Leicestershire-based Andersons The Farm Business Consultants has calculated that a combination of energy, fertiliser, labour and rent increases have pushed up costs for potato growers between 2004 and 2006 by more than 25 per cent on a cost-per-tonne basis.
In 2007 the average cost of production rose by a further 10-12 per cent. Andersons vegetable production specialist Jay Wootton said: "The 2007 rise is likely to be much higher. However, many farms negotiated forward prices for energy and fertiliser. The reality is likely to be nearer 15 per cent, with extreme cases at 20 per cent per tonne, depending on price exposure and the forward-deal obtained."
Andersons' figures also demonstrated a rise in farm labour costs of more than 12 per cent in the past three years.
The firm said the recent upsurge in land values, linked to demand from overseas buyers and rising commodity prices, has also seen a land-rent rise begin to take effect.
Both Andersons and the BPC emphasised that these rises made it more important than ever to understand the true cost of producing a tonne of potatoes.
Wootton said: "These significant rises mean it is vital to be realistic about how much it costs your specific farm to produce a tonne of potatoes, with an accurate idea of your farm's average yield, and how cost per tonne is affected by yield fluctuations.
"It is crucial to pinpoint the specific costs attributed to your potato enterprise, in order to appreciate the risk versus reward."
He added: "Difficult growing conditions over the past two seasons have hit yield. These, combined with climate change uncertainty, present a further risk to working capital.
"Growers need to allocate costs carefully to their potato enterprise. A true picture of costs is crucial before signing any forward-deal, to ensure the minimum return at least exceeds your production cost."
BPC supply chain manager Phil Bradshaw advised potato growers to use the BPC benchmark model to calculate the cost of production.
He said: "It can be easily utilised to project costs for the forthcoming season. A better understanding provides the knowledge to plan and ensure your business has a sustainable future. It will ensure you make the correct marketing decisions for your crop to make the most of your farm situation."
He also pointed out that, despite the rising costs, the overall market for growers looks promising.
"The commitment from Walkers and McCain to buy 100 per cent British crops shows positive support for the industry. Using the model and evaluating your cost profile will enable you to make the right decision at contract signing."
- For more information on the BPC benchmark model contract Phil Bradshaw on 07776 492274.