Category: Uncategorised

Ending Agri-environment Agreements Early

Defra has released information on how and when existing Countryside Stewardship (CS) and Higher Level Stewardship (HLS) agreement holders can exit their current agreements if they wish to.  From September, CS Mid Tier and HLS agreement holders will be able to apply to end their existing agreements early to go into the SFI or a CS Higher Tier scheme (opening this winter) either:

  • at the end of the current agreement year and receive the full payment due for that year (subject to meeting the requirements of the agreement)
  • before the end of the current agreement year, but not receive payment for the part of the current agreement year that’s already completed

Note, that it will not be possible to end existing agreements before September.

Contrary to previous advice, there will not be any requirement for the new agreement to be the same or ‘better’ than the existing agreement.  Previously the message had been that early termination would only be allowed if the new agreement would deliver the same or greater environmental benefits as the existing agreement.  However, we always thought this would be difficult to show when the system doesn’t allow a new scheme to be applied for when the old one is still running.

If the existing agreement includes an SSSI or Scheduled Monument, agreement holders will need to keep managing the land in line with the requirements of those designations.

The case is not so straight forward for those with a CS Higher Tier agreement.  It will only be possible to end the existing agreement early ‘by exception’.  Defra has not expanded on the criteria for this as yet, and has said more information will be available in the summer together with details on how CS MT and HLS agreement holders can apply to end their agreements.

In terms of agreements which end on 31st December 2024, Defra has said it should be possible to apply for an SFI or CS Higher Tier agreement ahead of this date, so that the new agreement is ready to commence on 1st January 2025.  Furthermore, agreement holders are reminded that they can apply for an SFI agreement to run alongside an existing agreement as long as the actions under both schemes are compatible and there is no double funding.

Ending an existing agreement early to enter the SFI is one of the most common questions we receive.  This does give a time frame, even if we still don’t have all the detail.  We also know of cases where there has been a problem applying for SFI when an HLS or CS agreement is coming to an end or has recently finished, hopefully this means Defra has addressed or will be addressing this problem shortly.

If you found this article useful, there are numerous additional articles published each month on our Professional Update bulletin service. You can access a no obligation 90-day free trial via the link below.

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Country Landscape

Nutrient Management Research Grants

Defra has announced funding for projects which will develop innovative solutions to farm nutrient management.  Through the Farming Innovation Programme, £15m will be available through two competition strands;

  • Farming Futures: Nutrient Management Phase 1 – Feasibility – Funding for projects of between £200,000 to £500,000
  • Farming Futures: Nutrient Management Phase 1 – Industrial Research – funding for projects of between £500,000 to £1,000,000

The Farming Innovation Programme, is a partnership with Innovate UK who are part of UK Research and Innovation (UKRI) – the UK’s innovation agency.  Innovate UK deliver the programme, providing funding to those who want to research or develop an innovative solution to a known problem in agriculture.  Funding is grouped under four different themes; this support is via the Farming Futures Research and Development (R & D) Fund which supports work on ‘longer-term’ innovations.  Both competitions will open on 29th May and close at 11am on 24th July, but further guidance has been made available in advance of opening and can be found via https://farminginnovation.ukri.org/

Further to these strands, Innovate UK will run an additional competition, Farming Futures: Nutrient Management Phase 2 – Industrial Research, in Autumn 2024.  This Phase 2 competition will have higher project costs that can be supported through the Phase 1 competition.

If you found this article useful, there are numerous additional articles published each month on our Professional Update bulletin service. You can access a no obligation 90-day free trial via the link below.

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Loam Farm Update

The 2024 harvest year continues to be challenging for cereals farmers.  Whilst dryer weather has allowed some spring operations to progress, the wet weather since the autumn has already affected the likely financial returns for the coming harvest.

In light of these difficulties we have updated our Loam Farm Model.  Loam Farm is a notional 600 hectare business that has been used since 1991 to track the fortunes of British combinable cropping farms.  It is partly owned and partly rented and is based on real-life data. It has one full-time worker and employs harvest casual labour.

The farm has just finished its sales from harvest 2023.  It can be seen that the returns have been far lower than the previous 2021 and 2022 harvests.  However, those two were unusually good (some of the best profits Loam Farm has seen in 30+ years).  The results for harvest 2023 are far more in line with historical averages.  However, even with the farm making a profit, the business is under some cashflow pressure due to higher working capital requirements and the need to pay tax on the profits from the two previous good years.

