Rising Input Costs Challenge Dairy Farmers Amid Middle East Conflict

During the Kite Consulting South West Conference in Taunton, dairy farmers were advised to focus on long-term business performance and system reviews in light of rising input costs. The conference highlighted the impact of recent geopolitical tensions in the Middle East, particularly around the Strait of Hormuz, which have led to a 10-13% increase in oil prices.

Kite Consulting's Tim Kneale explained that the volatility in oil prices significantly affects the agriculture sector, especially in terms of diesel costs, which are essential for farm operations. He recommended that farmers consider fixing or forward purchasing during price dips and working with suppliers on flexible contracts.

Evie Rogers, a consultant from Wiltshire, emphasized the impact of high oil prices on farming input costs and advised against waiting for prices to drop. She highlighted the importance of being proactive, as energy companies often do not pass on savings when prices fall.

The conference also addressed nitrogen fertiliser costs, which are linked to natural gas prices. With the Gulf region being a major exporter, fertiliser prices are expected to remain high. Mr. Kneale suggested staged purchases and monitoring gas prices for opportunistic buying.

Additionally, the rising fertiliser costs are influencing feed prices. Farmers are encouraged to secure their feed for the coming months and consider diversifying feed sources to reduce reliance on nitrogen products while balancing milk yield and quality.

Attendees were urged to have discussions with milk buyers to adjust pricing according to current input costs and to remain vigilant in managing their operational costs.