LMC Report: Suckler Beef Costs Now Over £4 /Kg

UK - Compared to overall UK inflation of just over three per cent, the overall rise in agricultural input costs for the past 12 months has been 5.3 per cent, with beef and sheep production costs increasing by 9.3 per cent according to the Agricultural Inflation Index (AII).

16 September 2010

2 minute read

Europe

In the AII, published every six months by Anglia Farmers (AF) Ltd, with data for the 12-month period from September 2009 to August 2010, the figure for the cost of beef and sheep production 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 12 months from September 2009 to August 2010. More importantly from a farmer’s point of view, comparing these figures with those produced by the Office for National Statistics for food prices, the 5.3 per cent increased cost of producing food was greater than the increase in food prices measured under the Retail Price Index (RPI) which was 3.3 per cent for all food.

Table 1. AF Agricultural Inflation Figures
(Percentage Changes in Descending Order)

Table 2. Estimates of the Costs of Production
((£ /Kg CW rounded to nearest 5p) for efficient producers)

This indicates that farmer’s margins were being squeezed further, and in no sector was the squeeze on margins greater than in the beef and lamb sector which had a 9.3 per cent increase in production costs and only a 3.4 per cent increase in retail prices.

The 9.3 per cent figure for the beef and sheep sector has been applied to the Task Force production costs for August 2009. 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.

It also has to be emphasised that the Task Force modelling was based on the physical performance of the most efficient producers (the top best practice producers who were operating at scale).