For harvest 2024, variable costs have reduced – mainly lower fertiliser values.  Overheads increase due to labour, machinery, fuel and general overhead cost inflation.  Some costs have increased to deliver the SFI options that the farm has signed-up for.   The key issue for the coming harvest is output though.  Despite the reduced UK harvest crop prices are un-exciting for growers – largely due to plentiful grain stocks  around the world.  Yields are also forecast to be lower.  Loam Farm is assumed to have established its winter crops, but the forecast yield has been reduced due to crop stress over winter and the significant bare patches in fields.  The farm has around a third spring cropping.  Again, these crops are assumed to have been established but the expected yield has been cut due to the late planting and unfavourable soil conditions.  It can be seen that, for Loam Farm, this means there is a forecast loss from production for this harvest.  The (declining) BPS and SFI are required to bring the business back into profit.

If you would like more detail on the topics covered above as well as additional articles on UK farm business matters, why not subscribe to our Professional Update bulletin? Over the course of each month, we give a concise and unbiased commentary on the key issues affecting business performance in the UK agri-food industry, and its implications for farming and food businesses. Please click on the link below for a 90-day free trial.

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Beef and Lamb Markets Update

Beef

Cattle prices remain strong but fell back throughout March and are just below 2023 levels.  However, prices appear to be stabilising now.  The GB deadweight prime all steer price for the week ending 13th April 2024 stood at 487.5p per kg; compared with 490.8 p per kg for the same week in 2024.  The cull cow price has climbed steadily since the turn of the year, from 316.9p per kg at the start of 2024 to 356p per kg for the week ending 13th April.  Even so, it is still some 27p per kg below last year’s record levels.  GB slaughterings are estimated to be up on the year, with prime supplies seeing a 2.7% (13,100 head) growth on the year-to-date.  But prices are being supported by demand, which is reported to be good ahead of the summer BBQ season.  Furthermore, Irish cattle prices have been trending up over recent weeks due to firm demand adding further support to GB beef values.

Sheep

The GB sheep market has experienced some exceptional prices over the spring.  Following a slight dip a couple of weeks ago, prices have increased again; the GB deadweight SQQ overall price for the week ending 13th April rose by 21p per kg on the week to 850.7p per kg, compared with 636.3p per kg in 2023.  Prices have remained strong post-Easter supported by tight supplies.  The AHDB estimates slaughterings to be down by 7.6% (238,000 head) for the year-to-date.  The wet weather is also impacting finishing of hoggs and will mean spring lambs are likely to take longer to come to market.

Looking ahead, the AHDB has updated its domestic sheep meat production for the year.  It is now estimating supplies to fall by -1.4% to 282,000 tonnes (previously -1%).  The update follows the lastest livestock numbers from Defra, which reports a larger decline in the breeding flock.  In turn, the lamb crop, which was previously forecast to increase by 2%, is now expected to decline by -1.2% compared with last season and this doesn’t take into account any impacts from Schmallenberg or Bluetongue virus.

However, the carryover of old season lambs from 2023 to 2024, although still down on the year, is not expected to drop by as much; the fall in carry-over is now estimated at -4.3%, compared with the previous figure of -10%.  This is due to the assumption that more ewe lambs, previously expected to go into the breeding flock, will be slaughtered.  In terms of new season lamb slaughterings in the first six months of the year, this is now expected to be around 1.57m head (previously 1.6m).  Slaughter in the second half of the year assumes a typical pattern and is forecast to be 6.4m head (previously 6.6m); growth of just under 1% compared with the same period in 2023.  Adult sheep slaughterings across the year are forecast to fall by -3%.  The revised forecast show supplies tightening and whereas, previously, the increase in product in the second half of the year could have put downward pressure on prices, this has reduced.  The main concern for the sector will be from reduced consumer demand because of a switch to cheaper meats.

If you would like more detail on the topics covered above as well as additional articles on UK farm business matters, why not subscribe to our Professional Update bulletin? Over the course of each month, we give a concise and unbiased commentary on the key issues affecting business performance in the UK agri-food industry, and its implications for farming and food businesses. Please click on the link below for a 90-day free trial.

