The war in Iran has led to an effective blockade of the Strait of Hormuz, via which around 20% of the world’s oil and gas shipments pass through, causing a surge in the price of oil.
The price of oil has continued to fluctuate as the US-Israeli war with Iran continues, with US President Donald Trump calling on allies to help secure the maritime passage.
NFU President Tom Bradshaw said farmers and growers “are having to shoulder increased costs of fuel and fertiliser, often only being made aware of the price they will pay once products have been delivered onto farm”.
"If these cost pressures persist, which span the whole food supply chain, it could lead to further food price inflation."
NFU President Tom Bradshaw
“Meanwhile, many horticulture businesses face a double whammy with the surging cost of heating glasshouses, combined with large increases to their standing charges for energy use.”
Natural gas accounts for between 60-80% of the input costs associated with the production of nitrogen fertilisers, while energy contributes to around a third of horticultural costs.
Defra monitoring developments
On Friday, Farming Minister Dame Angela Eagle said the department was “actively monitoring the developments in the Middle East and the impacts for our food and farming sectors, including ongoing discussions with industry leaders to gather evidence”.
She added: “Today I have raised industry concerns about prices of fertiliser and red diesel, including price transparency, with the Competitions and Market Authority CEO Sarah Cardell.
“I will also be asking the Agriculture and Horticulture Development Board to report back on fertiliser and red diesel supply and use across agricultural sectors, and to consider what they can do to publish more reference data to support greater market transparency for farmers and growers.”
The only public UK fertiliser price data comes from AHDB and is updated just monthly, which is inadequate in a market that is moving daily. Red diesel pricing is even less transparent, with no recognised index and many farmers only receiving the price at delivery.
“We are committed to ensuring that these markets function fairly and we stand ready to act swiftly and appropriately to support our domestic farming industry and food security,” the Minister added.
Prime Minister Sir Keir Starmer has also announced a £53 million support package for the most “vulnerable” households reliant on heating oil.
CMA warns it will act ‘without hesitation’
CMA (Competitions and Market Authority) CEO Sarah Cardell has written to the Chancellor, outlining the actions the body has taken on heating oil and fuels, and how it is monitoring prices across the country.
Ms Cardell wrote that the CMA would continue to monitor the impact on red diesel and fertiliser as part of its wider monitoring work: “It’s especially important in these circumstances that price rises reflect genuine cost increases; that timely, accurate and transparent pricing information is available; and that suppliers treat customers fairly.
“With this in mind, we will work with relevant officials and regulators to identify and monitor sectors likely to be affected by price rises and disruption – including agricultural inputs such as fertiliser and red diesel, groceries and travel – so that both the CMA and wider government can respond swiftly to any evidence of harmful practices across the economy.”
Ms Cardell also said the CMA was writing to suppliers and intermediaries to get further evidence and assess any consumer protection concerns. This is currently focused on complaints around existing orders being cancelled, followed by new offers at significantly higher prices, and price increases applied to automated delivery arrangements which are triggered when fuel in oil tanks drops to a certain level.
She warned that the regulator would act “without hesitation, using our full range of powers, if there is evidence that competition or consumer protection law has been broken”.
Transparency and fairness
These developments follow NFU President Tom Bradshaw’s meeting with Defra Secretary Emma Reynolds and Farming Minister Dame Angela Eagle last week, where Tom outlined issues NFU members have been experiencing over transparency on pricing, with some farmers not receiving a price until delivery.
Tom said: “If these cost pressures persist, which span the whole food supply chain, it could lead to further food price inflation – a situation we’ve already seen play out with the Russian invasion of Ukraine which drove an ongoing cost-of-living crisis here. This is something the government needs to take very seriously.
“Transparency and fairness over fuel and fertiliser prices is critical. It’s positive that the CMA has listened to our concerns, which the Defra Secretary of State put forward after our meeting last week, and is monitoring the sale of red diesel. We now need similar transparency for fertiliser and we support Defra’s push for better market data.
“In the long-term, it all comes down to resilience. We need to find ways to prevent UK farm businesses becoming collateral damage to global politics. This is about ensuring we have a stable homegrown food sector which can withstand shocks from global volatility and continue to produce food for the 70 million consumers of the UK.”
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