Rising fertiliser prices drive a 4.5% increase in the cost of farming

Fertiliser being spread on a potato field in Wighton. Picture: Matthew Usher.

Fertiliser being spread on a potato field in Wighton. Picture: Matthew Usher.

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Rising fertiliser prices have helped drive a 4.54pc increase in the cost of farming in recent months, according to inflation figures compiled by a Norfolk-based purchasing group.

AF AgInflation index compared to RPI total food inflation, 2006-2018. Graphic: The AF Group.AF AgInflation index compared to RPI total food inflation, 2006-2018. Graphic: The AF Group.

The AF AgInflation Index is a weighted average using data from the Anglia Farmers’ buying office at Honingham Thorpe, which sources more than £250m of agricultural goods for its members annually – equivalent to 10pc of the UK’s farm inputs.

The latest report shows the cost of farming inputs has increased by 4.54pc in the six months up to February 2018, driven by a 16.9pc rise in fertiliser costs, 6.5pc in fuel, and 4.8pc in animal feed.

It is the second report in a row to record an inflation increase of more than 4.5pc – much higher than the retail price index (RPI) in the same period, showing farm costs continue to rise faster than those of the consumer.

AF Group chief executive Jon Duffy said: “Our figures once again highlight volatility within the marketplace, underpinned by weak performance of sterling against other major currencies and global supply-chain issues.

“This highlights the need for farmers to get to grips with risk management and to control the controllables. Getting on top of costs is normally a good place to start.”

This is the second successive AgInflation Index which has seen the costs of fertiliser grow. There was an 8.9pc increase in the year to September 2017, with the price of phosphate and potash influencing a 16.9pc rise this time around.

AF Fertiliser and Seed general manager Chris Haydock said: “Year-on-year prices remain unchanged for ammonium nitrate, with the early buyer once again seeing the benefit. While the February price is up considerably on the new-season price, on the back of our advice we have seen more farmers buy earlier in the season than previous years to secure better prices. The real change year-on-year has been the phosphate and potash market where we have seen a rise of £15 per tonne, with the outlook being for these prices to remain firm.”

The weakness of sterling against the dollar and unrelenting US shale oil production has seen a 6.5% rise in the cost of fuel – and the market is expected to remain volatile throughout 2018.

The report says the 4.8pc rise in the cost of animal feed was driven by adverse weather in South America, the closure of a major animal feed production facility in the UK, and a fire at a Citral plant in Germany that took out 40pc of the EU’s capacity to manufacture Vitamins A and E.

AF Livestock business development manager Thomas Baines-Sizeland said: “The closure of Vivergo’s Hull plant at the end of 2017 made wheat distillers unavailable and, although alternatives were offered at inflated prices, the required volume wasn’t there. As well as increasing raw material costs, mineral prices rocketed following the BASF factory fire at the end of October. As a result, £2/t– £9/t has been added on to ruminant and monogastric compounds.”

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