FARMING input costs have risen by 7.8% on the year according to a new report from AF AgInflation which claims the price increase has been driven by higher fuel costs.

In the 12 months between September 2017 and 2018, inflation for AF – a nationwide agricultural buying group which each year sources 90m tonnes of fuel and 105,000 tonnes of feed – saw fuel costs rise by 17.4%, while increased prices for fertiliser and animal feed of 15.8% and 16.1%, respectively, caused further angst for farmers.

This is the third consecutive report to record an inflation increase of more than 4.5%. reflecting the significant pressure costs are exerting on the farming sector, with the price increases affecting all sectors. Dairy farming was nevertheless hit most experiencing l1.26% inflation, followed by livestock farming 10.21%, and broad acre arable, 7.45%.

Meanwhile, the retail price index has held relatively steady at 2.4% in the same timeframe, with food inflation lower still, demonstrating the focus farmers need to be taking on controlling costs within their businesses.

“Brexit is undoubtedly the single most emotive topic of 2018,” said Jon Duffy AF Group chief executive officer.

“With less than five months to go until the exit date, this lack of certainty alongside broader global trade tensions between the US and China is likely to continue to create price volatility. We as an industry have little influence on the eventual outcome, however we would encourage farmers to look at controlling as many of these costs as possible through good risk management strategies."

Instead, Mr Duffy said producers should look to forward fixing, deferred payment and planned purchasing, all of which offers farmers options to manage risk effectively and efficiently thereby delivering business resilience against an unpredictable market.

The report is also the second successive AgInflation Index that has seen the cost of fuel grow by double-digit percentage, according to Spencer Hill, AF fuel manager

“The stigma of Brexit clearly has increased volatility in sterling values which has become just as important, if not more so than USD denominated oil prices," he said.

“The GBP/USD exchange rate has been around the 1.30 level, 14.5% down from values seen prior to the referendum. The combined effect of the exchange rate and Brent crude oil prices mean we have not seen GBP denominated oil prices at these levels since the beginning of 2014.”

AF fertiliser and seed general manager Chris Haydock, who buys up to 200,000t of fertilisers each year for the group backed up these sentiments: “Increases in energy costs have inevitably led to a rise in fertiliser price with ammonium nitrate particularly affected. These rises have been impacted further by a shortage of supply in the UK due to the closure of the CF Ince plant for maintenance during the autumn. Also increased worldwide demand for urea and phosphate has impacted prices further”.

Seed has similarly been impacted as the extreme weather we experienced in 2018 resulted in reduced yields, pushing grain prices to over £190 per tonne, their highest since 2012.

“2018 has been a year of volatility and unavailability due to extreme weather and geopolitical tensions”, concludes Thomas Baines-Sizeland AF feed business manager.

“Further pressure has come from the loss of wheat distillers after the closure of Vivergo’s Hull plant along with the rise in mineral prices following a fire at BASF’s Citral plant in Germany. Whilst many raw materials have eased from recent highs, ultimately, all ingredients are currently significantly higher than at this point last year. We would recommend all farmers to look carefully at risk management strategies during their planning for 2019 and beyond, even in more predictable times pinning down the costs you can control provides a strong foundation for taking the business forward.”