Cost inflation is approaching 20% for growers of the UK’s most important protected edible crops, says a report published by the NFU in May. The overall rate for agriculture stood at 18.6% for the 12 months to January.
Tomato growers are seeing the highest rises in protected crop production costs, according to research and grower interviews conducted by consultancy Promar for the NFU in February and March, with inputs up 17% year on year. Inflation is running at 19% for mushroom production.
Its analysis for tomatoes says growers should be receiving an additional 9p per 400g pack to recover their additional costs. Mushroom growers would need 13p per 300g pack.
The biggest percentage cost increase is in energy (up 80%). Fertiliser prices are up 75%, packaging by 25% and transport by 17.5%.
Inflation in labour costs is 15% overall, but the report points out that because labour is the single biggest element of growers’ expenditure – accounting for more than one-third of total production costs for horticulture in general – it is the area where any cost increases have the most significant effect on a business. When ‘indexed’ against total costs for horticulture as a whole, the impact of the extra spent on labour this year is as much as as the extra cost of energy.
During its research Promar interviewed 18 of the UK’s leading growers, focusing on seven crops across the vegetable, fruit and greenhouse sectors, representing around 50% of the total UK horticulture production volume and a mix of labour-intensive and more mechanised production systems. Report author and Promar director John Giles said the responses from growers showed a strong degree of consistency.
Growers interviewed said they were responding to the situation by reducing production by as much as 10% and rationalising the range of crops grown, with many pointing out that they had no further scope to cut costs.
The report warns that without appropriate increases in prices paid to growers, some produce would be left unharvested this year and some producers could be forced out of the sector altogether, leaving the supply chain more dependent on imports from countries where growers are facing similar economic challenges.
Many of those interviewed for the report said the level of inflation could not have been predicted at the time last year when they were negotiating this year’s prices with their customers. The delay and confusion around extending the seasonal workers scheme, and the associated minimum pay rates, came in for particular criticism, making it impossible to budget or negotiate price increases with customers.
The report also clearly highlights the frustration of growers in what is traditionally a hugely resilient sector used to dealing with the unpredictable. “It might seem we are being over dramatic – but we are not – make no mistake,” one grower told Promar. “This sector is facing an existential crisis, such as we have never seen before.”
“If this pressure continues, it will be simply unsustainable for some businesses to continue as they are,” said NFU horticulture board chairman Martin Emmett. “This report presents the stark reality of what will happen if we continue without any action from the rest of the supply chain to bear some of the cost pressures and ensure a fair return for growers.
“Losing growers at a time when people want to see more British food in shops would be a huge loss, not just for UK horticulture but for the entire nation. The industry needs long-term planning and investment, so the current situation, if left to continue, will mean dire and irreversible consequences for the future of British horticulture.”