Fruit and veg growers are still not receiving sufficient returns from soaring food price inflation, with many facing an uncertain future in the face of crippling input and labour cost increases, research for the NFU has shown.
A new report, prepared for the NFU by agricultural consultancy Promar International and published today, revealed already sky-high costs of producing key fruit and veg items had increased even further this year – rising by as much as 27% over the past 12 months, with products such as tomatoes, broccoli, apples, and root vegetables most affected.
Many growers were now “walking away” from retail contracts, cutting production by as much as 20% or diversifying into other more profitable crops such as oilseed rape and wheat, the report warned. NFU horticulture and potatoes board chair Martin Emmett said if the sector’s cost pressures continued “it will be simply unsustainable for some businesses to continue as they are”.
The main inflationary drivers were energy costs (up 165% on average), fertiliser (up 40% on average) and workforce costs (up 13% on average), the Promar research found, while this year’s volatile weather had also brought significant challenges.
Other standout input cost rises included packaging (up 23%), transport (up 28%) and agricultural chemicals (up 18%), while even seed costs had also risen significantly, at 8% higher than a year ago.
These costs translated into a 27% increase in the amount of money required to produce tomatoes, a 25% increase for broccoli, 23% for apples and 21% for onions. Lettuce growing costs, plus those for strawberries, potatoes and carrots rose by 20%, while the cost of producing mushrooms was up 17%.
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The report was based on 21 interviews with leading producers and packers of horticultural produce across the UK, alongside research from other sources from the likes of the ONS, Defra, agri supplies business AF Group and consultancy Andersons.
The findings indicated a rapid “escalation” of rising costs previously outlined by the NFU and Promar in April – challenges that meant many growers were already facing an “existential crisis”.
But despite food and non-alcoholic beverage inflation rising by 14.6% in the 12 months to September [ONS], the market had “not absorbed the real cost of food inflation”, Promar said.
“Nothing has got fundamentally better for horticultural producers in the past six months,” the report added, with costs continuing to increase sharply for growers.
“Some, but not many, producers have been able to pass the increased costs of production to retailers since the spring of 2022,” it added. But the majority had been “unable to do this at the required rate to keep pace with their increasing costs of production”.
And in some cases, no increase has been achieved at all.
As a result, “many horticultural producers in the UK are still struggling for any degree of profit and/or are making a straight loss”, Promar warned, with most growers not expecting the situation to get any better in the next six to 12 months.
The situation was further exacerbated by uncertainty over future energy costs following the end of the government’s six-month price cap. “This means the situation could yet get worse for British growers,” Promar said.
“The UK horticulture sector is ambitious, innovative, and strives to be the best in the world, producing iconic products like strawberries, apples, and asparagus,” added the NFU’s Emmett.
“Despite challenging political and supply chain pressures, it has long held an ambition for growth, matched with government’s ambition for UK horticulture as set out in its National Food Strategy,” he said.
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“But the viability of producing fruit and vegetables is under the greatest strain I’ve ever seen. A continued lack of a reliable workforce, both in permanent and seasonal roles, combined with sharply rising input costs, particularly for energy, has put many businesses on a knife edge. Producers of high-energy crops in particular, such as top fruit, root vegetables and crops grown under glasshouses, have severe doubts about their business viability.”
Growers were doing “everything they can to mitigate the impacts, but they cannot do it alone”, he warned.
“If this pressure continues, it will be simply unsustainable for some businesses to continue as they are. In these unprecedented times, stability and confidence are critical.”
The NFU had been in contact with the Groceries Code Adjudicator to ensure he was aware of the pressures growers were under and to “alert him to the unfair buying tactics and practices many of our members face during discussions with retailers”, Emmett pointed out.
“It’s critical that UK businesses are able to have constructive dialogue with their customers about the pressures they are facing,” he added.
“To safeguard the future of British fruit and vegetables, we need sustainable farmgate prices, a commitment from government to lift the cap on the seasonal worker scheme and increase the number of visas available to meet the sector’s needs, and for government to recognise agriculture and horticulture as a vulnerable sector in regard to energy security.”
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