On 29 June 2022, the House of Lords is scheduled to debate the following question for short debate:

Lord Redesdale (Liberal Democrat) to ask Her Majesty’s Government what steps they are taking to combat the rising cost of agricultural fertiliser and feed.

1. How much have fertiliser and feed prices risen?

Prices for both agricultural fertiliser and feed have risen significantly over the past year. Figures from the Agriculture and Horticulture Development Board (AHDB) have shown that in May 2022, the price of UK-produced ammonia nitrate fertiliser in Great Britain had increased by 152% since May 2021 and imported prices had increased by 171%. The price of potassium chloride fertiliser (potash) had increased by 165% and phosphate fertilisers had increased by between 120% and 128% depending on the type. AHDB data also showed that concentrate animal feed prices in March this year had increased by 15.6% over the past 12 months.

2. Why have fertiliser and feed prices risen?

According to the US Department of Agriculture, fertiliser prices have doubled in the last year due to a combination of factors. These include:

Animal feed is increasing in cost largely due to the price of sunflower meal (a by-product of sunflower oil), soyabean and wheat. Figures from Our World in Data at the University of Oxford show that in 2019, Ukraine was responsible for nearly half of global sunflower oil exports and Russia and Ukraine combined were responsible for almost two thirds. In addition, Russia was the world’s biggest wheat exporter in 2019 and Ukraine the fourth biggest. The majority of global soyabean supplies come from the USA and Brazil, accounting for 69% combined in 2018.

Furthermore, the war in Ukraine has disrupted exports of Ukrainian agricultural produce. Typically, 90% of Ukraine’s grain is exported by sea but these exports have been held up by Russian blockades of Ukraine’s Black Sea coast. Figures from the World Bank show that the cost of sunflower meal increased by 6.4% in the first quarter of 2022 compared to the same period in 2021. On 20 June 2022, wheat prices were also up 56% year on year. This increase in the price of wheat is reflected in the cost of wheat-based animal feed in the UK. AHDB figures show that UK pelleted wheat feed prices rose by around 60% in the 12 months to May 2022.

Poor harvests due to drought have reduced soyabean supplies from the USA and Brazil. Figures from the World Bank show that soyabean prices increased by 14.3% in the first quarter of 2022 compared to the same period in 2021.

3. What is the impact of higher fertiliser and feed costs?

Concerns have been raised that increasing fertiliser prices could disrupt global food supplies. Maximo Torero, chief economist for the UN Food and Agriculture Organisation, has said if the fertiliser problem is not solved then the world will have a serious food supply problem next year. Ian Wright, former chief executive of the UK Food and Drink Federation, has also raised concerns, stating that there is no proper plan for a “scary” future with disrupted food supplies.

Rising prices for non-food products could also cause farmers to shift production away from food produce. The Telegraph has reported that farmers may have to plant fewer crops for milling wheat and more for animal feed, which is “spiralling” in cost, as they are very likely to obtain a good price. Minette Batters, president of the National Farmers’ Union (NFU), has warned that this could “leave the bread market short” and argued that farmers should be incentivised to produce food.

Growers are also increasingly utilising crops to produce biofuels. Food companies and policy makers are calling for the easing of incentives for biofuel crops to increase global grain and vegetable oil supplies. The International Food Policy Research Institute has said that “now is not the time to be encouraging the conversion of food crops to energy through artificial policy incentives”.

Farmers are having to adapt their business model in response to high fertiliser prices. Matt Culley, NFU crops board chairman, has said that farmers will need to make tough decisions on what to plant this autumn and whether to downsize production or reduce fertiliser usage, potentially reducing productivity. Mr Culley has also said that higher prices mean greater risks for farmers, as they must make a greater investment despite potential threats including weather and reduced future demand with no price guarantees.

Livestock farmers are similarly experiencing problems due to high feed prices. Helen Dickinson, chief executive of the British Retail Consortium, has said that animal feed costs for farmers, including poultry farmers, are “soaring”. Pig farmers have also seen a significant rise in costs with feed prices now making up 70% of total input costs. In an open letter to Tesco CEO Ken Murphy, Rob Mutimer, chair of the National Pig Association, said that farmers are now losing in excess of £50 per pig.

High costs also risk the sustainability of farmers’ businesses. Tom Bradshaw, deputy president of the NFU, has warned that poultry and pig farmers face “massively increased costs and need a more sustainable price” for their products. Mr Bradshaw added that unless there was a rise in prices, farmers “won’t be able to afford to produce the eggs and the chickens and the pigs for next year”.

4. What is the government’s policy?

A DEFRA press release issued on 30 March 2022 detailed how the department was “supporting farmers ahead of the coming growing season”, including assistance with “the availability of fertilisers to address uncertainty amongst growers and keep costs down”. This includes a delay in implementing the findings of a review into reducing ammonia emissions from solid urea fertilisers. From 2023, farmers were due to only be able to use untreated or unprotected urea fertilisers from 15 January to 31 March each year. The delay has been made to help farmers manage costs and give them more time to adapt.

The press release also outlined new government guidance on the use of slurry and other farmyard manure. This relates to the Reduction and Prevention of Agricultural Diffuse Pollution (England) Regulations 2018, also known as the ‘farming rules for water’. This instrument regulates how farmers use their land to avoid diffuse water pollution from agricultural sources. The guidance does not amend the rules but clarifies how farmers can use slurry and other manures during autumn and winter. Farmers will also be provided with grants for slurry storage to help meet the farming rules for water.

The government has also introduced a ‘sustainable farming incentive’. The initiative aims to “help farmers manage land in a way that improves food production and is more environmentally sustainable”, including reducing reliance on manufactured fertilisers. Farmers will be paid to help with the cost of sowing nitrogen-fixing plants and green manures to substitute some of their fertiliser requirements. The scheme involves three sets of standards, listed as:

  • the arable and horticultural soils standard
  • the improved grassland soils standard
  • the moorland and rough grazing standard (introductory level)

Farmers will be paid a set rate per hectare for the level they achieve in any given standard, dependent on meeting set criteria.

The government is also increasing the frequency of subsidy payments made to farmers via the Basic Payment Scheme (BPS). BPS is the biggest rural grant that provides help to the farming industry. Responding to a written question on 1 June 2022, Minister of State for Farming, Fisheries and Food Victoria Prentis said that eligible farmers would receive payments in two instalments, half from the end of July and the rest from December 2022. Ms Prentis also said that DEFRA has created a fertiliser taskforce, where government and industry were “working together to help improve market confidence and provide farmers with the information they need to make business decisions on fertiliser use”.

The March 2022 DEFRA announcement did not contain any specific measures in response to rising animal feed prices. On 26 May 2022, Shadow DEFRA Minister Daniel Zeichner asked what steps the government was taking to “tackle animal feed inflation”. Responding to the question, Ms Prentis said that she had “already set out measures to support farmers and growers in England ahead of the coming growing season” and that the UK was “largely self-sufficient in cereal production, growing 88% of all the cereals we need”.

The government published its food strategy on 13 June 2022. This document refers to previous measures the government has announced to “help farmers and food producers manage increased input costs, including a package on fertilisers”. The strategy says that the government will “work with industry to develop plans to bolster resilience of critical inputs”, including fertilisers.

Cover image by Arisa Chattasa on Unsplash.