The real impact of cost pressures on the horticulture sector

First published: 15 November 2022

A picture of workers packging rhubarb

At a time of soaring inflation across the supply chain, we commissioned Promar International to investigate the true impact of cost pressure on growers.

Soaring energy costs combined with a continued lack of people to pick crops are posing a serious threat to the future of the UK’s fruit and vegetable industry.

A new report, prepared by Promar International, has found that growers’ cost of production has increased by as much as 27% in the past 12 months, with products such as tomatoes, broccoli, apples, and root vegetables most affected.

The main drivers being energy (up 165%), fertiliser (up 40%) and workforce costs (up 13%). 

The report also warns that despite food inflation at record highs, growers are not achieving the returns needed to run sustainable, profitable businesses, with additional further concerns on future energy prices following the end of the government’s six-month price cap. This means the situation could yet get worse for British growers.

“The UK horticulture sector strives to be the best in the world, but the viability of producing fruit and vegetables is under the greatest strain I’ve ever seen.”

NFU Horticulture and Potatoes Board chair Martin Emmett

Soaring costs

Change in production costs, autumn 2021-2022 (%)

Tomatoes +27%
Lettuce +20%
Mushrooms +17%
Strawberries +20%
Potatoes +20%
Broccoli +25%
Onions +21%
Carrots +20%
Apples +23%

Promar International report, median values based on trade interviews, October 2022

An ambitious sector under the greatest of strains

NFU Horticulture and Potatoes Board chair Martin Emmett described the UK horticulture sector as ambitious and innovative, saying: “We strive to be the best in the world, producing iconic products like strawberries, apples, and asparagus.

“Despite challenging political and supply chain pressures, the UK horticulture sector has a long held ambition for growth, matched with government’s ambition for UK horticulture as set out in its National Food Strategy.

“But the viability of producing fruit and vegetables is under the greatest strain I’ve ever seen.

“A continued lack of a reliable workforce, both in permanent and seasonal roles, combined with sharply rising input costs, particularly for energy, has put many businesses on a knife edge. Producers of high energy crops in particular, such as top fruit, root vegetables and crops grown under glasshouses, have severe doubts about their business viability.

Access to affordable energy and a skilled and secure workforce

“Growers are doing everything they can to mitigate the impacts, but they cannot do it alone.

“If this pressure continues, it will be simply unsustainable for some businesses to continue as they are. In these unprecedented times, stability and confidence are critical. 

“We have been in contact with the Groceries Code Adjudicator to ensure that he is aware of the pressures growers are under and alert him to the unfair buying tactics and practices many of our members face during discussions with retailers.

“It’s critical that UK businesses are able to have constructive dialogue with their customers about the pressures they are facing.

“To safeguard the future of British fruit and vegetables, we need sustainable farm gate prices, a commitment from government to lift the cap on the seasonal worker scheme and increasing the number of visas available to meet the sector’s needs, and for government to recognise agriculture and horticulture as a vulnerable sector in regard to energy security.”

NFU writes to CEOs

Following the publication of the report, the NFU wrote to all grocery retailer CEOs in a private letter laying out Promar’s findings.

We highlighted that without sustained, consistent and responsible action from all parts of the supply chain, we risk deepening a crisis that could lead to a contraction in the market, reduce the availability of British produce and ultimately leave many growers no option but to leave the sector altogether.

The letter called on buyers to discuss with suppliers’ sustainable market pricing with urgency.

“A continued lack of a reliable workforce, both in permanent and seasonal roles, combined with sharply rising input costs, particularly for energy, has put many businesses on a knife edge.”

NFU Horticulture and Potatoes Board chair Martin Emmett

Our key asks

We have a number of key asks of the government and retailers to ensure the industry remains viable and has the opportunity to achieve its full potential, with four issues of paramount importance.

  1. The industry urgently needs a commitment to lift the cap on the Seasonal Worker Scheme, and for it to be guaranteed for a minimum five-year rolling programme.
  2. Agriculture and horticulture should be classified as a vulnerable sector and receive longer-term energy price support, extending well beyond the initial six-month commitment.
  3. There needs to be good-faith discussions with retail buyers about the realities of cost price inflation, aligned to the GCA’s seven golden rules for CPI.
  4. The government’s commitment of delivering a horticulture strategy for England should be developed as a matter of urgency, and to ensure that the rest of the supply chain supports this ambition and works with growers to manage current and future volatility.

Report findings

Inflation gathers pace

In Promar's initial report in spring 2022, the biggest year-on-year inflationary increases were reported in energy (+81%), fertiliser (+75%), packaging (+25%), transport and raw materials (both +18%), and labour (+15%).

By autumn 2022 energy costs had seen a staggering 165% increase year on year, with fertilisers up 40%, transport 28%, packaging 23%, plants/raw materials 20%, and workforce costs up 13%.

Broccoli, tomato, onion, lettuce and potato suppliers interviewed reported year-on-year production cost increases of between 20% and 27%, while even the least inflationary product – mushrooms – recorded a 17% production cost hike.

All crops have seen additional increases in the past six months compared to the March report, underlining the huge extra strain heaped on growers over the summer and autumn.

Labour

While the cost of businesses’ seasonal and permanent workforces has risen by a relatively modest – in comparison with other categories – 13%, the significance of that cannot be understated as it accounts for anything between 40-70% of a horticultural outfit’s overall production costs, depending on the crop.

Promar’s report suggests that producers are struggling to keep their heads above water, and with the efficiency of workers from some new source countries lower than that which growers have been used to with eastern Europeans, lower productivity also comes at a cost.

Energy

The Energy Bill Relief Scheme was aimed at offering businesses some respite from astronomical gas and electricity price rises, but while its introduction was welcome, it has not necessarily changed much for growers, some of whom have already fixed their prices in advance of the scheme being introduced.

With the price cap limited to six months, the horticulture sector lacks any long-term certainty that bills won’t go through the roof once next spring comes around. The way the scheme is administered is also not totally clear to many growers.

Mitigating the impact

Across the industry, growers are taking a range of measures to mitigate the impact of inflation if they are not making a sufficient margin.

Promar found that some growers were taking steps to reduce production, with plantings scaled back by up to 20% in some cases this year already. That is only likely to accelerate, especially in the glasshouse salad sector as energy costs remain staggeringly high.

Other probable outcomes include reducing the number of Stock Keeping Units (SKUs) supplied, or in the vegetable and potatoes sectors in particular, even switching out of horticultural crops altogether into more profitable alternatives.

NFU horticulture members can read more about the findings of Promar in the winter edition of your horticulture magazine, due to land with you around Saturday 19 November. Since the magazine went to print, some of the figures have been updated. The most current stats are published on this page. 

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