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Nottingham Farming Conference

Thursday 8th February 2024

10 am  – 4 pm

 

University of Nottingham, Sutton Bonington, Leicestershire, LE12 5RD

“Challenging perceptions – Next generation farming”

 

Soil-Crop-Animal-Manure Cycle

Andrew Sinnock

Agriton

 

Regenerative Farming

William Hudson

Writtle University College

 

Biodiversity Net Gain

Mark Topliff

Knight Frank

 

Pasture, Climate and the Consumer

Hannah Thorogood

Pasture for Life

 

There will be a hot buffet lunch and refreshments provided throughout the day

EMFMA Members £40 per person

Non Members £45 per person

Parking £5 per car

 

To book your place, please complete the booking form (This link will take you to MS Forms) by Wednesday 24th January 2024

 

If you have any queries, please contact Rebecca Stretton on [email protected]

Agflation has Peaked, but its Corrosive Effects Linger

After rising sharply since 2021 and peaking in July 2022 at 28.4%, agricultural inputs’ inflation (Agflation) has been in free-fall during the first half of 2022 and has become deflationary. The latest estimates suggest that agricultural input prices in May 2023 are 3% lower than in May 2022. Agricultural output prices have broadly mirrored the trend for agricultural inputs and have also become deflationary, currently standing at -2.3%. This is in sharp contrast to food prices (depicted by CPI Food), which in May 2023 are estimated to have risen by 18.7% year-on-year.

Although, it appears that food prices for consumers are continuing to rise whilst agricultural prices are falling, importantly, there is a lag between how agricultural prices evolve and how these prices are reflected in retail prices. Back in 2017, when agricultural output prices reached their highest point in May of that year (at 13.2%), the CPI Food index did not peak until the following November (at 4.1%). This reveals a lag of about 6 months and indicates that the highest extent of inflation in food prices was significantly lower than for agricultural outputs. A key reason for this is that agricultural raw materials are one of several inputs that go into supplying food to consumers. Other inputs such as labour, energy, and packaging are also significant, and traditionally are much less volatile than agricultural prices.

Andersons ‘Agflation’ and UK Consumer Prices Index (CPI) – 2015 to 2023

Sources: ONS, Defra and Andersons

Notes: Andersons’ Agflation index builds upon on 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 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 being updated as the official Defra data becomes available.
* represents the % change versus the same month a year earlier.

That said, the combined effects of Brexit, Covid and the Russia-Ukraine conflict have exerted multiple pressures on both agricultural commodities, labour and energy inputs meaning that recent CPI Food inflation has almost reached 20%. However, there are signs that food price inflation might have peaked in March 2023, about 7 months after agricultural output prices had done similar.

Furthermore, although the chart above shows that inflation is trending downwards, it disguises that agricultural and food prices today are substantially higher than they were two years ago, as the indexed chart below shows. Agricultural input prices are 24% higher, agricultural outputs are up 15% whilst food prices are up by 29% in that time. In this time, prices elsewhere in the economy, denoted by the CPI index are also up by 18%. This reveals the corrosive pressure that inflation exerts on consumers’ incomes. Understandably, workers will seek pay rises to mitigate these increases. This, in turn, will mean that inflationary pressure across the economy generally will continue to linger, especially as annual inflation (8.7% (CPI)) remains way higher than the Bank of England’s 2% target.

Indexed Chart of Agricultural Inputs, Outputs, Food Prices and CPI – 2015 to 2023

Sources: ONS, Defra and Andersons

With consumer incomes under pressure, there is even greater focus on food prices and, by implication, the prices that farmers receive. All the while, farmers too are contending with their costs being significantly higher than two years’ ago. This signifies further challenges ahead, at a time when recent Free Trade Agreements with Australia and New Zealand have entered into force. Although farmers in those countries have also had to contend with inflationary pressures, it suggests that a delicate balancing act will be needed so that British prices remain competitive, whilst permitting farmers to cover the significant cost increases that they have experienced in the past two years.

Indeed, a key reason why agricultural inflation has come down is because the annualised figures compare with a given month a year earlier, a period when the world was adjusting to the shocks caused by the start of the Russia-Ukraine conflict. When annual inflation is compared to a period after which costs had increased considerably, it is unsurprising that the rate of increase has slowed, or turned negative in the case of agflation.

