Friday, December 6, 2019

Biggest cost increases for machinery and fertiliser

November 6, 2019 by  
Filed under News & Business

Farm machinery and fertiliser saw the biggest cost increases over the past year – driven by rising energy prices, confirm the latest figures.

Machinery running costs – including depreciation – rose by 7.2% in the year ending September 2019, according to the AgInflation Index. Published by the farmer-owned AF Group, the index reveals fertiliser costs rose 7.8% during the same period.

AF fertiliser general manager Chris Haydock said: “Fertiliser prices have inevitably gone up alongside energy costs, with ammonium nitrate particularly affected. The EU anti-dumping duties have also kept the UAN market firm.”

Like fertiliser, machinery costs are also affected by energy prices. Despite this, the average inflation across the agricultural sector has slowed considerably over previous years – hinting at a welcome return to stability after a turbulent few years.

The three previous reports all recorded an inflation increase of more than 4.5%. But overall inflation for the sector in the last 12 months was negligible at 0.57%. Despite the significant financial pressure on many in the sector, this year’s inflation figures will be lower than many feared.

Although most prices have remain in line with last year, annual seed costs are down 22.7%. This is largely because extreme weather conditions pushed up grain prices during 2018 with a knock-on effect on seed. The decrease this year indicates a partial return to previous levels.

Most figures remained around the levels of last year, with only machinery and fertiliser moving higher. Dairy and sugar beet enterprises are among those bearing the biggest brunt of inflationary pressures, with overall cost increases of 1.77% and 1.73% respectively.

Risk management

“After the volatility and unavailability experienced in 2018, these figures are a welcome breath of fresh air,” said AF Group chief executive Jon Duffy.

“However, it’s important to remember that while many inputs have eased from recent highs, these figures are still significantly higher than they were just a few years ago. Extreme weather conditions and geopolitical tensions are still present and likely to exert their influence to some degree.

“We would encourage all farmers to investigate risk management strategies for 2020 and beyond. This can include forward fixing, deferred payment and planned purchasing, all of which our members use to effectively manage risk and remain resilient against unpredictable market swings.

“The ideal time to do this is during a period of relative stability, like we’re seeing now. This is the best time to lay a strong foundation for business growth going forward.”

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