All farmers need to become more aware of costs of production when consumer food prices continue to rise while values to the farmer head in the opposite direction.

That was the stark warning from Farm Consultants Andersons, in their latest agflation update, which highlights food prices for the month of May were a massive 18.7% up year-on-year, while agricultural output values fell 2.3% in line with input prices which were down 3%.

According to the report, agflation or inflation in agriculture, has been in ‘free fall’ for the first half of 2023 having peaked at over 28% in 2022. It also points out there is a lag between how agricultural prices evolve and how these prices are reflected in retail prices.

“Back in 2017, when agricultural output prices reached their highest point in May of that year (at 13.2%), the CPI Food index did not peak until the following November (at 4.1%).

“This reveals a lag of about six months and indicates that the highest extent of inflation in food prices was significantly lower than for agricultural outputs,” said the Consultants.

The main reasons for this are agricultural raw materials are one of several inputs that go into supplying food to consumers with labour, energy, and packaging also significant, and traditionally much less volatile than agricultural prices.

Andersons said the effects of Brexit, Covid and the Russia-Ukraine war had exerted multiple pressures on both agricultural commodities, labour and energy inputs, meaning that recent CPI Food inflation had reached 20%.

“However, there are signs that food price inflation might have peaked in March 2023, about seven months after agricultural output prices had done.”

The firm’s agflation index builds upon Defra price indices for agricultural inputs and weights each input cost, such as animal feed, by the overall spend by UK farmers.