In such times, it is more important than ever for farmers and those that transact with farmers to be aware of the costs that farmers face. The Agricultural Budgeting and Costing Book contains all the farm and rural business information you need in one publication. It is concise, clear, and easy-to-use. The information is updated every six months, so you are always using the most relevant data, something which is especially vital during inflationary periods. The contents include;

  • Fully updated gross margins for all farming sectors, crops, and livestock, including net margins for key enterprises.
  • Sensitivity analysis and discussion of market prospects.
  • The widest range of information on alternative enterprises, diversification, and non-farming income sources available in any UK publication.
  • Explanation of the support systems and grants across GB, including BPS rules and rural grants. An outline of post-Brexit farm policy.
  • Farming costs including forage, feed, fertiliser, and pesticides.
  • Overhead cost data covering machinery, labour, contracting, building costs, and rents.
  • A vast array of general reference information for the farming sector.

For nearly 50 years, The Agricultural Budgeting and Costing Book has been providing industry leading farm management and costings information to agricultural advisors across the UK and is the leading publication of its kind in the industry. The 96th Edition, or an annual subscription (2 editions) can be ordered via The Andersons Centre website – https://theandersonscentre.co.uk/shop/

Ends.

Notes:

No. of Words: 966

Authors: Michael Haverty and Richard King

Date: 21st June 2023

This news release has been sent from The Andersons Centre, 3rd Floor, The Tower, Pera Office Park, Melton Mowbray, Leicestershire LE13 0PB. For further information please contact Michael Haverty on +44 (0)7900 907 902 or Richard King via +44 (0)7977 191427. 

Cost of Farming Squeeze Continues

Agricultural inputs’ inflation (Agflation) continues to outpace general economic inflation (CPI) as well as agricultural outputs and food prices (denoted by CPI Food). This is the key finding of Andersons’ Agflation estimates for January. The latest estimates put Agflation at 18.7% annually, significantly ahead of agricultural outputs (11.1%). Although the CPI and CPI Food indices continue to rise, currently standing at 10.5% and 16.8% respectively, there is still a gap between the food price inflation that consumers face and the increased input costs that farmers must manage. Therefore, UK agriculture continues to experience a cost of farming squeeze.

Andersons ‘Agflation’ and UK Consumer Prices Index (CPI) – 2015 to 2023

Sources: ONS, Defra and Andersons

Notes: Andersons’ Agflation index builds upon on 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 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 being updated as the official Defra data becomes available.
* represents the % change versus the same month a year earlier.

Although Agflation remains higher than food prices, it is declining. In July 2022, it peaked at 26.3%. That said, throughout 2022, agricultural input cost inflation generally surpassed price rises for agricultural outputs. The only exception came in October and November when both indices were aligned. During December and January, the agricultural outputs’ inflation rate has more than halved, declining from 22.9% in October to 11.1% today. It is now 7.6 percentage points lower than agricultural inputs’ inflation.

This signifies a challenging period ahead for farmers as the gap between input cost rises on the one hand and output prices on the other continues to widen. Global Dairy Trade (DGT) auction prices, taken as a proxy for global milk prices, have declined by 6% in the past month. Feed wheat prices (£213/t) are also down by 6% versus December and are returning to levels seen this time last year when prices stood at £210/t. The implications of these trends will require careful consideration.

Whilst general economic inflation looks to have peaked and several commentators are forecasting that the inflation rate will decline significantly during 2023, food prices continue to rise. This should not come as a surprise at this juncture because there tends to be a lag between the rates of inflation for agricultural commodities (inputs and outputs) and the inflation rate for food prices. In the past year or so, this has been in the region of 6 months. With agricultural inflation peaking in July, one would anticipate that the CPI Food index will also peak shortly, if it has not already done so.

Inflation and the impact of the ‘cost-of-living crisis’ on UK agriculture will be key themes during the forthcoming Andersons’ Spring Seminars on the Prospects for UK Agriculture which will be taking place across 11 UK venues from 24th February. The Seminars will examine UK farming’s profitability and performance, upcoming farm policy changes, trade, inflation and the impact of the cost-of-living crisis. They also provide sector-by-sector analysis and profitability outlook for the farming industry. Andersons’ Seminars have been running for 26 years and are renowned across Britain for informing agri-food professionals on how the industry is set to evolve in the next year and beyond, and the implications thereof for organisations serving the sector.

