Agflation Update – May 2026

Cost of Farming Crisis Emerging

Agricultural input inflation (‘Agflation’) has risen further in April 2026, with Andersons’ latest estimates placing it at 8.4% annually. This is now running well ahead of CPI (3.3%) and CPI Food (3.5%), and sharply above the Bank of England’s 2% target. At the same time, prices for agricultural outputs have fallen 5.8% year-on-year, tightening the vice on farm profitability still further. The divergent gap between rising input costs and falling output returns represents one of the most challenging margin environments UK farmers have faced in years and suggests that a ‘Cost of Farming Crisis’ is emerging.

Agflation is being driven primarily by continued disruption linked to the Iran conflict and the threat this poses to shipping through the Strait of Hormuz, through which circa 20% of global oil and gas flows. Around 30% of global urea supply passes through the same chokepoint, pushing UK farm-gate urea nitrogen fertiliser prices to around £650-700 per tonne. Ammonium nitrate prices are following closely given their linkage to gas markets. Dairy systems face the most immediate exposure, with ongoing fertiliser demand running through spring and summer. That said, fertiliser shortages more globally will also start to have an impact on UK farmers in all sectors in the latter half of 2026.

What makes the current situation particularly difficult is the absence of any compensating uplift in output prices, in sharp contrast to 2022. Milk prices are now approximately 25% lower than they were a year ago whilst pig prices are 12% lower. Beef prices are also around 10% lower than last year, however, these prices were at near record levels in 2025. This suggests sizeable profitability headwinds for livestock farmers.

Whilst cereal prices are improving with UK wheat prices now around 12% higher than 12 months ago, as the Middle East conflict has given rise to supply concerns globally. That said, UK farmers are getting increasingly concerned about yield, given recent dry weather which could reduce cereals output in several areas. This would also lower profitability at a time when the costs of purchasing fertiliser for next year’s crop will be much higher than last autumn.

As noted previously, the Iranian conflict is also leading to cost pressures in other areas, notably, fuel, electricity and machinery, with these effects expected to linger for some time yet giving the conflict-related damage in the Middle East.

Farm businesses and their advisers need accurate, up-to-date cost data now more than ever. The Agricultural Budgeting and Costing (ABC) Book, now in its 102nd Edition, provides fully updated gross margins across all farming sectors, overhead cost data covering machinery, labour and contracting, and sensitivity analysis across key enterprises. It is an indispensable reference for farm managers, consultants and lenders working to stress-test budgets and plan purchasing strategies in a volatile cost environment. The May 2026 edition is available to order now, priced at £58.00, at: https://theandersonscentre.co.uk/store/abc-budgeting-costing-book/

Figure 1: Andersons Annual ‘Agflation’, Agricultural Outputs & CPI Estimates – 2015 to 2026*

Sources: ONS, Defra and The Andersons Centre

Figure 2: Andersons ‘Agflation’ and UK Consumer Prices Index (CPI) – 2019 to 2026

Sources: ONS, Defra and The Andersons Centre
Notes: Andersons’ Agflation estimates build upon Defra price indices for agricultural inputs and weights each input cost (e.g., animal feed) by the overall spend by UK farmers. Andersons then provides a more up-to-date estimate of the price index and annual inflationary trends for each input cost category.

The Agricultural Outputs index is compiled in a similar manner. Defra price indices for agricultural outputs are weighted based on their overall contribution to UK farming output. Andersons then provides more recent estimates for each output category, with the index, and annual inflationary estimates, being updated as the official Defra data becomes available.

* represents the % change versus the same month a year earlier.

This news release has been sent from The Andersons Centre, 3^rd Floor, The Tower, Pera Office Park, Melton Mowbray, Leicestershire LE13 0PB. For further information please contact Michael Haverty (M:07900 907 902; Email: [email protected]), or Richard King (M: 07977 191 427; Email: [email protected]).