The cost of farming inputs has continued to fall over the past year, new analysis has shown.
Overall, there was a 2.6% drop in input costs in the year to 30 September, according to farm supplies business AF’s latest annual AgInflation Index.
However, the business stressed this was “only part of the story” – and inflation is still hitting some categories.
Prices fell across five of the nine categories of inputs AF procures for members. fuel and electricity, crop protection products and fertiliser declined by 21.3%, 10.4% and 7.0% respectively.
But prices rose in the four other categories. Seed was up by over 9% and labour, machinery and contract & hire all climbed by 2%-3%.
Growing conditions also remained challenging, the index revealed, pointing to bad weather for crops such as cereals and potatoes, coupled with tighter supply in areas such as beef.
Despite the overall reduction in production costs and a corresponding increase in the Retail Price Index of just over 2% for a basket of food, AF said retail price hikes were “not enough to cover the high costs of farming”. RPI for food stood at an average of 186 points, it said, while aginflation stood at 274 points on its index.
“Although the headline fall in AgInflation is encouraging, the devil is in the detail,” said AF CEO David Horton-Fawkes. “Our members are running their businesses on wafer-thin margins and there is a big impact in small differences.”
The changes in production costs had the following impact on farming enterprises:
Cereals and OSR – Figures showed a reduction in the cost of growing cereals and OSR of 2.16%, while RPI for bread and margarine has increased by almost 4%. The reduction in variable costs would not, however, alleviate financial threats to overall margins from “tricky establishment conditions followed by lower average yields in harvest 2024”.
Potatoes – Costs to produce increased by just under 1.5% compared to 2022/23. The price paid for consumers over the past year “went a good way to cover that as the cost to shoppers for stored potatoes and new in the past year increased by 19.25% according to the RPI, driven by lower volumes in store from a difficult 2023 harvest”. Adverse weather has made conditions difficult this year too, AF said.
Sugar beet – Production costs increased slightly by 0.35%, and the price of granulated sugar in the shops has increased again, but only by 1.74%. The total area for UK sugar beet in the ground this year is the highest for more than three years at just over 100,000 ha, “perhaps driven by optimism about year on year improving margins for this crop”, the index reported.
Dairy – The cost of dairy farming has followed the input prices downwards, helped significantly by drop in the cost of energy by 21.28% from record highs, and fall of 5% in feed and medicine costs to contribute to overall deflation in inputs that fell by 3.53%. However, unlike the other four of the production sectors, milk prices paid by consumers show no increase in value in the RPI.
Beef and lamb – Production costs have reduced in the year to September 2024 by 2.36%. The retail price of minced beef and lamb has increased by nearly 5% over the same period. During the same period government statistics revealed the falling total numbers of cattle and calves (-2%) and sheep and lambs (-4.3%).
No comments yet