The latest estimates for agricultural input inflation is 30.6% according to Andersons consultancy.

In sharp contrast general inflation, as measured by the consumer prices index (CPI) and food prices (CPI Food) have been rising at a much slower rate of around circa 6%. This means that many farm businesses are now feeling a severe squeeze on margins and this is set to continue for the foreseeable future.

Andersons’ Agflation index is calculated through Defra’s price indices for agricultural inputs and weights each input cost (e.g., animal feed) by the overall spend by UK farmers.

The Russia-Ukraine conflict has had most effect on feed, fuel, and fertiliser prices. However, as these underpin most agricultural inputs in some form, cost increases are also showing elsewhere such as contracting costs, crop protection products and building materials.

The sector under the most pressure according to is most pronounced in the pig and poultry sectors where feed traditionally accounts for 65-80% of production cost. Dairying and grazing livestock are also feeling the strain, particularly for those farms that have not bought forward their fertiliser.

The arable sector is less affected for 2022 as most farmers have bought forward their fertiliser and output prices have hit record levels recently. For many farmers in this position, 2022 is shaping up to be a stellar year – the value of the unharvested wheat crop has risen by more than 50% since it went in the ground. That said, significant challenges loom for 2023. High input costs and taxation on 2022 profits will stretch working capital requirements.