Since the turn of the year UK ‘Agflation’ has been soaring driven by primarily by the Russia-Ukraine conflict. The latest estimates from Anderson's Agflation Index for April shows that it now stands at 30.6% – levels not seen in decades. All the while, general inflation, as measured by the consumer prices index (CPI) and food prices (CPI Food) have been rising at a much slower rate (circa 6%).

This means that many farm businesses are now feeling a severe squeeze on margins and this is set to continue for the foreseeable future.

The Russia-Ukraine conflict has had most effect on feed, fuel, and fertiliser prices. However, as these underpin most agricultural inputs in some form, cost increases are also showing elsewhere (e.g., contracting costs, crop protection products and building materials).

Several livestock sectors are showing signs of stress. The pressure is most pronounced in the pig and poultry sectors where feed traditionally accounts for 65-80% of production cost. Dairying and grazing livestock are also feeling the strain, particularly for those farms that have not bought forward their fertiliser.

Stellar year for arable sector

The arable sector is less affected for 2022 as most farmers have bought forward their fertiliser and output prices have hit record levels recently (contributing to the feed cost rises mentioned above). For many farmers in this position, 2022 is shaping up to be a "stellar" year – the value of the unharvested wheat crop has risen by more than 50% since it went in the ground. That said, significant challenges loom for 2023. High input costs and taxation on 2022 profits will stretch working capital requirements.

Michael Haverty the author of the report said that: "severe inflationary pressures are happening at a time when all farms in England will be facing cuts in BPS payments, which will reach 35% during 2023.

"Without significant price increases to cover elevated production costs, many farms will struggle. In such times, it is especially crucial to demonstrate competent cost management, particularly for farm advisors which many farm businesses are depending on to steer them through the current crisis."

• Andersons’ Agflation index builds upon on Defra price indices for agricultural inputs and weights each input cost (e.g., animal feed) by the overall spend by UK farmers. Andersons then provides a more up-to-date estimate of the price index for each input cost category.