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Fuel and fertiliser prices drive a 7.8% rise in the cost of farming

PUBLISHED: 14:30 20 November 2018 | UPDATED: 14:51 20 November 2018

Fuel and fertiliser prices have driven a 7.8% increase in the cost of farming in the last year, according to the latest AF Aginflation figures. Picture: Ian Burt

Fuel and fertiliser prices have driven a 7.8% increase in the cost of farming in the last year, according to the latest AF Aginflation figures. Picture: Ian Burt

Archant 2018

Fuel and fertiliser prices helped drive a 7.8pc rise in the cost of farming in the last year, according to inflation figures compiled by a Norfolk-based purchasing group.

AF Aginflation Index compared to Retail Price Index (RPI), 2006 - 2018. Graphic: AF GroupAF Aginflation Index compared to Retail Price Index (RPI), 2006 - 2018. Graphic: AF Group

The AF AgInflation Index is generated using data from the Anglia Farmers’ buying office at Honingham Thorpe, outside Norwich, which sources more than £270m of agricultural goods for its members annually – equivalent to 10pc of the UK’s farm inputs.

The latest report says the cost of farming inputs increased by 7.8pc in the twelve months to September 2018, with key factors including a 17.4pc rise in fuel costs, 15.8pc in fertiliser, and 16.1pc in animal feed.

It is the third report in a row to record an overall increase of more than 4.5pc, while retail price inflation has held relatively steady at 2.4pc during the same period.

AF Group chief executive Jon Duffy said this reflected the significant cost pressures within the agricultural sector, and the need for farmers to focus on cost control – especially with Brexit uncertainties looming.

Jon Duffy, chief executive at Anglia Farmers.Jon Duffy, chief executive at Anglia Farmers.

“Brexit is undoubtedly the single most emotive topic of 2018,” he said. “With under 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 – for example, forward fixing, deferred payment and planned purchasing,

AF sources around 90 million litres of fuel for its members every year, and its Aginflation analysis showed the costs rising by a double-digit percentage for the second time in a row.

“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”, said Spencer Hill, AF fuel manager.

“The GBP/USD exchange rate has been around the 1.30 level, 14.5pc 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.”

Chris Haydock, AF’s fertiliser and seed general manager, added: “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”.

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