Agricultural price index: Farm input prices continue to fall, yet labour costs tell a different story

• Agricultural input costs continue to decline, with the API down 5 index points year-on-year.
• Fertiliser prices fell 17 index points from November 2023, but recent increases suggest potential future rises.
• Labour costs are rising, up 4 index points on November of last year, with further increases expected in 2025 due to minimum wage and national insurance changes.

In November, the overall API for all agricultural inputs continued to fall, down 5 index points year-on-year. This was likely driven by the three main drivers of API: fertiliser, energy and feed. However, the API remains 5 index points above December 2021.

In previous years, soaring input costs created significant challenges for farmers, impacting confidence and leading some to scale back or exit production due to unsustainable margins. However, as time has passed, input prices have not only stabilized but have continued to decline. With this shift, the question now is whether lower costs will drive a resurgence in production and investment or if other economic and market pressures will shape the industry’s next moves.

Agricultural price index for key inputs, Jan-20 to Nov-24 (2020=100)

Source: Defra

November’s fertiliser prices showed a continuation of decline, 17 index points below November 2023. Yet, the price in January 2025 for UK AN sits above November 2024 levels at £356/t, a price increase of £14/t suggesting Defra’s next API data release may tell a different story.

Both compound feedstuffs and energy and lubricant prices have also continued to stabilise, down 8 and 21 index points respectively compared to November 2023. Although, prices for both have remained relatively consistent for the latter half of 2024.

Labour costs have not been included in Defra’s API calculation of all agricultural inputs. These have risen over the past 12 months, up 4 index points. With national living wage and national insurance costs set to rise in April, this could be a trend that continues into 2025.

As inflation eases across key input categories, farm costs are becoming more stable, which could help restore farmer confidence and support business planning. However, broader structural and policy changes within the industry may continue to have a greater influence on on-farm decision-making.

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