The recent surge in fuel prices – driven by escalating geopolitical tensions in the Middle East – is being felt across the country. For farmers, the impact is immediate and significant: rising fuel costs, sharply increasing fertiliser prices, and growing uncertainty at a critical point in the farming calendar.
The 2026 Landscape: By the Numbers
If you’ve checked your invoices lately, you don’t need us to tell you things are expensive. However, seeing the data helps put the scale of the challenge into perspective:
Red diesel is currently facing a “rapid ascent”, with prices hitting between 120p and 130p per litre, up from 65p before the war began. In some regions, farmers have reported price jumps of 10p in a single day, driven largely by instability in the Strait of Hormuz affecting global oil shipments.
A third of the world’s key fertiliser chemicals also pass through the Strait of Hormuz. According to recent AHDB reports, nitrogen fertiliser prices have surged by 13% to 36% in just the last few weeks. As of late March 2026, UK-produced ammonium nitrate is hovering around £504 per tonne, while imported urea has climbed as high as £640 per tonne.
Tom Bradshaw, president of the National Farmers’ Union, also warned of a “double whammy” for 2026, as electricity standing charges for infrastructure are set to double in April, further squeezing margins for horticulture and livestock sectors.
What has fertiliser price got to do with insurance?
As prices rise, so does the value of the fertiliser and fuel stored on your farm. While the quantity may remain the same as usual, the amount it is worth, and the amount you would want and expect to be paid out in the event of a claim, is increased.
Therefore, you should ensure you have informed your insurance company of how much fertiliser and/or fuel you are storing and its value. If you don’t, you could find yourself underinsured.
What is underinsurance and why does it matter?
Underinsurance occurs when the value declared on your policy is less than the true value of the insured items. In these cases, insurers can apply what’s known as the ‘condition of average’ clause.
This clause is the insurance term used when calculating the settlement for a claim where the policy undervalues the actual value of what is insured.
In the event of a loss, under this clause, the amount paid out for a claim will be in the same proportion as the value of the underinsurance. The below shows an example of how the condition of average generally works. Individual payouts though will be calculated on the basis of your specific policy wording.
Payout = Claim x Sum Insured/Actual Value
Payout = 1,000 x 1,000/2,000
Payout = 500
In the above example, the fertiliser has been insured for just £1,000 (half of its actual value). With the condition of average clause at play here, the settlement is halved by the insurer, leaving just a £500 payout for a £2,000 (the actual value of the fertiliser) loss.
Not only this, but underinsurance in this area can also impact a number of different areas of your insurance cover, including your Business Interruption cover.
Heightened Theft Risks
As red diesel and fertiliser prices rise so too does their appeal to thieves. What were once everyday farm inputs are increasingly being seen as “liquid gold,” making them prime targets for rural crime.
The high value of both fuel and fertiliser means that a standard fuel tank or a pallet of fertiliser now represents a significant financial asset. Opportunistic and organised thefts are becoming more common, particularly where storage is visible or security measures are limited. This too points towards why it is so important to have adequate insurance in place to protect against such risks.
Practical Steps to Protect Your Farm
Whilst you can’t control the prices, you can control your resilience:
- Mid-Term Reviews: Don’t wait for your annual renewal. If you’ve just taken delivery of high-value stock, call your broker to adjust your limits.
- Audit Your Inventory: Keep a precise log of fuel and fertiliser volumes on-site.
- Enhance Security: Visible deterrents CCTV, alarms, and secure gates can be useful for protecting high-value inputs like fertiliser and fuel.
How McClarrons can help Farmers
If you’re an existing McClarrons client and need to inform us of a change to your sums insured, please do so at your earliest opportunity. Alternatively, if you have any queries around your insurance or what underinsurance is, please do not hesitate to contact our specialist Farm Insurance Team on 01653 609152 or at farm@mcclarroninsurance.com.
Originally posted: Dec 2021
Updated: Apr 2026
