AgInflation Index shows a fall in farming costs

A cow has blocked a major road in and out of Norwich. Picture: Matthew Usher.

A cow has blocked a major road in and out of Norwich. Picture: Matthew Usher. - Credit: Matthew Usher

Farming costs including fertiliser, animal feed and fuel have fallen in the last year, according to the latest agricultural inflation measure published by a Norfolk-based buying group.

The latest Anglia Farmers AgInflation Index shows the average cost of agricultural inputs has fallen by 1.77% between August 2013 and August 2014 – the first time the figure has fallen since 2008/9.

AF chief executive Clarke Willis said: 'This reflects the reduction in fertiliser, seed, animal feed and fuel cost over the past year.

'The fall in the cost of fuel in particular reflects the continual reduction in fuel prices, with the price of a barrel now well below $100 and predicted to fall further in the coming months.'

The index was launched in 2006 by Anglia Farmers, the largest agricultural purchasing group in the UK, and has become a definitive national tool for assessing the cost of farming production and guiding negotiations within the wider food industry.

Using information from the group's buying office at Honingham Thorpe, the index is intended to reflect the changing expenditure of farming and is a weighted average of nine cost centres and 132 cost items.

The latest index shows increases in hire and labour costs (up 4.3pc), with the average wage for a labour craftsman up by 5pc – believed to be linked to the abolition of the Agricultural Wages Board. A 4pc increase in contract and hire costs has been driven by prices for tractor hire, which peaked last winter.

Most Read

The cost of some inputs has fallen significantly, with fuel prices down by 8.1pc compared to an increase of 8.5pc in the previous 12 month period.

Seed prices have also experienced a substantial drop – during 2012/13, seed prices increased by 3.8pc but in the past 12 months have fallen by 14.1pc.

The general inflation figure of the Retail Price Index has fallen by 0.5pc in the same period, the first time since before the AF AgInflation Index was first calculated in 2006 that the cost of buying food has fallen.

Mr Willis added: 'Although the gap has narrowed very slightly, there is still a significant differential between the cost of inputs and the RPI. Both were given an index figure of 100 when AF AgInflation figures were first calculated in October 2006 and the figures now stand at 169 (AgInflation) and 140 (RPI).

'Figures by farm enterprise have largely followed the market trends, with beef and lamb production costs changing only by -0.31pc. While retail sale prices have increased very slightly (0.3pc), livestock producers continue to be under significant pressure.'

Figures by enterprise show that production costs have gone down for all cropping – potatoes by -1.55pc, combinable crops by -1.52pc, dairy by -1.47pc and sugar beet by -0.87pc.

The prices paid by consumers have dropped for many products – bread and margarine prices have fallen by -4.4pc, potatoes by -14.7pc and granulated sugar by -3.3pc.