NFU tells banks rising costs are hitting farm confidence

The NFU has warned major UK banks that British farm businesses are being squeezed by soaring input costs, extreme weather and uncertainty over future support schemes.

The union set out the pressures facing agriculture during its bi-annual banking roundtable, bringing together leading banking and finance representatives.

The NFU said the meeting gave lenders a clear picture of the realities facing farmers and growers, including the impact of the conflict in the Middle East on key production costs.

Latest average input price increases cited by the NFU included ammonium nitrate fertiliser at £497 per tonne on 15 May, a 25% rise.

Urea fertiliser was £611 per tonne, up 43%, while red diesel was between 95p and 110p per litre, representing a 35% to 55% increase.

Natural gas stood at 126GBp per therm, up 56%, while UK electricity futures were £101/MWh, a 48% increase.

The union said these rising costs were placing further strain on farmers and growers already operating in a volatile market.

It also warned that the loss of direct payments had left farm businesses more exposed to economic shocks.

Continued uncertainty over the future of agri-environment schemes is also affecting business confidence, the NFU said.

The union told banks that climate change is having a growing impact on food production, adding further risk for farm businesses.

The NFU said lenders have a key role to play in helping farms manage short-term volatility while investing in long-term resilience.

It also said Defra’s Farming and Food Partnership board could help identify opportunities for growth and resilience across the sector.

Banks represented at the roundtable included NatWest, Lombard, Oxbury, Barclays, HSBC, Virgin Money, Lloyds Banking Group, Royal Bank of Scotland and UK Finance.

NFU Deputy President Paul Tompkins said: “British farmers are a resilient bunch, but that resilience is being put under more and more pressure.

“With direct payments all but gone, farm businesses are more exposed to economic shocks, while the risks of producing food continue to rise.”

Mr Tompkins said farmers and growers across the country had reported rapid increases in production costs linked to the Middle East conflict.

He added: “At the same time, extreme weather and uncertainty around agri-environment schemes are also having a knock-on impact on business confidence.

“It was important to set out these pressures to the banks, so they understand the reality facing the industry that produces the nation’s food, as well as its energy and environmental goods.”

The NFU said the roundtable was also an opportunity to show how banking agri leaders could support the sector during a period of heightened uncertainty.

Mr Tompkins said: “It was encouraging to see how receptive the banks were, and we look forward to working with them to strengthen resilience and restore profitability across the British agriculture industry.”