As part of a recent survey, Right Fuel Card questioned a range of businesses across their SME base to understand the current challenges their industry is facing. In the agriculture and farming industry, there is uncertainty about what will happen over the next 12 months, due to stock issues and rising costs. As a result, 46% of respondents are very pessimistic about the future and less than 25% feel positive. The recent changes to the red diesel entitlement have also been challenging for businesses in this sector with 98% believing that this will only lead to a further rise in costs.
Uncertainty about the future of agriculture and farming
Although 2022 has been difficult for many businesses, those in the farming and agriculture industry in particular have faced many challenges that are putting their livelihoods at risk. Not only are they struggling with rising costs but the lack of rain has significantly impacted their crop production, leading to a limited supply for customers and an increase in prices.
This year, we’ve had the driest January to June since 1976 which has led to overall yields and crop sizes being lower than usual. This poses a problem to farmers if they haven’t irrigated their crops as it’s likely they won’t grow to their full capacity due to the lack of rain and so it might not be possible for them to be sold. As a result, profits will decrease and there will be less supply on shop shelves, adding to the pressure on the farming and agriculture industry. In addition, many irrigation reservoirs are nearly empty and this will have a severe impact on future crops and could lead to inflated prices for customers. There’s also less food available for livestock as the fields which they’d usually graze on has been dried out, so farmers are relying on silage, hay and grain that was set aside for the winter months, limiting their supply for the rest of the year.
However, the Department for Environmental, Food and Rural Affairs (DEFRA) is now allowing farmers to relax the rules in their agri-environmental scheme agreements and will provide them with wider access to water. This will help to ease the burden on the agriculture and farming industry as they’ll be able to continue producing crops despite the dry weather and can provide vital food for livestock.
Despite the assistance from DEFRA, businesses in this sector are still facing challenges due to the current cost-of-living crisis. The price of animal feed, fuel and fertilisers has increased dramatically, putting farmers at risk of going out of business as many are unable to keep up with the rising costs. Some businesses have been forced to reduce their food production and use less fertiliser in an attempt to reduce outgoing costs. This will cause a reduction in supply for customers and increase wholesale prices, so the agriculture and farming industry is calling on the UK Government to provide more assistance and help to prevent this situation from occurring. The Government did introduce its food strategy for England in June, which aimed to help farmers with the rising costs. However, many believe that these measures do not provide enough support for businesses, as costs are still excessive and unsustainable.
Changes to the red diesel entitlement have caused problems for farmers
In April 2022, the UK Government introduced changes to the red diesel entitlement to encourage businesses to consider greener alternatives for their vehicles. As a result, many businesses are no longer able to use red diesel for their vehicles. However, only 24% of respondents think these changes will drive users towards EV technology, so the positive impact of these changes has been minimal.
Although the agriculture and farming industry is exempt from these changes, the accepted use of red diesel has become more restricted and there are exceptions that farmers need to be aware of. Businesses in this sector are not immune to the challenges that have been caused by these changes as they’ve also been financially affected and have concerns about damage and theft.
98% of those who responded to this survey believe that the red diesel changes will only raise costs and this assumption has been proven to be correct as the cost of red diesel has doubled since last year. To reduce fuel costs, some businesses are restricting the use of their agricultural vehicles, however, this will limit how much work they can get done and therefore reduce the profits they’ll receive.
Large stores of fuel are regularly targeted by thieves, especially when they’re located in exposed areas like farms. As red diesel is expensive and not as accessible as it was previously, there are concerns amongst the agriculture and farming industry that the level of damage and theft will rise as criminals seek to steal fuel which they’ll then sell themselves. Farmers are therefore advised to secure red diesel tanks with lighting, locks and alarms.
EV technology is inaccessible for many vehicles
The sale of new petrol and diesel cars will be banned in the UK from 2030. The purpose of this legislation is to help reduce carbon emissions so that the environment can be protected. This means that those in the agriculture and farming industry who use new vehicles will need to consider greener alternatives in the near future. However, there are concerns that EV technology is not yet equipped to handle the needs of farmers as there are barriers that still need to be tackled. Some of the concerns that businesses in this sector have include:
- Limited models. Currently, there are not enough EV alternatives for agricultural vehicles and so it’s not possible for fleets to completely switch to EV. However, hydrogen technology may be a potential energy source for farmers, as engineers are working to create hydrogen-powered tractors.
- High-purchase cost. In the current financial climate, many farmers are unable to warrant the cost of investing in new electric vehicles as they’re considerably more expensive to purchase than traditional ICE vehicles.
- Charging infrastructure restrictions. Due to the rural skew of these businesses, there is limited access to public charging points. Unless drivers install their own home charging points, which can be expensive, they’ll struggle to recharge their vehicles when needed as it’s unlikely that they’ll be able to find a local charging point.
- Inadequate driving range. Vehicles in this industry can be used for long periods of time, depending on the size of the farm, so it’s essential that they have a driving range that can handle this. The driving range of an electric vehicle is often limited which can lead to concerns that it may run out of charge halfway through a job and this deters businesses in this sector from using them.
There need to be developments made to EV technology before it can be used on a wide scale by businesses in the farming and agriculture industry. In particular, prices need to become more affordable, and the charging infrastructure will need to be expanded. However, as farmers are under increasing pressure to decrease their carbon footprint, it’s likely that many will be considering greener alternatives soon. The adoption of EV will also improve safety, lower fuel costs and promote greener farming, so will be highly beneficial for businesses in the long run.
To help customers in the farming and agriculture industry during these challenging times, Right Fuel Card offers a range of cost-effective fuel cards. Our online account management system allows businesses to monitor all their fuel transactions and makes it easier for them to reclaim VAT on their fuel. As businesses are starting to shift their focus to alternative fuels, we intend to develop our range of fuel cards so that they can be used by our customers even when the fuels in their vehicles change.
Note: The survey was conducted in June 2022, receiving 1156 responses.
Matt DoddsWith over 14 years of experience across two of the leading fuel card companies in the UK, Matt Dodds joined RFC Edenred to help lead the development of products to support our customer's move to EV and other alternative fuels, a transition he feels passionately about.