New Holland Harvesters in field grain wheat with John Deere Chaser Horizontal 1200px

Agflation: Production Cost Rises Squeezing UK Farmers

Up to a third of British croppers will grow fewer crops for food this year amid staggering rises in the cost of inputs, including fuel, fertiliser and energy – being termed “agflation”.

Many will switch their focus to fodder crops for livestock to reduce their reliance on fertiliser which has risen by up to 400% over the past few years.

This year, Lincolnshire grower Andrew Ward is considering using less fertiliser than normal across his 1,600 acre farm in response to growing input costs.

“If the fertiliser is too expensive and it’s not viable to apply the maximum amount, then the tonnes [of wheat] we’ll get will be less, which means there’ll be less food.”

With the price of diesel also increasing by 200%, the squeeze on profitability is placing an enormous burden on many UK farmers.

“I’ve never known farming to be so volatile and so stressful. I get up in the morning and sometimes I wonder, ‘why am I doing that?'” he said.

Pigs Might Fly (Away)

Likewise, Oxfordshire pig farmer Tom Allen said that economic conditions were putting a significant strain on the pork industry.

“We’re losing £30-£40 on every pig we produce. It’s totally uneconomic.”

The pig industry is still trying to recover from the impact of post-Brexit abattoir worker shortages which saw thousands of pigs culled and burned.

Suffering from more recent fuel and pig feed costs, Mr Allen has recently reduced his herd by a third, and laid staff off.

“What this means is there will be a shortage of pig meat coming quite quickly.”

“Prices will have to rise to cover our costs, let alone make a return on our investments. If it doesn’t, there won’t be any pig meat on the shelves at all, because the industry will just implode,” he added.

Agflation Not on Par with Food Inflation

Agflation – the new term for the inflation of farm inputs – stood at around 25% in May this year, compared with an increase in British food prices by just 8.5%. The UK Government has responded in part by releasing its new food strategy which included a £270m investment for innovations to boost yields, and a lofty target of 50% of government-procured food supplies to be locally sourced.

Some industry commentators are hopeful that food inflation may temper in the near future amid favourable growing conditions in many parts of the world.

“Supply may not be as impaired as we think because other areas will compensate for any losses from Ukraine, and it is happening across the board,” said Marc Ostwald, ADM Investor Services’ global strategist.

Australia’s predicted grain yield is one such contributor, along with the bumper corn harvest experienced recently in Brazil and easing conditions in North America.

A recent Rabobank report showed that wheat and soybean futures have softened by around 15% in June alone, along with a drop in the price of corn, coffee, sugar and cocoa.

The price of palm oil has also dropped by 30% as Indonesia increases global exports.

Sources: BBC, Bloomberg

Image: Photo by Al Mabin at Agrishots

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