Agflation Beware!

Oil prices have increased by 68% in the last 12 months ($44 to $474 per barrel).  Wheat prices have increased by 10%, spot vs June 2017 and futures for November are 15% higher than November 2017 actual prices. Fertiliser prices are 20% higher now for new season Nitrogen vs 2017.  These three commodities will make up a significant part of a dairy or arable farmers’ variable costs and have a knock-on effect on contracting costs.

Coupled with more extreme weather events being experienced now and over the past 12 months, there is potential for significant cost increases in your business.  The last time we had a dry summer you may have had less cows or more forage reserves in store.

What should you be doing?

• Assessing forage stocks
• Forward buying feed and fertiliser and locking into realistic prices today.
• Don’t expect rising milk/corn prices to pay for increased costs.  You cannot control the sale prices apart from forward selling.  You can focus on more efficient use of more expensive wheat, oil and fertiliser in terms of minimising waste, culling the ‘passengers’ in your herd, or maximising P, K and Lime levels in your soils to ensure best use of applied Nitrogen.

Use rising costs as an opportunity and your business will become even more efficient and profitable. This is what farmers did when their sale prices fell especially in the dairy area when milk prices slumped to 20ppl.  Take action today.  Don’t wait for the lag effect of increased sale prices to pay for inflation.

To discuss further, please contact your local FCG office or Gerard at gerardfinnan@fcgagric.com

Posted in Business Management, Sherborne.