Scots farmers are facing cost rises of up to 200 per cent and warning a tsunami of escalating prices could mean further price rises in shops – and even food shortages leading to “civil unrest”.

Farmers are paying sky-high prices for fertiliser, fuel, energy, and feed, and some agricultural sectors could be facing labour shortages again this year, as a result of Brexit and Russia’s invasion of Ukraine.

Escalating costs for farmers are already impacting food prices with some staple groceries costing 45 per cent more than they did last year.

The National Farmers Union Scotland (NFU Scotland) - which has accused the UK Government of “undermining” the economy with its immigration policy - is calling on help from both the UK and Scottish governments.

The union stressed that the “focus has to fully be on the human catastrophe” in Ukraine but it pointed out that the impact on global food supplies has “yet to unfold”.

HeraldScotland:

Farmers are facing a perfect storm. An unprecedented rise in the cost of fertiliser will have “massive implications” for farmers’ production capacity, warns NFU Scotland.

The UK imports 60 per cent of its fertiliser which is used to boost crop growth. It is crucial to the operations of most arable farmers, vegetable growers and dairy and livestock farmers.

Twelve months ago nitrogen fertiliser cost around £200 a tonne but that price has risen to more than £600 a tonne, NFU Scotland said.

Soaring gas prices have contributed to the high cost of fertiliser. Increased demand for natural gas in China, low European reserves, reduced flows from UK gas fields, and an over-reliance on Russian gas supplies, are all contributing factors.

There are now fears that Russia could cut off natural gas flows in response to economic sanctions imposed by the EU and UK after its invasion of Ukraine.

Russian, Ukraine and Belarus are also three of Europe’s main producers of potash, one of fertiliser’s main ingredients, which swill send costs even higher as manufacturers are forced to look elsewhere.

Higher prices

Some Scots farmers have been reluctant to order fertiliser at high prices, leading to fears of supply problems as the 2022 growing season begins. They are also facing further price hikes in fuel and energy prices, among other rising costs.

Latest figures from the UK Government’s agricultural price index (API), provides a snapshot of rising rates in the 12 months up to 2021. Information is collected for all major crops including wheat and potatoes, and livestock and animal products such as sheep, milk and eggs.

The cost to farmers for fertilisers rose by 199 per cent over the year while energy costs spiked by 35 per cent. Feed costs were up by 11 per cent. The (API) also showed that the cereal price rose by 21 per cent, wheat by 17 per cent and barley by 42 per cent. Potatoes went up by 25 per cent. API data is a key factor to inflation.


READ PRICED OUT: PART ONE


Inflation

The Consumer Prices Index (CPI), which measures inflation, rose by 5.5 per cent in the 12 months to January 2022. The ONS said: “This is the highest CPI 12-month inflation rate in the national statistic series, which began in January 1997, and it was last higher in the historical modelled series in March 1992, when it stood at 7.1 per cent.”

The CPI revealed that the price of staple groceries including tomatoes, mushrooms and apples have rocketed by as much as 45 per cent in the past year.

The East of Scotland Growers (ESG) - a farmer owned cooperative based in Fife, whose main crops are broccoli and cauliflower - said that the cost of production for broccoli has risen by 14 per cent, and 17 per cent for cauliflower.

ESG is one of the largest broccoli producers in the UK, with 16 members and a collective turnover of £20m. Its farmers reported hikes of 93 per cent for electricity, 55 per cent for fuel, and 11 per cent for labour.

The ESG told the NFU Scotland AGM this month it would have to cut production by 26 per cent this year, because it is difficult to get the increases back from the market.This could mean food shortages and inflation in supermarkets, and three farms have already decided not to produce this year, ESG added.

Another major concern is a lack of labour since Brexit. Last year a shortage of both permanent and seasonal workers, combined with a lack of haulage drivers and processing staff, seriously impacted agricultural, food and drink businesses across Scotland.

In Fife and Perthshire, fields of broccoli were abandoned for sheep fodder, with farmers losing income from more than 5.5 million heads of broccoli and 1.5 million cauliflower. The growers faced labour shortages in the fields, in pack houses and transport to move the product from farms to processing plants. Labour shortages at soft fruit farms – there was a 20 per cent shortfall according to NFUS – meant crops were left unpicked.

