The total costs incurred by NI farmers this year could be £500m higher than 2021, analysis by the Irish Farmers Journal has found.

The unprecedented rise in the cost of concentrates, fertiliser and fuel are behind the jump which is wiping out profits on local farms.

Our analysis is based on a scenario where the current cost for key agricultural inputs is applied to the entire 2022 calendar year and there is no change in the volume of inputs purchased when compared to 2021.

Concentrates

The biggest jump is seen in the cost of concentrates, where a 23% price rise equates to an extra cost of £220m. Fertiliser prices are up 270% which adds £144m to overall costs and a 63% rise in red diesel price adds £80m to machinery and contractor costs.

Other costs associated with farming, such as veterinary, maintenance and sundry expenses, are also up, with most of these seeing rises in line with the current rate of inflation, which is 10.1%.

Overall inputs for the NI farming industry under this scenario stand at £2.2bn, representing a £487m or 28% increase on DAERA’s official figure for 2021.

Fewer inputs

A second scenario has also been analysed where current price rises remain in place for all of 2022 but the volume of inputs purchased by NI farmers is down significantly.

Under this example, NI farmers purchase 15% less bought-in feed, 30% less fertiliser and costs associated with machinery are down 20%.

However, total costs incurred for 2022 are still £102m higher under this conservative scenario when compared to DAERA’s official figures for last year.

It is also questionable if this second scenario will play out in practice as farmers are limited in how much can be shaved off inputs before income from production takes a hit.

For example, the volume of concentrates purchased, the largest single cost on NI farms, could turn out to be similar to last year as many farmers try to compensate for lower-quality silage.

Profit wipeout

DAERA figures show that total income from farming, a key measure of farm profitability in NI that includes the Basic Payment Scheme, stood at £501m last year.

The projected rises in farm input costs in 2022 is set to eat into profits and could leave many farms in a loss-making situation, especially in the beef and sheep sectors.

Official figures from DAERA show that current beef prices paid by local factories are only up 8.5% year on year, while lamb prices are up by just 5%.

The dairy sector has seen the biggest jump in output prices and is best placed to absorb inflated costs as base milk prices are now running 50% higher than this time last year. In the arable sector, current grain prices are typically up 33% year on year.