU horticulture and potatoes board chair Martin Emmett told The Grocer “we’re now in a climate where people are trying to identify opportunities to see some price deflation but as the Promar report quite effectively highlights, we are still facing cost price inflation”.
The crops impacted most by these increases include tomatoes, apples, lettuce, strawberries, broccoli and mushrooms, which saw increases of over 30% in the last two years. Meanwhile, production costs for potatoes, onions and carrots all increased by over 27% in the same period, Promar found.
Its report warned these production costs, along with the impacts of ongoing global volatility, were now seen as the “new normal”, with businesses not expecting the situation to change anytime soon.
Emmett said he was “seriously concerned” about the plans of growers to cut back production as they face ongoing “uncertainty” across a number of key areas.
“We are now facing the third year of unprecedented and highly volatile costs of production, coupled with ongoing uncertainty about the availability of permanent and seasonal workforce, and supply chains that return little value back to growers,” he explained.
He told The Grocer the supply chain “does need to be adapted to address that”.
Work has been done by growers to continue supply, he said. However, further consolidation in production and distribution was likely and “if pressures continue as they are, it will be unsustainable for some businesses”.
It comes as a separate report, published this week in collaboration with the Oxford Farming Conference by retail expert Ged Futter, argued the farming sector was no longer in a position to ‘subsidise’ cheap food in the supermarkets, with increasing numbers of businesses exiting the sector.
Farmers subsidising cheap food ‘cannot continue’, new report urges
The NFU report added the union continued to call on the government to “back our fruit and vegetable growers with action and ambition as set out in its own food strategy”.
“It is crazy to think, at a time when we want people to eat more healthily, we are only 50% self-sufficient in vegetables and 15% self-sufficient in fruit,” said Emmett.
At the end of last year, the government opened its long-awaited horticulture supply chain review for input from the industry, which Emmett said was “positive” and “urgently required”.
However, “many businesses are continuing to face difficult customer relationships with prolonged contract negotiations, and contract planning cycles out of sync with production cycles, making it tough for growers to plan long-term for their businesses”, he added.
“This needs to change.”
In the short-term Emmett said the government could provide more detail on the recent decision to include horticulture companies in the energy intensive industry support scheme, and pledge to a rolling five-year programme for the seasonal worker scheme.
He added the government could also improve communication around living wage price rises, as labour accounts for a significant proportion of growers’ costs and this year they were “left guessing up until the last minute”.
The report from Promar and the NFU follows new data published by the Labour Party that 6,300 agricultural-related businesses in the UK have been terminated since 2017. According to Labour’s data, this included nearly 5,000 meat, fruit, vegetable, and dairy producers.
But despite challenges facing the industry, Emmett told The Grocer he was still positive as “ultimately, we are going to have to realise we need to become more self-sufficient and make a bigger contribution to the global food economy as well”.
“I am convinced ultimately that recognition will come, but it will be easier to achieve that objective if we start to make the right provisions now.”
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