Average arable input costs continue to ease – but fertiliser prices are showing an upturn, fuelled by market uncertainty and conflict between Israel and Hamas.
Overall costs fell by 4.7% in the year to 30 September, according to the latest Aginflation Index from the AF Group. But this is only part of the story, says the co-operative, which monitors 10 input categories.
Mixed picture
The AF Aginflation Index is a weighted average of the real costs of more than 130 items using data from the AF procurement teams who spend over £250m a year to procure farm inputs for 3,000 members.
Prices for six of the 10 categories have fallen – including electricity (-58%), fertiliser (-49%) and fuel (-15%). But the other four input categories have risen, with a 9.6% hike in the price of crop protection and an 11% increase in farm office costs.
The figures show a 2.1% reduction in the cost of growing cereals and oilseed rape. There has been a bigger drop in the potato production costs, which fell by 6.1%. But any savings have been more than offset by lower commidity prices compared to 2022.
Sugar beet
More worryingly, sugar beet production costs increased by 7.15% in the year to September 2023. Confirmation of the rise comes amid the ongoing dispute which could see a drop in beet prices for the 2024 crop.
In terms of crop protection, the 9.6% cost hike across the portfolio, reflects the knock-on impact of last year’s high energy prices. But AF crop protection procurement manager Aleksija Curcic says this is not the case for all products.
“The largest price increases contributing to this percentage were spring fungicides, potato products and sugar beet products. We have analysed the key autumn products and we have only seen a 2% price increase, with prices remaining fairly stable.”
Fertiliser
For crop nutrition, AF fertiliser procurement manager Josh Joachim said: “Fertiliser prices have taken a nosedive from the dizzy heights of 2022, with all major products coming back between 40-50% 12 months on.
“While it has been a better year for our members in terms of price per tonne, we are now witnessing some upturn and nervousness going into the first quarter of 2024.”
Natural gas prices are aso on the rise, with costs doubling since June 2023. This is partly due the rising demand for energy following the onset of winter. But market analysts say other factors are at play too.
The ongoing conflict between Israel and Hamas has implications for phosphate and potash prices in particular, said Mr Joachim, because Israel was a major exporter of both these commodities.
Some 72% of AF members had ordered fertiliser for next season by mid-autumn. With cropping plans becoming clearer but market uncertainty continuing, it might be worth locking in some product, said Mr Joachim.
‘Cooperate to combat costs’
Growers who join forces by using a buying group to purchase inputs usually get a better deal, says AF chief executive David Horton-Fawkes (right).
“One of the simplest ways for farmers to reduce their costs is to maximise your spend through 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.”
With more than 3000 members, the farmer-owned AF Group is the UK’s biggest farm purchasing cooperative. Each year the group purchases:
• 165,000t of fertiliser
• 14,000t of seeds
• 105,000t of feed
• 100m litres of fuels
• £2m worth of tyres
• £12m building materials
Mr Horton-Fawkes said: “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.
