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The average input cost reduction was 4.7% to 30 September 2023 compared to the previous year

AF’s latest annual Aginflation Index has revealed a fall in the overall costs of farming inputs compared to 2022.

The farm supplies business’s yearly analysis of production costs revealed an average fall of 4.7% across 10 key farming inputs in the 12 months to 30 September 2023.

The report found that six of the 10 categories of inputs saw falling prices, with electricity, fertiliser and fuel seeing the greatest decreases at 58%, 49% and 15% respectively.

However, the other four input categories showed increases with farm operating costs, which cover rent and interest, up by over 11% and crop protection costs up by almost 10%.

The impact this has on consumer costs varied based on the product, according to the research. Cereals and oilseed rape crop costs had decreased by an average of 2.09%, while the price for bread and margarine rose by 1.89%.

“These figures are encouraging given the movements in fertiliser and fuel costs over the last couple of years, but mask the anticipated effects of the very difficult 2023 harvest and autumn,” AF said.

Costs had also decreased in dairy production with deflation of 9.4% across all costs, however, AF said this had “been more than eroded” by the reductions in farmgate milk prices paid to producers. Last year the Defra All Milk UK farmgate price hit a peak of just under 52p per litre, but was at 37p per litre or lower, AF remarked.

In beef and lamb, production costs have also dropped by 5.24%, however prices on shelf have increased by nearly 11%, which AF suggested indicated that “farmers are being cut out of the profit chain, with retailers keeping a disproportionate share of the price increase for themselves”.

Potatoes have also seen falling costs, with a decline of 6.08%, however AF warned the increase in farmgate prices had not matched the previous year’s aginflation.

It was a different picture in sugar beet, where production costs are up by 7.15% but the price of granulated sugar to UK consumers increased by 51.32%.

The total retail price index for food has risen over the same period by an average of just over 12%.

The farming co-op said the gap between costs of production and retail prices had narrowed but was still double the size it was a decade ago.

“One of the simplest ways for farmers to reduce their costs is to maximise spend through AF/a buying group, because clearly the greater the volume of inputs we buy on your behalf, the better the economies of scale and market share we can achieve,” said AF chief executive, David Horton-Fawkes. “Not only will you achieve cost savings, but we have a team of experts on the end of the phone waiting to share the benefit of their experience for your advantage.”