Costs for farmers at record levels with fertiliser prices sky-high before latest supply crunch concerns

• Agricultural price index shows fertiliser costs were already the biggest contributor to rocketing farm input prices.
• Farm input costs rose a record 33.1% in the year to June 2022 as rising energy prices set costs soaring.
• The closure of ammonia production by CF Fertilisers raises fresh worries about rising costs and potential livestock culls.
• The output value of agricultural products increased for the fifth month in a row in June, up to the record level of 24.9% year on year.
• The agricultural output value of oats soared by 88%, wheat 54%, rapeseed by 66% and milk by 41% in the year to June.

The government has released the latest agricultural price index:

https://www.gov.uk/government/statistics/agricultural-price-indices/api-index-of-the-prices-of-agricultural-outputs-and-inputs-statistics-notice-data-to-june-2022

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown:‘’Costs for UK farmers keep surpassing record levels, sowing the seeds for more painful price rises for shoppers who are already struggling amid the painful cost-of-living crisis. Agriculture input prices rose 33.1% between June 2021 and June this year, with a big jump in April and steady increases in May and June. Fertiliser prices have hurtled upwards and were the biggest contributor to the alarming jump in farmers’ costs, even before the latest supply crunch concerns.

The decision by AF Fertilisers to stop the production of ammonia, a key ingredient, because soaring gas costs mean it is no longer commercially viable, has led to fears of fresh shortages and price rises. Although the company says it’ll import ammonia to fulfil orders over the next few months, it underlines the huge difficulties in the fertiliser industry right now. Livestock farmers face a potential double whammy of consequences due to the closure. Not only do they often use fertiliser on grass to feed animals, there is now set to be a shortage of CO2 gas, due to the ammonia production shutdown, which is used to stun livestock before slaughter. Farmers may once again face the difficult decision of having to cull animals if a backlog builds up for abattoirs and if a solution to the looming CO2 shortage isn’t found quickly.

Farms have been trying to absorb the eye-watering rise in costs, by finding new ways of working. Although input costs rose by 33.1% the value of agricultural output rose by 24.9% in the year to June. This still represents a horrible rise in prices which has been feeding through to our grocery bills. The value of some agricultural products have soared much higher than the headline rate such as  oats, up 88%, oilseed rape up 66% and milk up 41% in the year to June, and only forage plants saw a reduction in output value. Although the rise in farmers input costs have been slowing down a little, they are still on an upwards trajectory and this latest fertiliser production crisis will add fresh impetus to the storm they are facing.’’

Category	June 2021	May 2022	June 2022	12-month rate (%)	1-month rate (%)
All agricultural outputs	132.2	159.1	165.1	24.9	3.8
Crop products	145.5	182.9	189.8	30.4	3.8
Cereals	165.1	244.5	258.2	56.4	5.6
Wheat	168.9	244.7	261.3	54.7	6.8
Barley	152.2	249.3	244.9	60.9	-1.8
Oats	128.8	214.4	242.9	88.6	13.3
Potatoes	138.2	138.2	138.2	0.0	0.0
Oilseed rape	188.2	311.0	314.2	66.9	1.0
Sugar beet	104.8	104.8	104.8	0.0	0.0
Forage plants	305.3	143.8	143.8	-52.9	0.0
Fresh vegetables	131.7	125.0	142.5	8.2	14.0
Fresh fruit	135.1	169.6	155.6	15.1	-8.3
Animals and animal products	122.9	143.9	147.8	20.2	2.7
Animals	125.5	135.3	137.3	9.5	1.5
Cattle and calves	121.0	134.3	136.2	12.6	1.4
Pigs	119.1	133.9	140.7	18.1	5.1
Sheep and lambs	166.0	172.3	173.5	4.6	0.7
Poultry	113.8	119.2	117.7	3.4	-1.3
Animal products	119.1	156.3	163.2	37.0	4.4
Milk	123.0	164.6	174.2	41.6	5.8
Eggs	100.1	106.7	106.7	6.6	0.0

25/08/2022