AF AgInflation index shows 3% fall in farming costs

The AgInflation Index is generated using data from purchasing co-operative AF, based at Honingham Thorpe, outside Norwich, which sources more than £350m of agricultural goods every year for its 3,000 members across the country.

The latest estimates show the average cost of all farming inputs fell by 3.17pc in the six months to the end of March 2023.

It is the first downward movement after three years of soaring fuel, energy, fertiliser, and animal feed costs.

But while this fall was welcomed - particularly for fertiliser and fuel which saw the greatest reductions of 30pc and 23pc respectively - some important farm costs continue to rise, with chemicals up almost 13pc, rent and other operating expenses up by 7pc and labour up 6.6pc.

The index also shows contrasting trends across sectors, with costs falling for dairy (-4.84pc), potatoes (-3.71pc) and beef and lamb (-2.68pc) businesses, while production costs are rising for sugar beet (4.75pc) and cereals and oilseed rape (0.56pc).

David Horton-Fawkes is chief executive of agricultural buying co-operative AF (Image: AF Group)

Over the same six-month period, the total food Retail Price Index rose by 14.3pc. But AF chief executive David Horton-Fawkes said food inflation is still not rising enough to provide prices which cover farmers' heightened costs.

"The dip in aginflation is very good news but it’s too variable across different types of farm business to give much cause for relief," he said.

"The gap between the cost of production and the value of sales is still too wide and too variable to be sustainable.

"The significant drop in fertiliser prices is, of course, welcome but many farmers bought their fertiliser when prices were still sky high and now output values are falling, so this could be a very difficult harvest for farmers."