NFU President Tom Bradshaw outlined how disruption to global oil and gas markets has affected the price of fuel and fertiliser, which are key inputs used for spring planting, boosting crop growth and forage production for livestock.
He relayed particular issues with a lack of transparency over the pricing of these critical inputs, with some farmers not receiving a price until delivery.
Stressing the need for greater price visibility to help farmers make informed decisions, Tom also emphasised the need for confidence that availability will continue, alongside access to natural gas for horticultural production.
“While the impact on food production and food price inflation will depend on what happens over the coming weeks, it is yet another sobering reminder of the need to build resilience in UK farming.”
NFU President Tom Bradshaw
With the potential for increased costs to drive further food price inflation, he pressed the importance of building farm business resilience so the food supply chain can better manage global shocks.
Defra in listening mode
Following his meeting with the Defra Secretary, NFU President Tom Bradshaw said Ms Reynolds “recognised that volatility in the global energy market has a huge impact on our food supply chains here and they are watching this very closely”.
While demand for gas and electricity may be declining, fertiliser and fuel usage will increase in the coming weeks as spring planting begins.
Iranian oil exports only account for 4.5% of global supply, but it’s the ongoing disruption to the Strait of Hormuz, via which around 20% of the world’s oil and gas shipments pass, that has caused a surge in oil prices.
Qatar and the United Arab Emirates also produce around one fifth of global LNG (liquefied natural gas), much of which is shipped to Europe and Asia via the Strait.
“It’s clear that transparency and fairness over fuel and fertiliser prices is critical, and we’ve been asking for this for a long time, regardless of market volatility,” Tom added. “It’s particularly urgent as farmers and growers are busy getting crops in the ground and boosting grass growth ahead of spring grazing.”
Prices continue to fluctuate
The situation is constantly evolving and, as with Russian’s invasion of Ukraine, much will depend on the events of the coming days to determine the extent of the impact on farming and food.
The NFU is gathering evidence and reports from members, and is working with the CBI (Confederation of British Industry), agricultural supply chains and Defra to ensure intelligence is being fed into the right government decision makers and keeping assessments up to date.
The increased volatility has exacerbated the lack of price transparency in supply chains with farmers often only being made aware of the price they will pay once products have been delivered onto farm. This limits the ability of farmers to make informed decisions and erodes trust.
Anecdotal evidence from members suggests that red diesel prices were pushing 110ppl at the start of the week, with localised price variability reported.
The anecdotal nature of the reporting highlights a key failing – that there is a lack of transparency in these markets. 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.
Impact on farming
While the majority of growers will have already taken receipt or have fertiliser on order, where there is demand for later season application, then there are questions around how this will be impacted by the market volatility.
The withdrawal of the direct support payment in England has also removed farmers’ main tool for managing these types of risk, which are out of their control. Farm business incomes are already under significant pressure and these price rises will add to that.
This is also a critical period for livestock farmers, who typically only buy fertiliser when they need it due to cashflow and storage constraints.
NFU President Tom Bradshaw said that he was focused on long-term solutions: “We need to find ways to prevent UK farm businesses becoming collateral damage to global politics.
“While the impact on food production and food price inflation will depend on what happens over the coming weeks, it is yet another sobering reminder of the need to build resilience in UK farming. We have to build our ability to withstand global shocks so we can continue to produce food for the 70 million consumers of the UK, and the Secretary of State recognised that.”
The NFU is:
- Closely monitoring commodity markets and encouraging members to feed through price information from the ground.
- Working closely with NFU Energy to understand the impact on electricity pricing and contracts.
- Engaging with the supply side, to understand the pressures they are facing, such as the AIC with respect to fertiliser and Fuel Industry UK.
We have also briefed the DIMMP (Defra Industry Market Monitoring Panel) on the existing and potential future impacts. Additionally, we have highlighted the exposure of the food system to energy markets in conversations with the CBI (of which the NFU is a member organisation) as they build their work to lobby Treasury and wider government to reduce the cost of energy for businesses.
Get support
Are you concerned about the Iran war and the impact it could have on your farm business? Tell us using the form below, giving examples of how it’s affected your business and information you want to see on NFUonline. The information you provide will be processed in line with our Privacy Notice. If you have a specific, individual enquiry, contact NFU CallFirst on 0370 845 845 for free initial legal advice and guidance and for assistance with the potential contractual issues that may arise. The NFU’s legal team has also produced general guidance on contracts, answering your questions relating to issues with input supplies.
NFU Energy is also able to support you if have questions. Call NFU Energy on: 024 7669 8891. Read NFU Energy’s latest guidance: What the Middle East conflict means for the UK energy market.