Despite the inflationary pressures that UK farming is facing, we have held the cost of the seminars at the same level as last year. Furthermore, if you book online via you will receive, via e-mail, a bonus complimentary copy of our most recent Professional Update bulletin (worth £50). More information including booking details is available via: https://www.theandersonscentre.co.uk/seminars

Ends.

Notes:

No. of Words: 658

Authors: Michael Haverty and Richard King

Date: 31st January 2023

This news release has been sent from The Andersons Centre, 3rd Floor, The Tower, Pera Office Park, Melton Mowbray, Leicestershire LE13 0PB. For further information please contact Michael Haverty on +44 (0)7900 907 902 or Richard King via +44 (0)7977 191427. 

Andersons Supporting ABP’s £1.5 Million Beef and Lamb Sustainability Programme

ABP has recently announced a £1.5 million investment in a unique sustainability programme which will support 350 of its farmer suppliers, and share wider learnings across the UK beef and sheep sectors. The Andersons Centre (Andersons) is delighted to be supporting ABP in conducting the on-farm assessments which will encompass both greenhouse gas emissions and other sustainability benchmarking.

This new programme, called PRISM 2030, will provide farmers with a support framework initially over 2-3 years. The aim of the programme is to help participants to improve their carbon footprint and sustainability across the entirety of the farm. The detailed programme will include assessment of carbon footprint, soil health, water use and support biodiversity creation and resource efficiency.

In addition to Andersons’ input, Harper Adams University will also provide support to ensure that farmers have direct and ongoing access to, and feedback from, the very latest environmental innovations and methodologies. ABP will also be making a sustainability grant available to farmers. There will also be peer-to-peer learning and expert advice on how environmental and productive performance can be improved throughout the programme.

The carbon assessments will be undertaken using Agrecalc as it is widely recognised as one of the leading carbon calculators in the UK, particularly in the grazing livestock sector. Agrecalc has over 8,000 active users with more than 17,000 carbon assessments completed across the UK in recent years.

Michael Haverty, Partner and Senior Research Consultant, will lead the Andersons team and commented that “given the scale of the climate change challenge, it is crucial that improvements in terms of greenhouse gas emissions are made as soon as possible. The PRISM 2030 programme addresses this challenge head-on by giving a robust baseline on emissions and, importantly, is focused on identifying and implementing actions which can improve both environmental emissions and productive performance.”

Dean Holroyd, Group Technical and Sustainability Director for ABP, stated that “British red meat production is amongst the most sustainable in the world, but we can and must do more because as an industry, we are well placed to be part of the climate solution.”

“So, we want to build on this position of strength, and while PRISM will mean direct support for those in our supply base who qualify for the programme, all of the outcomes will be made available to the wider industry.

In this way, it’s our hope that this initiative will play a part in helping beef and sheep farmers across the country become the global leaders in sustainable meat production – with lower emissions, lower costs and improved productivity.”

Farmers interested in participating in the PRISM 2030 programme should firstly contact a member of the ABP Livestock Team for their region to avail of a complimentary carbon assessment as well as a suite of other benefits.

Notes:

No. of Words: 475

Author: Michael Haverty

Date: 24th November 2022

This news release has been sent from The Andersons Centre, 3rd Floor, The Tower, Pera Office Park, Melton Mowbray, Leicestershire LE13 0PB.

FFRF Programme – Free Farm Business Advice

The Andersons Centre are providing FREE farm business consultancy advice under the DEFRA funded FFRF programme.

The programme is open to ALL farming businesses in England with an SBI number.

You will receive THREE DAYS worth of FREE consultancy input.

You will:
• Receive a face-to-face meeting with a specialist consultant
• A detailed report
• A follow up meeting
• Access to online training courses

Areas we cover under the programme are:
• In-depth Business Review and help with future business planning
• Joint Ventures
• Debt Re-Structuring
• Feasibility Studies
• Analysis of Capital Investment and Future Funding
• Forward Budgeting and Cashflow Management
• Diversification
• Tenancy Help
• Anything else farm business related

In-depth Business Review

Any business requires a sound strategy with defined objectives. Not sure where your business is heading or how it is performing? Our in-depth review will analyse your business, compare it to others, challenge what you are doing, and provide you with independent and financially sound advice for you to consider.

