6 November 2017

Cost of agricultural inputs driven up by higher fuel price

The average cost of agricultural production inputs has increased 4.92% in the past 12 months to September 2017, according to new figures.

The main driver for the increase, according to Anglia Farmers’ (AF) AgInflation Index, was fuel price.

It rose 11.5% due to the increase in the cost of Brent Crude Oil per barrel (bbl) and a devaluation of Sterling against the US Dollar in the first half of the year.

AF Group Chief Executive Jon Duffy said: “Fuel is the primary driver in this latest AF AgInflation Index. In the 12 months to September 2017 Brent Crude Oil has increased from US$46bbl to US$55.9bbl.

“Couple this with an initial devaluation in the exchange rate between September 2016 and February 2017 of 1.31 to 1.25 US$/£, the past six months has seen the exchange rate strengthen to 1.33US$/£ in September 2017.

“All in, the global fuel marketing remains volatile with the ever-changing cost of Brent Crude Oil and the fluctuating exchange rate.”

Inflation hits all areas

It isn’t just fuel showing an increase, with all product areas recorded in the Index hit by inflation.

There was an 8.7% rise in fertiliser, 7.3% rise in seed and 8.5% rise in contract and hire.

Crop protection saw inflation of 0.9%, despite previously seeing deflation at -0.28% in the period between October 2016 and February 2017.

AF Fertiliser & Seed Business Manager Chris Haydock said: “The seed rises are down to the increase in grain prices, while the strength of the euro and the US Dollar means I can’t see fertilizer prices reducing in the short term.

“Importers of ammonium nitrate have struggled and further increases are expected. Granular urea has risen, while potash and phosphate prices have risen circa £15 per tonne over the season so far.”

The AF AgInflation Index also shows the Retail Price Index at 2.2% against 4.92% inflation of agricultural production costs.

All categories of food have seen inflation with the greatest levels within Cereals and Oil Seed Rape at 5.75%.

Sugar Beet production costs have increased 4.63% against an 11.5% increase in the cost of granulated sugar.

Dairy farmers have seen further inflation in their production costs, now at 3.77%.