Agflation at decades-high levels


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30 June 2022
Russia-Ukraine conflict makes input costs soar.

LATEST estimates for June show that Agflation now stands at 25.3%. Since the onset of the Russia-Ukraine conflict in February, input costs have soared and are at levels not been seen in decades.

Andersons’ Agflation index builds upon on Defra price indices for agricultural inputs and weights each input cost by the overall spend by UK farmers. It then provides a more up-to-date estimate of the price index for each input cost category. As the ‘official’ Defra figures are updated, Andersons Agflation estimates are also adjusted to take account of the Defra updates.

In comparison with general inflation, as measured by the consumer prices index (CPI) and food prices (CPI Food) which stand at 9.1% and 8.5% respectively, Agflation is nearly three times higher. Given the current situation with the Russia-Ukraine conflict and the upheaval caused across numerous commodity supply-chains, particularly fuel and fertiliser, Agflation is set to remain at elevated levels for at least the remainder of this year, with many farm businesses feeling a severe squeeze on margins. 

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High input costs and taxation on 2022 profits will stretch working capital requirements.

These severe inflationary pressures are occurring at a time when all farms in England are facing cuts in BPS payments, which will reach 35% during 2023.

In such times, it is crucial to demonstrate competent cost management, particularly in terms of working capital, which will be essential to steer farm businesses through the current crisis.

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