Annual results from the Anglia Farmers AgInflation Index show that the input costs for producing food by farmers and growers are up by 3.38% in the twelve months to the end of August 2012 but that deflation in certain key areas such as fuel and fertiliser are masking significant increases in other areas such as rents, rates and finance (up 12.6%) and animal feed and medicine (up 10.8%). 

Individual enterprises show the cost of producing beef and lamb has gone up by 5.34% and dairy by 4.64%.  In comparison combinable crops has risen by 1.95% in the same period marginally ahead of sugar beet but potatoes have seen an increase of 4.15%.

The AF AgInflation Index reflects the changing expenditure of agricultural production.  It is a weighted average of nine cost centres and 132 cost items.  Importantly, costs are noted when they are experienced rather than when the inputs are used and the prices reflect prudent purchasing practice so may include, for example, fertiliser purchased but not applied until the following year.

The index began in October 2006 at a base figure of 100 (see table attached).  The right hand column shows considerable increases across all sectors with animal feed and medicine now overtaking fertiliser with the highest level of increase over the last six years of 120%.

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The AF AgInflation index is based on a similar model used for the UK Retail Price Index.  Products are grouped and weighted and, using a typical mixed arable and livestock farm, the products are attributed to different farming enterprises.

A comparison with the Retail Price Index is also significant from a farmer’s point of view.  The gap between AgInflation and the RPI continues to indicate that farmers’ costs have increased nearly twice as much as the RPI and that the gap has grown over the last year.  Comparing figures since 2006 at the base rate of 100, the RPI is now 135 and AgInflation Index is 167.

Jim Alston, the former AF director who developed the AF AgInflation Index said: “There is a stark contrast between corn and horn this year.  Beef, lamb and dairy costs have increased markedly, while cereals and rape have benefitted from lower fuel and fertiliser costs.  Dairy now shows the greatest disparity between the rising cost of production and the very limited rise in liquid milk retail price.”

“Potatoes are also coming under increased pressure as costs have risen by almost 5%, though in this case the retail price indicates that there should be enough margin in the system to adequately compensate growers,” Jim added.

Clarke Willis, chief executive of AF, said: “our ability to save members money on their farm inputs and a whole range of other goods is an absolute necessity for them to remain profitable, especially for members with mixed and livestock operations.”