Joint Ventures

Contract Farming Agreements are a structured way for land occupiers to collaborate with contract farmers. We can advise on how contract farming works – physically and financially, on the structure of the agreement and on the roles and responsibilities of each party. We can prepare budgets to assess the financial returns for an agreement for each party.

Debt Re-Structuring

We work alongside banks and finance providers to agricultural businesses on a fully independent basis. We are well placed to assist you with advice regarding your finance and debt requirements to find a solution which works best for you.
Is your debt structured correctly? Do you have the correct balance of long term and short term borrowing? Is your borrowing affordable? Do you have enough working capital? We can provide detailed forward budget & cashflow projections should you require a restructure to your business finances.

Feasibility Studies

Do you have a new enterprise you wish to try? Or wish to change your system and want to see how it will impact your business financially? We can carry out detailed feasibility studies on your business by comparing what you are doing now with what you want to change.

Analysis of Capital Investment and Future Funding

Are you planning a new capital project such as pursuing a new enterprise, buying a farm, beginning a new tenancy, buildings or improving infrastructure, expanding an existing enterprise, or diversifying? Analysis of the capital investment is critical – planning the costs, assessing the returns, cash flowing and funding the project correctly, integration of the project within your existing business are key to ensure you have all the right information available to you before you make the important decisions.

Forward Budgeting and Cashflow Management
A budget and cash flow forecast is a powerful tool for managing a farm business. Just by producing a budget it makes you consider the future direction of your business and importantly whether the result meets your annual capital needs. By periodically monitoring against budget you are better able to plan your future direction.

Diversification

Diversification is becoming important for many businesses. Whether to allow other family members to join the business, better utilise resources, or for entrepreneurial individuals looking for opportunities to add value, we have a range of knowledge and experience from working with different diversified farming businesses on a variety of projects.
A successful diversification project must be based upon sound business principles. We can assist with assessing the market-place for your chosen activity, evaluating the viability of investments, considering government policy and assessing routes to market. The overall business case is the important key to success, as well as a fit with current farm activities, people and resources.

Tenancy Help

We can assist with rent reviews, FBT negotiation, rent tenders for business expansion and exit strategies for landlords and tenants.

Sign Up to the Programme

The FFRF (Future Farming Resilience Fund) is being provided by The Andersons Centre in partnership with Ricardo. The programme which is grant funded by DEFRA runs from now until March 2025.

You can sign up to the FFRF programme through the Ricardo Website – https://ffrf.ricardo.com/ and click Register Here.

 

 

Progress not Perfection, the Key to Addressing Greenhouse Gas Emissions

Despite Covid, Brexit and the Russia-Ukraine war, climate change is fast-becoming the central issue facing UK, European and global agriculture – as the recent record temperatures attest. The challenge with Greenhouse Gas (GHG) emissions is especially prevalent in grazing livestock. A recent White Paper by farm business consultancy, Andersons, has found that whilst there are notable imperfections with the methodologies used to quantify GHG emissions on farms, particularly methane, this is not an excuse for inaction.

The white paper’s finds that although the current tools and methodologies used to calculate GHG emissions are not perfect, improvement against an imperfect measure is still progress – which is urgently needed. The farming industry needs to avoid fixating on the details of the calculation methods and focus more on making the changes necessary to reduce emissions. Society expects agriculture to play its part and the industry will be judged on improvements made.

That said, there are strong grounds for methane to be treated separately as a GHG. Even within methane, clear distinctions are needed between methane from enteric fermentation (livestock) and methane emitted from fossil fuels. The former is recycled, if livestock populations and feeding methods remain largely the same over time. The latter is ‘new’ methane which has a much more potent impact, especially as methane production from energy (38%) accounts for a similar share of global output as agricultural methane (40%). Waste has a 20% share, much of this is food waste and needs reducing with urgency.

Estimated Global Methane Emissions by Source

Source: International Energy Agency (IEA), analysed by Andersons

For farmers, ‘doing the right thing’ environmentally can also help to improve productivity. These ‘win-wins’ (e.g., reducing inorganic nitrogen fertiliser) need to be deployed widely and urgently. Yet, this will only get farming so far.

