UK farming is once again under mounting financial pressure, according to new data from agricultural consultancy Andersons, with so‑called ‘agflation’ rising to 7.6% year‑on‑year – more than double the national inflation rate of 3% and food inflation of 3.2%.
Crucially, the resurgence in input inflation is arriving at a point when agricultural output prices are falling, now 6.5% lower year‑on‑year, creating what Andersons describes as a clear “cost of farming” squeeze.
A renewed cost squeeze hits farming – and ripples through agtech
Agflation is now increasing at its fastest pace since early 2022. While still below the peaks seen following Russia’s invasion of Ukraine, Andersons points to ongoing disruption linked to the Iran conflict, particularly around the Strait of Hormuz, through which around 20% of global oil and gas flows, as a renewed source of pressure on energy‑linked inputs.
For the agtech sector, the message is clear: this is not simply a cyclical headwind, but a structural test of which technologies genuinely earn their place on farm.
The end of ‘interesting but unused’ technology?
Michael Haverty, partner and senior research consultant at Andersons and author of the report, says the immediate implication for agtech vendors is a much tougher filter on relevance and return.
Asked which categories of agtech are most likely to see spending delayed or cancelled, Haverty was blunt: “Equipment that does not have a clear return-on-investment associated with it will be most susceptible. This includes features which appear interesting, but which farmers do not use enough in practice.”
By contrast, tools that deliver immediate, measurable savings are likely to move closer to being non‑negotiable.
“Equipment that generates an immediate return – for example devices that limit ‘idling’ in tractors and machinery, which leads to fuel wastage – will be in greater demand,” he said.
For a sector accustomed to selling transformation narratives, the shift is significant. In a squeezed margin environment, farmers are not rejecting technology – but they are becoming far more selective.
ROI is mandatory
Haverty argues that credible ROI analysis is now essential for any agtech solution targeting farm businesses.
“This needs to be realistic and based on numbers that farmers can relate to – costings and revenue estimates from sources such as the Agricultural Budgeting & Costing Book or the Nix Pocketbook,” he said.
Just as important, he added, is honesty about the learning curve.
“Often, equipment is marketed as easy to use, but the reality is farmers are not always technically proficient, or it takes a significant amount of time upfront to become proficient. A realistic learning curve needs to be factored in.”
For agtech companies, this is a warning: solutions that only look good in demos or trials risk falling apart when time, labour and complexity are priced in.
Retrofitting vs new kit: optimisation beats scale
Does this environment favour retrofitting and optimisation tools over capital‑intensive new machinery and platforms?
Haverty says the answer is nuanced. “This needs to be looked at on a case‑by‑case basis. If retrofitting is relatively easy to install and machinery can continue to run for several more years, then it makes sense to explore further.”
However, he cautions that simply adding technology is not enough.
“With the new technology added, it needs to be reliable and ideally interoperable with other equipment and software being used on‑farm.”
In practice, this suggests growing demand for bolt‑on efficiency tools, software upgrades, and sensor‑based optimisation – provided they slot cleanly into existing systems.
Fertiliser shock pushes precision from ‘nice to have’ to necessary
Agflation pressures are most acute in fertiliser markets. Andersons notes that around 30% of global urea supply is constrained by the Strait of Hormuz, while the production of ammonium nitrate remains closely tied to gas prices.
The result is farm‑gate nitrogen fertiliser prices approaching £500 per tonne – where available – placing immediate cost pressure on dairy systems and later‑season applications, with continued exposure globally despite a temporary ceasefire between the US and Iran announced on 7 April.
So does this mark the tipping point for precision nutrient management, biologicals and decision‑support tools?
“It depends on whether elevated prices are sustained,” Haverty said.
“The longer that prices remain elevated, the more attractive precision‑focused tools can become. However, to have a strong chance of success, they also need to prove their worth at lower fertiliser prices.”
He pointed out that fertiliser prices spiked rapidly during the Ukraine conflict but later fell back, warning that tools must still deliver value when ammonium nitrate drops closer to £350 per tonne.
In other words, resilience beats opportunism.
Data‑driven – but only the data that matters
When margins tighten, Haverty says farmers do become more data‑driven, but selectively so.
“Certainly, they have a greater focus on cost control. That said, data that does not inform, but distracts from running the business efficiently, tends to be left to one side.”
For agtech platforms awash with dashboards and metrics, this is another warning sign: decision‑relevant insights will survive; data noise will not.
Financial agtech gains appeal – with strings attached
Rising agflation combined with falling output prices is also likely to increase interest in financial agtech, such as margin forecasting, risk management and input‑cost optimisation tools.
But Haverty says adoption will be cautious.
“Farmers will need to be convinced of a return and not to be trapped by contractual obligations if they try a given offering and it either doesn’t meet their expectations or if a new competitor offering is much better.”
Flexible pricing, transparent contracts and demonstrable savings are likely to be decisive.
From innovation to infrastructure?
Perhaps the most telling insight is Haverty’s view that parts of agtech are approaching a new phase altogether.
“These tools are becoming more mainstream, yes. But the acid test is whether they inform or distract effective decision‑making.”
In an environment defined by cost pressures, resilience technologies – those focused on efficiency, cost control and risk mitigation – are moving closer to becoming viewed as essential infrastructure rather than innovation.
For agtech companies, that shift brings opportunity – but little patience.
As agflation tightens its grip, the sector is entering a harder era, where promise is cheap, but proof is everything.
