Anglia Farmers AgInflation Index shows a rise in the cost of farming

A crop sprayer at work in Norfolk. Picture: Matthew Usher.

A crop sprayer at work in Norfolk. Picture: Matthew Usher.

The rising price of fuel has helped drive a 6pc 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, February 2017

AF AgInflation Index compared to RPI, February 2017 - Credit: Anglia Farmers

The AF AgInflation Index is a weighted average using data from the Anglia Farmers' buying office at Honingham Thorpe, which sources more than £230m of agricultural inputs each year.

The latest figures for September 2016 to February 2017 show a 6.23pc increase in the average cost of production inputs, primarily attributed to a 4.06pc inflation in fuel, resulting from the rising cost of crude oil and a devaluation of sterling against the dollar.

The figures also show increased inflation in the vast majority of product areas including seed, fertiliser, animal feed and medicine, contract and hire and machinery. Only agro-chemicals saw deflation, at -0.28pc.

The index also reveals farmers saw a greater increase in their production costs than the Retail Price Index (RPI), one of the key wider measures of inflation, which rose by 0.6pc during the same period.

AF group chief executive Jon Duffy said: 'The increase in agricultural inputs inflation comes as no surprise – in fact we forecast significant hikes at the start of the year when our buyers collectively anticipated inflation of ag-inputs to increase 9.5pc during 2017.

'Fuel is clearly driving the increase in the AF AgInflation Index with the 4.06% increase in inflation between September last year and February this year.

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'That's why we at AF had the foresight to help farmers manage risk and price volatility by introducing risk management schemes in fuel, feed, fertiliser and electricity.'

Sector-by-sector analysis shows production costs for cereals and oilseed rape have seen the greatest increase in inflation at 4.81pc, against a 4.4pc deflation in the cost of bread and margarine. Sugar beet production costs increased 3.55pc compared to a 9.8pc increase in the costs of granulated sugar. Dairy farmers' production costs rose 2.78pc, despite no change in the price of pasteurised milk.

Mr Duffy said: 'Cereals and oilseed rape growers will feel the pressure, as production costs have increased 4.81pc compared to a reduction in the cost of bread and margarine. Livestock farmers continue to feel the pressure as their production costs also continue to rise.'