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Profits take a hit as inputs spike

Fuel, feed and fertiliser prices jump 

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Profits take a hit as inputs spike

Farmers need to focus on the costs they can control, as farming inputs jump by 7.8 per cent and the UK faces the uncertainty of Brexit.

 

Rising costs have been driven by a 17.4 per cent rise in fuel costs, 15.8 per cent in fertiliser and 16.1 per cent in animal feed, according to AF’s annual AgInflation Index report for the 12 months to September 2018.

 

But the retail price index held steady at 2.4 per cent over the same time frame, with food inflation lower still.

 

Focus

 

AF said this showed farmers needed to be focusing on controlling costs within their businesses.

Jon Duffy, AF group chief executive officer, said Brexit was undoubtedly the single most emotive topic of 2018.


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He said: “With under five months to go until the exit date, this lack of certainty alongside broader global trade tensions between the US and China is likely to continue to create price volatility.

 

“We as an industry have little influence on the eventual outcome, however we would encourage farmers to look at controlling as many of these costs as possible through good risk management strategies.”

 

He gave the examples of forward fixing, deferred payment and planned purchasing to manage risk.

 

Volatility in sterling has become as important as oil prices when it comes to fuel inflation, according to AF fuel manager Spencer Hill.

 

Exchange rate

 

“The combined effect of the exchange rate and Brent crude oil prices mean we have not seen GBP denominated oil prices at these


levels since the beginning of 2014,” added Mr Hill.

 

Increased energy costs have also led to rising fertiliser prices, with ammonium nitrate particularly affected.

 

This was added to by a shortage of supply in the UK due to the closure of the CF Ince plant for maintenance during the autumn.

 

Seed has also been impacted as 2018’s extreme weather hit yields.

 

For feed, it has been a year of volatility and unavailability due to extreme weather and geopolitical tensions, exacerbated by the closure of Vivergo’s Hull plant and a rise in mineral prices following the fire at BASF’s plant in Germany.

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