Six weeks into the Middle East conflict and hopes are rising that peace talks will yield a longer term settlement for the region. Aside from the human cost of armed conflict, there is an economic cost that will last indefinitely in a similar pattern to what happened following the Russian invasion of Ukraine in 2022. In the aftermath of the beginning of this conflict oil prices surged as did gas prices though not to the extent that they did after the invasion of Ukraine. Gas prices matter as it is the key ingredient in the manufacture of fertiliser.
Measuring the cost impact on agriculture
At the Irish Farmers Journal NI Spring Conference on Friday, Michael Haverty presented the latest calculations by the Andersons Centre on what they term as “agflation”. The index for UK agriculture costs ran from 2019 right up to the present and for the first two years fluctuated a few points above or below 100 points. From late 2020 and throughout 2021, it climbed steadily to 124 by the time Russia invaded Ukraine in February 2022 after which it accelerated rapidly over the following months reaching the mid 140’s by the summer of that year.
Thereafter it began a downward trend over the following two years to below 130 points but never came close to the levels it was at prior to the invasion. By the end of 2025 it had climbed above 130 again but over the past weeks has accelerated rapidly again following the outbreak of the present conflict to 140 points.
Impact on farm gate prices
Farm gate prices are also tracked on the index and tended to lag behind the cost index as it rose from late 2021, accelerating in 2022. However, by the middle of 2023, farm prices caught up with the costs and actually moved ahead until late last year. Since then the value of farm outputs have been on a downward trend as costs began to increase again. By April this year when the cost index had climbed to 140 points, the outputs index had fallen to 130 points.
Comment – higher costs tend to linger
While the Andersons centre data is based on UK conditions, the general principle applies equally for Irish farmers. It is also a reality that higher costs tend to linger long after what caused them in the first place, ie conflict, have ended. A new base becomes established after which subsequent inflation bursts begin. For example after the Ukraine invasion, fertiliser prices increased rapidly and while they subsequently fell back, they never returned to pre-invasion levels.
Good management of resources helps to limit the negative impact of higher costs but the reality is that higher output prices are essential to offset the higher costs of production. The challenge then arises for retaining consumer loyalty as they cope with higher overall inflation costs. Rising beef and lamb prices have led to a situation where they spend more than before but have less product in their shopping basket, which in turn squeezes prices that farmers are paid for their produce. As is so often the case, farmers are the most exposed part of the supply chain when inflation and input costs are on the increase.
Read more
Strait of Hormuz crisis could trigger global agri-food shock
‘Agflation’ at its highest level since 2022
Six weeks into the Middle East conflict and hopes are rising that peace talks will yield a longer term settlement for the region. Aside from the human cost of armed conflict, there is an economic cost that will last indefinitely in a similar pattern to what happened following the Russian invasion of Ukraine in 2022. In the aftermath of the beginning of this conflict oil prices surged as did gas prices though not to the extent that they did after the invasion of Ukraine. Gas prices matter as it is the key ingredient in the manufacture of fertiliser.
Measuring the cost impact on agriculture
At the Irish Farmers Journal NI Spring Conference on Friday, Michael Haverty presented the latest calculations by the Andersons Centre on what they term as “agflation”. The index for UK agriculture costs ran from 2019 right up to the present and for the first two years fluctuated a few points above or below 100 points. From late 2020 and throughout 2021, it climbed steadily to 124 by the time Russia invaded Ukraine in February 2022 after which it accelerated rapidly over the following months reaching the mid 140’s by the summer of that year.
Thereafter it began a downward trend over the following two years to below 130 points but never came close to the levels it was at prior to the invasion. By the end of 2025 it had climbed above 130 again but over the past weeks has accelerated rapidly again following the outbreak of the present conflict to 140 points.
Impact on farm gate prices
Farm gate prices are also tracked on the index and tended to lag behind the cost index as it rose from late 2021, accelerating in 2022. However, by the middle of 2023, farm prices caught up with the costs and actually moved ahead until late last year. Since then the value of farm outputs have been on a downward trend as costs began to increase again. By April this year when the cost index had climbed to 140 points, the outputs index had fallen to 130 points.
Comment – higher costs tend to linger
While the Andersons centre data is based on UK conditions, the general principle applies equally for Irish farmers. It is also a reality that higher costs tend to linger long after what caused them in the first place, ie conflict, have ended. A new base becomes established after which subsequent inflation bursts begin. For example after the Ukraine invasion, fertiliser prices increased rapidly and while they subsequently fell back, they never returned to pre-invasion levels.
Good management of resources helps to limit the negative impact of higher costs but the reality is that higher output prices are essential to offset the higher costs of production. The challenge then arises for retaining consumer loyalty as they cope with higher overall inflation costs. Rising beef and lamb prices have led to a situation where they spend more than before but have less product in their shopping basket, which in turn squeezes prices that farmers are paid for their produce. As is so often the case, farmers are the most exposed part of the supply chain when inflation and input costs are on the increase.
Read more
Strait of Hormuz crisis could trigger global agri-food shock
‘Agflation’ at its highest level since 2022
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