Retail food prices are set to strengthen considerably over the coming months, but this may not translate into better farm gate prices.
Andersons Centre director, Michael Haverty, explained that increases in food distribution costs and additional economic pressures incurred by retailers – trends directly linked to the impact of the ongoing conflict in the Persian Gulf – will serve to dilute the impact of stronger food prices in the shops back down the line to primary producers.
Meanwhile, agricultural input inflation – or ‘agflation‘ – rose further in April, with Andersons’ latest estimates placing it at 8.4% annually.
This is now running well ahead of the UK’s Consumer Price Index (CPI), which is sitting at 3.3%, and the 3.5% CPI Food value.
Haverty added: “At the same time, prices for agricultural outputs have fallen 5.8% year-on-year, tightening the vice on farm profitability still further.
“The divergent gap between rising input costs and falling output returns represents one of the most challenging margin environments UK farmers have faced in years and suggests that a cost of farming crisis is emerging.”
Andersons Centre analysis confirms that agflation is being driven primarily by continued disruption linked to the Middle East conflict and the threat this poses to shipping through the Strait of Hormuz, through which circa 20% of global oil and gas flows.
Input costs
Around 30% of global urea supply passes through the same chokepoint, pushing UK farm-gate urea nitrogen fertiliser prices to around £650-£700/t.
Ammonium nitrate prices are following closely given their linkage to gas markets. Dairy systems face the most immediate exposure, with ongoing fertiliser demand running through spring and summer.
In addition, fertiliser shortages globally will also start to have an impact on UK farmers in all sectors in the latter half of 2026, according to the Andersons Centre.
“What makes the current situation particularly difficult is the absence of any compensating uplift in output prices, in sharp contrast to 2022,” Haverty said.
“Milk prices are now approximately 25% lower than they were a year ago whilst pig prices are 12% lower.
“Beef prices are also around 10% lower than last year; however, these prices were at near record levels in 2025.
“This suggests sizeable profitability headwinds for livestock farmers.”
Wheat
Meanwhile, UK wheat prices are now around 12% higher than a year ago, which the farm consultancy believes is a direct consequence of the Middle East conflict giving rise to supply concerns globally.
The Andersons Centre director added: “UK farmers are getting increasingly concerned about yield, given recent dry weather which could reduce cereals output in several areas.
“This would also lower profitability at a time when the costs of purchasing fertiliser for next year’s crop will be much higher than last autumn.
“The Iranian conflict is also leading to cost pressures in other areas, notably, fuel, electricity and machinery, with these effects expected to linger for some time yet giving the conflict-related damage in the Middle East.”