NFU Director General covers rising costs in column for The Grocer

16 April 2022

NFU Director General Terry Jones

NFU Director General Terry Jones

With farms across the country facing significantly rising costs, NFU Director General Terry Jones put pen to paper for The Grocer to outline the NFU’s thoughts on the current situation and what can be done to mitigate the effects. He writes:

Preparing for a no-deal Brexit or dealing with the shift in demand from out of home to retail at the start of the pandemic, understandably, together we focussed on food supply. The worldwide impacts of the war in Ukraine require us to think rather differently, principally because of the gas that’s embedded the length of many supply chains in inputs like ammonium nitrate, the rampant cost inflation that we are seeing more generally, and that this is a global phenomenon rather than a local situation we can trade our way out of. To boot we must not forget that one of the world’s most productive agricultural areas has been cut off because of this dreadful conflict.

Collectively, this time, a calm focus is needed on production. Talking to farmers across the different sectors of British agriculture, the word that keeps coming up is confidence. If they don’t feel that the much greater outlay of working capital that they commit to in the coming weeks and months will be repaid, then output will decline. In some sectors, for instance protected horticulture, with shorter cycles and rapidly rising costs, that decline is already happening and if that production challenge is left unattended, it will eventually become a much bigger supply problem.

Thankfully, some businesses are putting their arms around production, reassuring their farmers and growers that they will have a return and securing their commitment to produce. They are signalling a willingness to engage, taking time to understand what’s happening to the cost of agricultural inputs and reviewing supply agreements. Nevertheless, many more still need to follow their example if we are to do in 2023 what we did together in 2020; keep the nation and especially the most vulnerable fed. To do otherwise could risk seeing our producers begin to ratchet back their production, in many cases drastically and some irrevocably.

Of course, I know that commercial teams are agonising over whether consumers will want to pay higher prices and are concerned about the risk of demand destruction. But without the product there in the first place then that’s not a question we’ll be able to answer.

The government also has a role here, after all we are talking about one of the 13 pillars of critical national infrastructure. All credit to Defra for the measures they put in place last week to make it easier for farmers to use organic manures this autumn, but it’s essential they continue to engage with industry to monitor market trends and farmer and grower intentions.

Even then, as decisions for 2023 loom, if gas remains where it is while Russia and Germany exchange blows on how it will be paid for in Europe, some more creative action could yet be required.

Summer is a critical time in the production calendar, both for livestock and dairy farms planning their forage in the autumn and for our crops in 2023. This is a key time to signal confidence for smooth ordering of inputs and reliable outputs for the next 18 months. If sourcing options are the key to our national food resilience, we cannot overlook the sagging confidence at home, nor can we afford to let our guard down against the risk of trade distortions as governments grapple with the same issues the world over.

Without a miracle of cheap and plentiful supply of natural gas, there are no easy wins. This could be one of the biggest tests for the food industry in living memory and we must plan for the worst and hope for the best, not just for ourselves but for the people of Ukraine.