Defra agricultural price index at highest level since 2013 for inputs
Every month Defra produces an agricultural price index that includes both input and output prices.
The prices are based upon the prices farmers paid (or received) in any given month. Perhaps unsurprisingly costs over the past year have increased significantly, with the total input index rising by 8% year-on-year in October 2018. It now is likely to stand at the highest level since at least early 2013.
As the index is not of actual expenditure but a price per volume, this index will not take into account any increased amount of use of feed within the livestock sector. However, increased demand will of course affect the supply and demand balance which may then have an impact on prices. Also affecting the supply and demand balance is production itself, and demand from other sectors. Therefore while the index may record a rise in costs, actual spend increase would be larger if the volume purchased also increases. Equally the index could potentially record a rise yet expenditure decline if use on farm decreases yet demand from other sectors increases.
Unsurprisingly considering recent movements in arable farmgate prices and an increase in demand for feed, the compound feeding stuff index has increased for all livestock sectors including cattle, pigs and sheep, by 7%, 9% and 10% respectively. Almost all individual feed components also recorded rises. Soya beans were the only component to record a decline.
The fertiliser index has recorded significant increases over recent months, which is in agreement with the AHDB UK Fertiliser Review for November 2018. Industry reports suggest that demand for nitrogen has increased, driven by changes in cropping plans for 2019/2020. Energy costs have also recorded significant increases over the year, with the cost of motor fuels up 22%, and electricity up 9%, which in part offered some support to fertiliser prices.
Output prices have not entirely followed the same trends. Crop products (including horticultural products) have recorded price increases this year overall, which is to be expected considering harvest conditions and the somewhat tight supply and demand balance in the UK wheat market. Animals and animal products however have not followed the same trend, overall recording 3% decrease on the year. All animals, apart from lambs and turkeys, have recorded year-on-year decreases, with lambs and turkeys recording only small increases.
Rebecca Oborne, Analyst
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