30 April 2010

2 minute read

Europe

After massive increases in 2007- 08, followed by reductions in 2008-09, there has now been an overall inflation of agricultural costs by two per cent in the last six months, and a three per cent rise in beef and lamb costs. This latter figure has been used to update the Task Force Costs of Production published in Bulletin Issue No. 2084 last October.

The AII is calculated in a similar way to the Retail Price Index in which separate cost categories are grouped and then weighted into an overall index. The AF AII has become accepted as the definitive guide to cost change, and Table 1 shows the cost changes in the six months from September 2009 to February 2010.

Over the six months the overall inflation for the beef and lamb sector was 3.01 per cent based on the proportions that each input category contributed. The major drivers have been increased protein and labour costs. For all sectors the overall inflation index was 2.10 per cent and the increase in fertiliser cost accounted for most the increase. These increases follow a year (2008-09) in which there had been a reduction in overall farming costs of six per cent from the previous year, with beef and lamb having reduced by eight per cent, mainly due to a fall in fertiliser costs and a drop in interest rates in that year.

The Task Force has applied the three per cent figure for the beef and sheep sector to August 2009 production costs. In order to get valid consistent comparisons from year to year, the physical performance given in the original Task Force models has not been changed; it is only input costs that have been changed.

Further Reading

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