Aginflation rate falls faster than food retail prices

14th November 2023 | Agricultural Inputs, Arable, Farm Business, Livestock

The latest AF Agricultural Inflation Index, for the year ended September 30th 2023, reveals a fall in the average cost of farm inputs, but an increase in some categories. A rise in geopolitical tensions, this time in the Middle East, points to more energy and fertiliser price rises.

The farmer-controlled purchasing group’s figures, measured from its procurement data, show an average input cost reduction of 4.7% year-on-year. Six of its input categories saw lower prices, including electricity (down 58%), fertiliser (down 49%) and fuel (down 15%). But this was partially offset by increases in the remaining four categories – farm office operating costs (rent, interest etc) rose by more than 11% and crop protection costs by nearly 10%.

Aginflation by Input Class

By enterprise, the AF Aginflation measures an average 2.1% reduction in the cost of growing cereals and oilseed rape compared to 12 months earlier. “These figures are encouraging, given the movements in fertiliser and fuel costs over the last couple of years, but mask the anticipated effects of the very difficult 2023 harvest and autumn,” comments the group. Meanwhile, the Retail Price Index (RPI) for bread and margarine increased by 1.9% over the same period.

The cost of growing potatoes fell by 6.08% over the latest year, while the retail price increased by 4.4% RPI. Sugar beet production costs rose by 7.15% in the year to September 2023, but the shop price of granulated sugar was 51.3% higher.

For livestock, dairy farm costs were 9.4% down on the previous year. However, the farmgate milk price fell faster over the same period, with the AHDB measuring the GB all milk price at 37p/litre or lower at the end of September 2023, down from 52p/litre twelve months earlier.

Beef and lamb production costs were down 5.2% over the latest year while the retail price of minced beef and lamb rose by nearly 11%.

Aginflation by Enterprise

By comparison, AF finds the total food Retail Price Index, measured by a “basket” of typical foodstuffs, rose by an average of just over 12% in the year ended September 30th, repeating the previous year’s trend. “The gap between costs of production and retail prices has narrowed but is still double the size of what it was a decade ago,” notes the group.

Aginflation Index

“Fertiliser prices have taken a nosedive from the dizzy heights of 2022, with all major products coming back by between 40-50% twelve months on,” states AF fertiliser procurement manager Josh Joachim. “Whilst it’s been a better year for our members in terms of price per tonne, we are now witnessing some upturn and nervousness going into Q4 2023 and Q1 ’24.

“The conflict between Israel and Hamas has implications for P & K prices, as Israel is a major exporter of these commodities. Natural gas prices are on the rise (currently double what they were back in June) as we move into our winter period of requiring more energy for heating. AF is advising growers to lock in some product for 2024 as cropping plans become clearer – 72% of members who buy from AF have already ordered fertiliser for next season.”

AF chief executive David Horton-Fawkes adds: “One of the simplest ways for farmers to reduce their costs is to maximise their spend through a buying group such as AF. Clearly, the greater the volume of inputs we buy on behalf of farmers, the better the economies of scale and market share we can achieve.”