To get to Net Zero a step-change in practices is needed, as are financial incentives for farmers to reduce net GHG emissions, particularly by sequestering carbon. Some farmers are adopting a wait-and-see attitude until there are clear commercial opportunities. Whilst many farmers want to do-the-right-thing, businesses need to be sustainable both environmentally and financially.

From a policy-making perspective, concerns with GHG emissions are rightly a core policy-making focus. Yet, it is vital that progress in this area does not lead to carbon leaking and environmental degradation elsewhere. Future policy requires a balanced approach across these issues.

Across the UK and Europe, emission targets are now in place. Whilst more work is required in terms of plans and strategies, the key now is effective action. Without this, the best plans and targets become, yet another, source of waste. There is much to be done and farmers are central to the solution. Andersons White Paper can be accessed by clicking here.

GHG emissions and the environment is a key topic within the forthcoming 53rd Edition of the John Nix Pocketbook for Farm Management, publishing in early September. It includes a detailed overview of emissions in agriculture and food production with additional information on ammonia emissions, food waste and an updated section on carbon markets in UK farming. Also, there is a wide array of detail on topics such as conservation costs, renewable energy, and fuel usage.

The 53rd Edition is updated for 2023 with over 100 enterprises costed for the year ahead, overheads, capital and other farming costs. It recognises that farming will continue; however challenging the coming months and years turn out to be, and farmers and managers must continue to focus on what they have control over within their farming systems.

The Farm Management Pocketbook is designed to help farmers, students, and other agribusiness professionals to understand their farms, the industry, and the opportunities that it offers. It costs £32.00 +P&P. Visit https://theandersonscentre.co.uk/shop/john-nix-pocketbook/ to pre-order a copy, for delivery in early September.

Ends.

Notes:

No. of Words: 627

Authors: James Webster and Michael Haverty 

Date: 17th August 2022

This news release has been sent from The Andersons Centre, 3rd Floor, The Tower, Pera Office Park, Melton Mowbray, Leicestershire LE13 0PB. For further information please contact James Webster (M: 07707 088409) or Michael Haverty (M:07900 907 902).

Cost of Farming Squeeze Apparent

For the first time, Andersons’ Agflation estimates include an index of Agricultural Outputs prices. The July estimates put Agflation at 23.5% annually, more than double that of agricultural outputs (10.1%). When Agflation is plotted against output prices, food inflation (denoted by CPI Food) and general economic inflation (CPI), which based on updated data for July 2022 now stand at 12.8% and 10.1% respectively, it becomes apparent that there is a cost of farming squeeze taking place.

In the months preceding June 2022, agricultural output prices generally rose in parallel with Agflation, albeit at a slightly lower rate. However, since then, these indexes have diverged considerably. Whilst recent falls in commodity grain prices have been the main driver, it also suggests that consumers are struggling to afford rising food prices and, that retailers and food service providers are reluctant to pass on further increases. With energy prices set to rise further towards winter and the Bank of England projecting that inflation will rise to 13% by year-end, the extent of the challenges facing the UK economy are stark.

Andersons ‘Agflation’ and UK Consumer Prices Index (CPI) – 2015 to 2022

Sources: ONS, Defra and Andersons

Notes: Andersons’ Agflation index builds upon on 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 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 being updated as the official Defra data becomes available.
* represents the % change versus the same month a year earlier.

Rising energy prices will also continue to affect Agflation in terms of fuel, fertiliser and feed costs. Therefore, Agflation will remain at elevated levels for this year and beyond.

Some sectors are better positioned to withstand these increases than others. Milk prices are up by 41% since July last year. Cereal prices, although lower recently, are still around 29% higher than a year ago. However, livestock prices, generally up 10-19%, are not rising as quickly as Agflation, with egg and fresh vegetable prices falling. Several of these sectors have been struggling in terms of profitability. Additional inflationary pressure on inputs will stretch working capital resources further.

Although advance BPS payments in England during July are welcome, BPS payments are declining and will by 35% lower in 2023 than in 2020. Successor schemes including the Sustainable Farming Incentive (SFI) will not bridge the income gap. If farmers are unable to get higher prices for their outputs, many will be severely squeezed in the months ahead. Difficult decisions will need to be made on cropping and enterprise viability. This will have direct implications for food supply, coming at a time when severe droughts are being experienced elsewhere, particularly in Europe.

