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Agflation tops 30 per cent

Costs in agriculture have soared to the highest levels in decades and are likely to remain high for the foreseeable future.

That is the prediction from agriculture business consultant Andersons, who has released its April estimates, showing inflation in farming stands at 30.6 per cent.

With many farm businesses now feeling a ‘severe squeeze’ on margins, the firm warned that inflation is expected to remain in the short-to-medium term.

Since the turn of the year, inflation in agriculture, or ‘agflation’, has been rapidly increasing, driven primarily by Russia’s invasion of Ukraine.

Due to both countries being major agricultural powerhouses, the conflict has had the most effect on feed, fuel, and fertiliser prices.

However, as these underpin most agricultural inputs in some form, cost increases are also showing elsewhere, such as contracting costs, crop protection products and building materials.

Worst hit is the livestock sector, with the pig and poultry sectors particularly feeling the strain. This is because feed traditionally accounts for 65-80 per cent of production cost.

Dairying and grazing livestock are also feeling the strain, especially for those farms that have not bought forward their fertiliser.

However, the arable sector is less affected, as most farmers have bought forward their fertiliser and output prices have hit record levels recently, contributing to the feed cost rises.

For many farmers in this position, Andersons said 2022 is ‘shaping up to be a stellar year’ – the value of the unharvested wheat crop has risen by more than 50% since it went in the ground.

However, it warned that significant challenges loom for 2023. “High input costs and taxation on 2022 profits will stretch working capital requirements,” said Michael Haverty, author of Andersons’ latest analysis.

All of this comes at a  time when general inflation, as measured by the consumer prices index (CPI) and food prices (CPI Food), soared to 9 per cent in April – its highest level for more than 40 years.

The CBI, which represents British businesses, said it was ‘critical’ that the government offered more support to people facing hardship in this ‘historic’ squeeze.