The latest official figures show UK farmers facing a renewed gap between what they pay for inputs and the prices received for outputs.
Defra’s Agricultural Price Index, updated on 24 September 2026, says the index for agricultural inputs rose by 6.4% in the 12 months to July. Over the same period, the output index fell by 3.5%. Input prices exceeded output prices from April through July 2026.
The year-to-date averages point in the same direction: outputs were 4.4% lower while inputs were 5.1% higher. That does not mean every farm’s margin has moved by those percentages. The index combines many products and businesses, and individual contracts, enterprises, timing and physical performance can produce a very different result.
It is still a useful prompt. An autumn budget built on last year’s assumptions may now understate costs or overstate receipts. These seven checks turn the national figures into a farm-level review.
1. Separate the headline from your own enterprises
Start with the parts of the index that resemble the farm, not the all-sector average.
Defra says milk made the largest negative contribution to annual output inflation in July, followed by pigs and cattle and calves. Fresh vegetables, sheep and lambs, and wheat made positive contributions. A mixed farm could therefore have stronger prices in one enterprise and much weaker returns in another.
List expected physical output, contracted price, uncommitted volume and payment month for each enterprise. Use the current contract or a defensible market assumption rather than the national headline. Run a downside case for the most exposed price or yield.
The aim is not to predict the market perfectly. It is to identify which assumption would cause the budget to fail first.
2. Reforecast the input categories that moved most
The overall input increase hides much larger movements. In the 12 months to July, Defra recorded increases of 13.8% for energy and lubricants, 13.1% for fertilisers and soil improvers, and 44.1% for plant-protection products.
The plant-protection figure deserves caution: much of the latest input data is provisional, and one national index does not describe every active ingredient or buying arrangement. Do not simply add 44.1% to the farm’s spray budget.
Instead, replace old budget prices with current written quotations for the products and quantities actually needed. Record the quote date, validity period, payment terms and whether VAT, delivery or seasonal surcharges are included.
3. Link buying decisions to cash-flow dates
A lower unit price is not automatically the best decision if it moves a large payment into the wrong month or ties up cash in stock.
AHDB’s cash-flow guidance recommends forecasting receipts and payments, reviewing the forecast regularly and acting before a shortfall occurs. Its practical suggestions include obtaining several quotes, negotiating regular orders and considering buying groups where appropriate.
For each large input, compare price, payment date, storage risk, likely use and the cost of finance. Mark months in which rent, tax, loan payments, contractor bills or annual subscriptions coincide. If the forecast approaches an overdraft limit, speak to the lender, supplier or adviser early rather than after the payment is due.
4. Measure energy and fuel by unit of work
Energy and lubricant prices were 13.8% higher than a year earlier, despite falling 4.7% between June and July. That monthly fall shows why a budget needs actual purchase dates and volumes, not a single annual inflation number.
Record litres or kilowatt-hours against useful outputs such as hectares cultivated, tonnes dried, livestock housed or delivery miles. Investigate changes in idling, tyre pressure, route choice, machine setup, grain-drying practice and maintenance before assuming the cause is price alone.
Secure tanks, reconcile deliveries with usage and investigate unexplained losses. Efficiency and theft control protect the same budget line.
5. Protect maintenance that prevents downtime
Pressure on margin can make maintenance look like an easy deferral. Some work can be rescheduled, but postponing safety-critical or failure-prevention tasks can create a larger bill during a narrow weather window.
Rank planned work into safety-critical, legally required, reliability-critical and discretionary categories. Use inspection findings, service intervals and repair history rather than a flat percentage cut. Price the likely cost of downtime, contractor replacement and crop delay alongside the invoice.
Defra’s index for maintenance of materials was 5.7% higher year on year. Review parts prices and lead times now, especially for machines needed at harvest, drilling or winter feeding. Holding every spare is expensive; identifying long-lead, high-consequence components is more useful.
6. Test capital purchases against the new margin
Revisit machinery, vehicle and building proposals using current finance costs, trade-in values and expected utilisation. Include insurance, servicing, tyres, software, storage and the operator time needed to use the asset properly.
Compare ownership with contracting, hiring, sharing or extending the current machine’s life. A lower monthly payment does not necessarily mean a lower whole-life cost, while an older machine is not automatically cheaper if breakdowns regularly interrupt work.
Protect existing assets where it is economical to do so. Farm Packs supplies heavy-duty tractor and machinery seat covers; confirm compatibility before use.
7. Set triggers before conditions worsen
A budget becomes more useful when it specifies the action attached to a change.
Choose a small number of measures: cash balance, available borrowing, output price, feed or fertiliser cost, fuel use, overdue debtors and machinery repair spend. Set review dates and thresholds that prompt a decision.
The response might be to obtain new quotes, delay a discretionary purchase, adjust marketing, discuss facilities with the bank or ask an accountant or adviser to test the forecast. Assign each action to a named person and record the latest date on which it remains useful.
A 30-minute autumn review
Before the next management meeting:
- Replace the five largest budget prices with current evidence.
- Update the timing of receipts and payments for the next six months.
- Run one realistic downside scenario for the most exposed enterprise.
- List maintenance that prevents a safety issue or expensive seasonal failure.
- Set three financial triggers and the action attached to each.
Defra’s index is not a forecast for an individual farm, and July’s data should not be treated as a guarantee of what prices will do next. It does confirm that the national relationship between inputs and outputs has tightened again.
The practical response is a current enterprise budget, a live cash-flow forecast and clear spending priorities. Farms that know which assumptions matter most can act earlier, protect essential maintenance and avoid making large decisions from an average that may not reflect their own business.
This article provides general information and does not replace farm-specific financial, tax, agronomy, engineering or legal advice.
Sources
Defra: Agricultural price indices – United Kingdom, July 2026 — updated 24 September 2026
Defra: Agricultural Price Index time series — updated 24 September 2026
AHDB: Managing cash flow for your farm business — accessed 25 September 2026