In such times, having access to the latest available information likely to impact farmers’ decision-making is crucial. Inflationary challenges, and other key issues affecting UK farming, will be examined in much more detail during Andersons’ forthcoming Webinar, taking place on 22nd September. Tickets are priced at £70 per place, the agenda is set-out below and places can be booked by visiting: https://register.gotowebinar.com/register/3842561566295604752 

Agenda – UK Farming Prospects – Autumn Update

  • Farm Profitability and Finance Performance
  • Trade Update
  • Farm Policy Updates – England, Scotland and Wales
  • Sector Updates
    • Arable
    • Dairy
    • Grazing Livestock
    • Pigs and Poultry
  • Summary and Conclusions

Ends.

Notes:

No. of Words: 596

Authors: Michael Haverty and Richard King

Date: 10th August 2022

This news release has been sent from The Andersons Centre, 3rd Floor, The Tower, Pera Office Park, Melton Mowbray, Leicestershire LE13 0PB. For further information please contact Michael Haverty on +44 (0)7900 907 902 or Richard King via +44 (0)7977 191427. 

Agflation Remains at Decades’ High Levels

Andersons’ latest estimates for June show that Agflation now stands at 25.3%. Since the onset of the Russia-Ukraine conflict in February, input costs have soared and are at levels which have not been seen in decades.

Andersons’ Agflation index builds upon on 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 for each input cost category. As the ‘official’ Defra figures are updated, Andersons Agflation estimates are also adjusted to take account of the Defra updates.

In comparison with general inflation, as measured by the consumer prices index (CPI) and food prices (CPI Food) which stand at 9.1% and 8.5% respectively, Agflation is nearly three times higher. Given the current situation with the Russia-Ukraine conflict and the upheaval caused across numerous commodity supply-chains, particularly feed, fuel, and fertiliser, Agflation is set to remain at elevated levels for at least the remainder of this year.

Andersons ‘Agflation’ and UK Consumer Prices Index (CPI) – 2015 to 2023

Sources: ONS and Andersons

Notes: Andersons’ Agflation index builds upon on 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 for each input cost category.
* represents the % change versus the same month a year earlier.

Due to the surging input costs, many farm businesses are feeling a severe squeeze on margins. Thus far, some sectors have been better able to withstand the inflationary storm than others.

The arable sector is less affected for 2022 as most farmers have bought forward their fertiliser and output prices have hit record levels (although this contributes to feed cost rises for livestock). For many farmers in this position, 2022 is shaping up to be a stellar year – the value of the unharvested wheat crop has risen by more than 50% since it went in the ground. That said, challenges loom for 2023. High input costs and taxation on 2022 profits will stretch working capital requirements.

As alluded to above, the livestock sectors are under additional pressure due to the burden of increased feed costs, which account for nearly a quarter of the weighting for the Agflation Index. Whilst pig prices have risen, they remain insufficient to cover the soaring production costs that pig farmers have had to contend with in recent months.

Dairy and livestock farms have also been feeling the strain. The dairy sector has seen some significant price rises in recent months, partly because UK milk production volumes are down, and processors and retailers are trying to encourage farmers to boost their production to meet with consumer demand. This will help the dairy sector to mitigate some of the inflationary strain.

These severe inflationary pressures are occurring at a time when all farms in England are facing cuts in BPS payments, which will reach 35% during 2023.

In such times, it is crucial to demonstrate competent cost management, particularly in terms of working capital, which will be essential to steer farm businesses through the current crisis.

To celebrate the John Nix Pocketbook becoming part of The Andersons Centre’s publications portfolio, and as an antidote to inflation, we are offering a 10% discount on all purchases of the 52nd Edition of the Pocketbook. To avail of the discount, simply click the link below and apply the discount (coupon) code “PKB5210” during the checkout process. Offer is available while stocks last. Please visit: https://theandersonscentre.co.uk/shop/john-nix-pocketbook/

Ends.

Notes:

No. of Words: 602

Author: Michael Haverty

Date: 28th June 2022

This news release has been sent from The Andersons Centre, 3rd Floor, The Tower, Pera Office Park, Melton Mowbray, Leicestershire LE13 0PB. For further information please contact Michael Haverty on +44 (0)7900 907 902.