farming field tractor sunset

Struggling British farmers benefited from a near 5% fall in the average cost of agricultural production between January 2015 and 2016, driven by significant drops in wholesale fuel and ­fertiliser prices.

The falling cost of key inputs offset some of the price cuts seen by dairy, pork and sheep farmers due to overproduction, with data from agricultural input supplier Anglia Farmers (AF) showing an overall reduction in input costs of 4.35%.

The company’s AF AgInflation Index, calculated using data from the group’s £250m buying operation and based on a basket of 132 items, revealed average input costs for British farmers were at their lowest since 2009, when deflation of 6.3% was recorded.

Wholesale fuel prices fell by an average of 20.7% year on year, according to AF data, with fertiliser prices falling by 13.6%, and some of the reduction in the cost of gas being fed through to fertiliser prices, says AF CEO Clarke Willis. “Although it could be argued that given the significant fall in gas prices, not enough of a drop in fertiliser prices has been seen,” he adds.

The cost of animal feed also fell, according to the index, with low grain prices (down 14.9% year on year) contributing to feed price deflation of 7.7%.

However, Willis adds the fall has masked increases in medicine and vet costs. Plus, overall seed costs have not seen much change “because while we have seen a reduction in cereal seed prices, the cost of potato seed has risen significantly”.

Low grain prices are set to continue for the foreseeable future according to Mintec, with global production for January and February forecast at a record high of 735.7Mt, up 1% year on year. Exports of maize from key grower Brazil are forecast up 67% year on year, while the removal of export taxes and quotas in Argentina could potentially keep supplies high for the rest of the year.