Russia’s invasion of UKraine will also likely impact labour numbers for Scotland’s soft fruit industry this year. Last year seasonal workers from Ukraine and Russia made up 90 per cent of a Fife farmer’s labour force.

In reply to labour concerns a UK Government spokesperson said the seasonal worker visa route has been extended through to 2024, allowing overseas workers to come to the UK for up to six months. There will be 30,000 workers allowed in this year, with an assurance this number could rise to 40,000. The spokesperson added: “We want employers to make the work attractive to domestic workers through offering training, career options, wage increases and to invest in increased automation technology.”

However, farmers say this is still not enough. “There is a real reluctance from the Home Office who seem to be burying their heads in the sand, to understand they are undermining their own economy,” said NFU Scotland president Martin Kennedy, speaking at the AGM last month.

A tenant farmer in Aberfeldy with 600 ewes and 60 cows on the farm, Kennedy said he personally raised this issue with Prime Minister Boris Johnson, who told him to pay people more. Kennedy said: “This lack of understanding of the UK Government and in particular the home office is incredible. It’s blatantly obvious that any move to retract on immigration policy would be seen as accepting their decision was wrong.”

He added: “I can understand the concerns of our consumers with high inflation costs, we too as an industry are facing that problem. However, if agriculture in Scotland and indeed throughout the rest of the UK is put in a position whereby the only way forward is to produce less, then our industry, the wider industries that rely on us, and ultimately the economy will simply implode.

“And if governments think our consumers are angry at the cost of inflation now, then watch this space – food shortages have always been the biggest cause of civil unrest.”

Robin Traquair, a pig farmer from Midlothian and vice president of NFU Scotland, told The Ferret: “The big cost is feed - that’s our biggest cost. And falling prices. Last year at harvest we were offered wheat for £165 a tonne. And that just kept going up to around £220 to £240 a tonne.

“The three main ingredients for pigs are barley, wheat and soya. Soya has been very volatile as well. That’s gone from historically just below £300 a tonne, anything up to £400 a tonne plus. That’s a considerable cost there. At the same time, the money we’re receiving has gone down. And pig farmers don’t get any grants or subsidies from the government. We’ve got a slightly protected market but that will change with trade deals. But at the moment we’re not getting any subsidy from the Scottish or UK governments.

Traquair added that energy costs will impact too, pointing out that an indoor pig farm uses a lot of heat, using electricity, to keep small pigs warm. “This will add to our woes,” he continued. “Already we’ve lost 10 per cent of the UK herd - they’ve either gone out or are going out (leaving the sector).”

Neil Shand, chief executive of the National Beef Association, said farmers were struggling with costs escalating at rates “never seen before”. He added: “There’s an awful lot of talk about the increased cost of living. I would just put a marker down that the inflation that farmers are facing is tenfold higher than the cost of living consumers are facing.”

NFU Scotland has asked both the UK and Scottish governments to maintain direct payments to buffer the rural economy against “volatile and high input prices”, and to support domestic fertiliser production.

Ewan MacDonald-Russell, head of policy at the Scottish Retail Consortium, said: “Household budgets are under huge pressure right now and we know consumers are more price conscious than ever. In that context retailers and their suppliers are doing everything to keep food as affordable as possible.

“However, retailers have built strong, long standing relationships with British farmers and know they need to ensure they receive sustainable prices to maintain those links into the future.”

Mairi Gougeon, the Scottish Government’s rural affairs secretary, said ministers recognise the challenges faced by farmers and crofters and £363m of support has already been provided. “Maintaining support provides vital stability and certainty and support payments are being delivered as a priority, such as the £50m that has been paid towards the less favoured area support scheme (LFASS),” Gougeon added. “Suckler beef and sheep support payments worth £41m and £7m respectively, will be paid out from this April and May.”

She added: “Many of the rising costs impacting on farmers and other rural businesses relate to matters within the control of the UK Government who have reneged on promises to fully replace EU funding. Instead, we now face a shortfall of £95m that could otherwise have been used to benefit our farmers and crofters.”

Priced Out is an investigation by The Ferret, co-published with The Herald, exploring the impact of - and reasons that lie behind – the cost of living crisis in Scotland. Support their journalism by becoming a member for £3 a month. Use discount code PRICEDOUT to get your first month free.