'Two years of crisis' as fertiliser prices rocket by 300%

12 May 2022

Rising costs and low margins are forcing farmers to consider exiting the industry, increasing the UK’s reliance on food imports, industry groups have warned.

Procurement professionals are being told to report back to superiors that growers are “starting to think twice about whether they're going to carry on”.

Fertiliser prices have risen by 300% year-on-year, from £250 a tonne to between £800-£1000 a tonne, according to the National Farmers’ Union (NFU). 

An NFU spokesperson told Supply Management the sector was experiencing “extreme volatility” which it “expects to grow in the coming months”.

They continued: “​​We’ve seen rapid inflation of input costs, with fertiliser prices rising four-fold, animal feed rising by 70% and fuel costs continuing to soar.”

On top of rising costs, farmers are facing “huge uncertainty” around the availability of fertiliser.

Animal feed has also seen significant price rises. Soya feed has increased by 37% from £370 a tonne to £506, with wheat increasing by 58%, from £190 a tonne to £300. 

Martin Caraher, emeritus professor of food and health policy at City University, said the scale of the UK’s food crisis puts the 2008 recession “in the shade” and high costs could result in fewer crops next year. 

Caraher told SM the impact of high fertiliser prices were two-fold. “Farmers will either grow less or add less fertiliser, but overall, this will result in the second issue, which is a reduction in crop production,” he said. “So food prices may go up because there'll be less food being produced.”

He said some food items – including bread – had already risen in price by 20% and they could increase by a further 20% if crop reductions take place.

However, rising prices for customers won’t be enough to mitigate costs increases for farmers or help offset the threat to UK food security. 

Caraher said: “Farmers are under pressure because the supermarkets are entering into a price war and hospitality is entering into a price war, so they're going to be trying to drive prices down at the production level. The irony is these rising prices are not going to necessarily result in benefit to the grower or producer. That’s the problem.” 

He continued: “We’re essentially not planning for a crisis. That's the problem. There's no overview plan, a national emergency plan for food.

“We're seeing two years of crisis, maybe longer, but certainly two years.”

Jack Ward, CEO of the British Growers Association, which represents the UK’s horticulture and fresh produce sector, said labour costs had already risen by 15%, with fuel prices up 50%, and electricity prices increasing seven-fold in some cases. 

He said the food sector will face further labour shortages as around 9,000 of the 13,000 seasonal workers (67%) the UK agriculture sector employs arrive from Ukraine.

“But what's not gone up at the same rate is the returns back to growers. So what we're facing at the moment is the possibility that over the next two to three years, we will see an erosion of our production capability.”

He continued: “I would be quite worried about security of supply, or the last part of this season, depending on access to workers in availability, and whether next year you'll start seeing people cutting back where they can because it's no longer worth their while growing it.

“If I was part of the procurement process, talking to growers, the message I will be taken back to my superiors is a lot of them are starting to think twice about whether they're going to carry on doing this or carry on doing it in the volumes that they are doing today.”

Margins on fresh produce sit at around 2%, Ward said, and he warned there was little growers could do to cut costs, as energy and fertiliser are all fundamental to the farming process. 

“There's very little fat left to cut off – the next question is, 'Do we stop altogether?'”

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