AF’s latest and Interim Aginflation Index has revealed the cost of farming inputs has increased by another eye-watering 23.28% in just six months to the end of March 2022.

This increase comes on top of the almost 22% increase recorded in the annual Index recorded in the year to September 2021.

Four out of the nine categories of inputs saw double digit inflation with animal feed, fuel and fertiliser seeing greatest increases at 27%, 29.4% and 107.7% respectively.

All farming enterprises avoided double digit inflation

The figures in the AF Interim Aginflation Index show that no farming enterprise has been able to avoid double digit inflation. Cereals and OSR production show the highest increases in costs at 28.05%, and sugar beet growing as the lowest but still at 18.97%.

The total food Retail Price Index has risen over the same six months period as the by an average of 5.6%, beginning to follow the sharp upward curve of Aginflation but not at a rate to supply prices to farmers that cover their increased costs. 

Every £100 you needed a year ago you now need £150 to run your business in the same way

The only food group to show negative inflation is potatoes at -2.3%. The AF Interim Inflation Index shows costs to that category of farming enterprise have risen by 26.72% giving a combined total of 29.02%, recording greater effect on margins than cereals and OSR.

The dairy enterprise category has inflation reaching 21.32% in the last six months. However, the increased value from milk retail of 19% is closing the gap.

The AF Aginflation Index is a useful tool for farmers of a wide range of crops to review their expenditure and procurement partners.

AF Member Tony Bambridge of B & C Farming Limited says, “The real benefit of the AF Aginflation Index is its integrity and independence, meaning farmers and the wider food supply industry can rely on this independent data to illustrate the true cost of inflation. For every £100 you needed a year ago you now need £150 to just run your business in the same way. This really robust data that gives the Index is incredibly useful to us in our discussions with our customers. The critical thing is can we retain that margin that we need?”.

In Yorkshire, carrot and cereal growing AF Member Rodger Hobson comments that the value of the AF Interim Aginflation Index is useful because “it’s crystallising what we on the ground already knew is happening. And that we have to get the message out there so people understand the challenge we are facing”. It is also making him question the future of forward contracts. “What looked like a sensible deal that we signed in December (before the war in Ukraine and other challenges) does not look so good now. How can farming have forward pricing when things are so volatile?”.

Certainty of supply

Volatility is part of the problem over the period measured but so has availability. Head of AF Crop Inputs Matt Kealey says, “The turbulence in the fertiliser markets has been challenging but, through AF, Members have secured product despite early concerns regarding availability. The value to Members in core sectors like fertiliser and crop protection products is the AF procurement teams’ supplier networks and real time market intelligence.

Ever mindful of the inflationary pressures for farmers, AF exerts pressure on the supply chain to them. For example, according to Kristian Dunham AF Head of Livestock Inputs and General, this spring Members faced a price increase of 22% on the key lambing vaccine for ewes.  AF negotiated an exclusive postponement until June 2022 for sheep farmer Members on this business-critical vaccine.

Monitoring aginflation helps farming business

As ever, the latest Aginflation Index from AF is eagerly anticipated by many in the farming sector. We hear from Members how they use the facts in our report in their negotiations with buyers.

AF Chief Executive David Horton-Fawkes says, “The evidence in our latest Aginflation Index illustrates the crisis many farmers are facing, and the consequences will be felt by all of us in 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 because 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 numbers reveal that the whole supply chain web needs to reset to secure affordable food in the UK and beyond.”