Farm costs continue to rise. Andersons ‘Agflation’ index shows input prices continuing to rise by around 20% compared to the same month a year earlier. Whilst this is down slightly on the increases seen in the summer, it is still well above historical averages.
Earlier in the year, as input costs increased, then output values were also showing big gains. However, over the past couple of months the sale prices of farm commodities have shown far less growth. Whilst some products, such as milk, have continued on an upwards trajectory, this has been largely offset by declines in other areas notably combinable crops. With costs continuing to increase but sale prices flatlining, this puts farm margins under pressure. Both the agflation and agricultural output indicies relate to the entire farming industry. The prospects for individual sectors will depend on how specific costs and prices are moving.

To recap, our agflation index uses Defra Agricultural Price Indices for agricultural inputs and weights each category of input (e.g. animal feed) by the overall spend by UK farmers. We fill in some gaps not covered by the Defra series and also provide some up-to-date estimates for the latest months (the official figures work some months in arrears). The same methodology is used for agricultural outputs.
The chart above also shows CPI along with the specific food inflation measure. It can be seen that food is one the elements driving general inflation in the economy. It is not necessarily the case that higher commodity prices are driving food-price inflation – the cost of the raw materials is often a very small part of the cost of food. It is other elements in the food chain such as electricity, fuel and labour that are pushing up costs. Food comprises a larger proportion of the spending of those on the lowest incomes. Therefore, effective inflation for those people will be even higher than the headline CPI rate.