AF Group measures half year Aginflation rate at 23%

3rd May 2022 | Agricultural Inputs, Farm Business

The latest AF Group Aginflation Index for the six months to the end of March 2022 measures a 23.28% increase in the cost of farming inputs. This follows a 22% increase in the annual index for the year to the end of September 2021.

The Norwich-based co-operative reports double digit inflation in four of the nine input categories it records for the index, while fertiliser saw a 107.7% rise since September; fuel 29.4%; and animal feed 27%.

Measuring inflation by enterprise sees all farming sectors affected by double digit input cost inflation. Cereals and oilseed rape (OSR) saw the largest increase at 28.05% while sugar beet had the smallest rise – although still 18.97% higher.

By comparison, the UK food Retail Price Index rose by an average 5.6% over the same six month period. While the food RPI is beginning to follow the sharp upward curve of Aginflation, the Group notes it is not rising at a sufficient rate to enable farmers and growers to cover their increased costs from the market.

For example, the retail value of potatoes shows negative inflation of -2.3%, while the AF interim Agflation Index shows potato growing costs to have risen by 26.72% in the last six months – a combined total of 29.02% which is a greater hit to margins than for cereals and OSR.

The AF Index measure dairy enterprise cost inflation of 21.32% in the last six months – but a 19% increase in the retail value of milk is closing the margin gap.
While price volatility is exercising farmer minds, the availability of key inputs when they are needed is also a problem. “The turbulence in the fertiliser markets has been challenging but, through AF Group, members have secured product despite early concerns regarding availability,” advises head of AF crop inputs Matt Kealey.

“The value to members in core sectors like fertiliser and crop protection products is the AF procurement teams’ supplier network and real time market intelligence.”

AF chief executive David Horton-Fawkes summarises: “The evidence in our latest Aginflation Index illustrates the crisis many farmers are facing – the consequences will be felt by all of society.

“The causes are deeply rooted and go beyond the appalling events in Ukraine and the continued lockdowns in China. Farmers are inherently resourceful, but cash flow now poses an existential threat to many businesses, as some farmers simply won’t be able to afford to grow crops or raise livestock next year.

“Beyond the immediate crisis, the combination of war and post-pandemic disruption highlights the strategic imperative to secure more resilient supplies of essential farm inputs and energy – and the need to develop more collaborative relationships with supermarkets and processors. Sadly, the most acute pain will be felt by those who can least afford to bear it, but these Agflation numbers reveal that the whole supply chain web needs to reset to secure affordable food in the UK and beyond.”