Nothing focuses the mind on cost and inputs quite like huge price increases. The AF Ag Inflation index shows an increase of more than 24% in the last six months which is on top of a similar figure for the previous six months.
This means that farmers need 50% more cash to fund their activities than they did this time last year.
The support from the banks has never been more important than it is today to cover the increased costs and cash flow until there is money coming in from sales.
Many sectors are seeing prices increase, which is giving some confidence, but there are other sectors, such as poultry and potatoes, which are facing significant pressure.
The war in Ukraine has highlighted Europe’s dependency on Russian gas and oil and moving away from this is having an impact on the market as supply has inevitably tightened.
The sector needs the support of the banks, and it also needs the support of the whole supply chain, including the retailers.
Producers cannot be expected to bear the full cost of increased inputs as this will not be a short-term issue.
Price of food will start to rise, and you will no doubt be reading articles in newspapers and magazines that are talking about food inflation.
As prices start to rise, we will see shoppers become even more savvy in how and where they buy their food. Discounters such as Aldi and Lidl are putting significant pressure on the big retailers and it is important that in their rush to compete, they do not start to move away from British sourcing strategies in the hunt for cheaper food.
It is vital that British produce can be clearly identified on shelf and that we maintain the highest standards. Love it or hate it, the Red Tractor has a role to play in clearly differentiating our products to give consumers confidence in what they are buying.
May saw the launch of the NFU export strategy which asks the UK Government to truly get behind British produce and open new markets around the world.
Following the launch of the dairy export strategy, the red meat sector has also produced its ambition to grow exports for beef and lamb.
I have always had the belief that the UK should be a net exporter in multiple sectors, particularly red meat, and dairy.
We have the raw ingredients to be global players in these sectors, with a temperate climate to grow the grass, leading genetics, high animal welfare and the skills in the farming community that are second to none.
We need the Government to open new markets and processors to be encouraged to supply them. There is increasing global demand for food, and it was good to hear Arla outline their plans for exports in the dairy sector. Strong demand will give farmers the confidence to invest and drive the productivity of their businesses.
As I mentioned earlier, rising input costs will be focusing the minds of many on where they invest in their businesses. It is vital that some inputs are not cut back too much, that they impact on productivity.
Increasing productivity is a core pillar of the NFU’s Net Zero ambition, and even in these uncertain times, the issue of climate change is not going away.
There are many things farmers can do to help reduce their carbon footprint and managing crop nutrients efficiently is a key part of doing this.
I am well aware that looking to reduce your carbon footprint will be well down the list of priorities at present, but I would ask that if offered the opportunity to do a carbon audit, you take it. An audit will show where your biggest carbon inputs are and how they can be reduced.
A reduction in carbon input is a saving financially, which is a good thing. We are planning an event in July where you can hear from both farmers and industry experts about how working to reduce carbon is both good for their business and the environment.
Please keep an eye out for the invitation in your inbox.