AF AgInflation Index to February 2011 is 8.39%

Whilst the UK Retail Prices Index (RPI) is running at 5.1%, latest figures from the Anglia Farmers Agricultural Inflation Index show the overall rise in agricultural input costs for the past six months from August 2010 to February 2011 is 8.39%.

Importantly from a farmer’s point of view, the RPI for food was 3.6% during the same 6-month period (Office for National Statistics) with pasteurised milk registering no increase at all. This shows that increased production costs are still not passing through to the consumer yet.

Compiled by North Norfolk farmer and former AF director Jim Alston, the AF AgInflation Index is based on actual cost change information from the £200m buying group covering 130 products and services. The method is similar to that used for the retail price index (RPI) where products are grouped and then weighted. Using the same principals as always the index represents the actions of a reasonably efficient farmer who would have pre-ordered a significant part of his requirements. This would include a proportion of animal feed and therefore the next 6 months will see a very significant further increase.

The overall agricultural inflation index covers nine cost centres (see attached table) and the impact of these is then equated to five enterprise sectors:

Combinable crops – 8.51%

Potatoes – 6.69%

Sugar beet – 6.16%

Dairy – 6.69%

Beef & lamb – 6.44%

Announcing the results at the Norfolk Farming Conference (24 February 2011), Clarke Willis – chief executive of Anglia Farmers – said:

"Since we introduced the AF AgInflation Index in October 2006 (base price of 100) we have seen the overall Index go up to 155. This means agricultural production costs have gone up by over a half in the last 5 years. On top of this, we’ve experienced incredible volatility in the marketplace. Yet more forward planning and risk management is vital in agricultural business.

"AF is putting together further structures to enable its members to improve risk management. This has been successful in the last 6 months with electricity and animal feed but we need to work harder with suppliers on doing the same with fuel and fertiliser. It is more important than ever for farmers to get together and benefit from group purchasing."