The AF Group’s annual Aginflation Index, measuring the rate of farm input inflation, has measured a 34.15% increase in the year ended September 30th 2022, after a 22% rise in the previous twelve-month period. All farming enterprises were subject to double digit inflation, which AF warns is becoming an “existential threat” to many farm businesses.
The co-operative monitors price increases across its £250 million annual procurement spend on behalf of members. In the latest full year, it has recorded rises of more than 10% in seven of the nine input categories comprising the Index. Fertiliser saw the largest increase, with cost increasing by 133% over the year, followed by fuel and power at 42.8% and animal feed and medicines at 36%. Seed inflation was measured at 22% and that for crop protection products at 13%. Farm labour costs were up by 6% in the period.
By enterprise, cereals and oilseed rape production was subject to a 40.11% rise in costs, with potato production just under that figure at 39.65% and sugar beet growing at 29.62%. Dairying costs were up by 36.94%, while beef and lamb production saw a 34.8% increase.
AF’s analysis compares the Aginflation rate to food prices paid by consumers, and finds that retail prices lag farm cost increases, with the gap getting wider – save for liquid milk. The Group notes that the total food Retail Price Index (RPI) for a standard basket of foodstuffs rose by 13.1% over the September 2021 – September 2022 period.
“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,” it states.
The exception is pasteurised milk with a retail price rise of 44.2%, compared to the dairy Aginflation figure of 36.94%. Elsewhere, the gap between cost of production and retail price is widening – 18.1% for beef and lamb, 20% for sugar, bread and margarine, and the widest difference for potatoes at 29.1%.
“The results of our latest Aginflation index can only be described as alarming,” comments AF Group chief executive David Horton-Fawkes. “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.”