Latest figures from the Anglia Farmers Agricultural Inflation Index show input prices are starting to increase after a short period of deflation. The main driver for the overall 2% increase during the last six months is the cost of fertiliser which is being inflated by world demand.

While these half-year increases might seem marginal, farming costs to date have risen by more than 28% since the agricultural purchasing group launched the index in October 2006. Within this, the dairy index figure shows a rise of 34%.

Announcing the results at the Norfolk Farming Conference (25 February) Clarke Willis – chief executive of Anglia Farmers – said:

“The fertiliser market is volatile and will have a significant effect on overall costs whatever the arable enterprise. We have seen a rise in costs for each with the exception of sugar beet which has remained more or less static. At just over 3% the increase in potato production is clawing back on the savings made in the previous year.

“The rise in animal costs - dairy at nearly 4% and beef and lamb at 3% - has been lead by increased protein and labour costs. While the cost of energy is likely to fall for the livestock farm, this will be counteracted to some extent by the changes in cost of protein and other ingredients. But the overall inflation of 34% for dairy is really taking its toll and is destroying the balance sheet of many herds throughout the country.

“Where arable input costs are heading depends on fertiliser factors outside our borders – world demand and the exchange rate will be key. Volatility in the fuel market seems inevitable too and chemical pricing for this year has not been settled. Added to this, with an election on the way and problems in the economy, interest rates are firmly in the unknown camp.”

Jim Alston, who is a farmer director of Anglia Farmers, co-ordinates the Anglia Farmers’ Agricultural Inflation Index.

The index is based on actual cost change information from the Anglia Farmers’ purchasing office on 100 products. The method is similar to that used for the retail price index (RPI) where products are grouped and then weighted.

The overall agricultural inflation index covers nine cost centres and the impact of these is then equated to five enterprise sectors for combinable crops, potatoes, sugar beet, dairy and beef & lamb.