Written by Eva Osborne-Sherlock from Agriland
The Agriculture and Horticulture Development Board (AHDB) has said that its latest agri-market outlook released today (Friday, February 10) indicates that high inflation and the cost-of-living crisis will continue to impact farm business planning in 2023.
The board said that the damaging effect of inflation, the suppressed economic activity as a result of reduced spending power and the lack of flexibility in the labour market will converge to continue affecting farm business margins.
Farmers, it said, are hit particularly hard and face higher input costs while simultaneously facing a price sensitive consumer market for their produce.
AHDB’s agri-market outlook is produced every six months and examines factors likely to affect farm businesses. The analysis features market outlooks for each levy-paying sector covered by AHDB’s remit: beef and lamb; dairy; pork and cereals and oilseeds.
Sarah Baker, AHDB’s economic strategist, said: “The main issue with inflation is it drives down real rate of growth in an economy, erodes households’ disposable income and leads to more cautious spending patterns.
“Coupled with rising input costs for farmers, the industry will face ongoing dual challenges this year.
“Therefore, peoples’ living standards will take some time to catch up, depending on income growth.
“Consumer confidence, along with demand, will take some time to recover, despite inflation dropping as it is expected to during 2023.”
AHDB’s agri-market outlook found that beef production is to grow slightly in 2023 due to higher cattle availability, by as estimated 0.6%.
Consumption, however, is forecast to ease by around 2% as the cost-of-living puts pressure on consumer budgets.
Imports are expected to fall by around 2%, driven by easing domestic demand, and exports are forecast to grow by around 3% which is reflective of the domestic market balance.
An increase in lamb production is forecast for 2023, AHDB said, driven by higher carry-over and a broadly stable lamb crop.
Consumption is expected to weaken which, like beef, is linked to recessionary pressures and tighter consumer budgets.
Lamb imports are forecast to ease year-on-year, the board said, and this is driven by weaker domestic demand.
Exports, on the other hand, are forecast to grow, reflecting the domestic market balance and supported by continued demand from the EU.
Pig meat production is forecast to decline by up 15% year-on-year in 2023, driven by reduction in clean pig kill in the first half of the year, following a significant drop in the breeding herd.
A gradual recovery in the breeding herd is then expected, with number predicted to increase by 7,000 head between June 2022 and June 2023.
Imports are expected to grow to match the gap left by reduced domestic supplies, meanwhile exports are projected to decline as available domestic supplies tighten.
Domestic demand continues to ease, driven by the cost-of-living crisis reducing retail sales and eating-out demand, AHDB said.
Great Britain’s milk production is forecast to record marginal growth in 2023 in the region of 0.3%, according to the market outlook.
However, AHDB said, there is some risk of a contraction in production if margins deteriorate.
Despite some recent signs of lower inflation in agricultural input costs, it said, replacement costs through 2023 will remain high, putting pressure on cash flows.
Global dairy demand is likely to remain challenged by low economic growth, although there is potential for improved import demand from China later in the year.
Domestic demand is also expected to be impacted by a squeeze on consumer incomes, with all dairy products seeing lower sales.
Farmgate prices are expected to decline in the first half of 2023, with some potential for this to abate in the second half if inflation subsides and demand recovers.
Despite an increase in domestic wheat and barley availability this season, global price strength continues to provide a support level for domestic grain values, AHDB said.
Price volatility is expected to continue, with a finely balanced global supply and demand, and the war ongoing in Ukraine.
Domestic winter crops for harvest 2023 are faring well, though fertiliser cost and application remain a key watchpoint, according to the market outlook.
Exports are forecast stronger year-on-year for wheat and barley, due to increased domestic grain availability. Oat export forecasts remain historically strong, though this season’s levels will be led by farmer selling and competitiveness on the global market, AHDB said.
Animal feed demand, and cereal usage, is expected to fall this season considering sector challenges from high input costs to avian influenza (bird flu).
Brewing, malting, and distilling cereal usage is forecasted strong, with increased capacity coming online. A key domestic demand watchpoint remains bioethanol cereal usage, considering high costs and lower ethanol prices.
AHDB has predicted an increase in domestic production for rapeseed will slightly reduce the demand for imports. However, it said, imports are forecast to remain historically high due to the UK domestic demand outweighing domestic production.
A sizable increase in area for harvest 2023 is forecast in reaction to the historically high prices over the past 18 months.
Crops are faring well, according to the market outlook, although there are reports of area loss due to on-going pest pressure.
Global supply and demand of rapeseed have both increased on the year and increased availability in the EU is adding to price pressure and improving processor margins.
The post Cost-of-living to continue to impact farm business plans in 2023 appeared first on Agriland.co.uk.
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The board said that the damaging effect of inflation, the suppressed economic activity as a result of reduced spending power and the lack of flexibility in the labour market will converge to continue affecting farm business margins.
Farmers, it said, are hit particularly hard and face higher input costs while simultaneously facing a price sensitive consumer market for their produce.
AHDB’s agri-market outlook is produced every six months and examines factors likely to affect farm businesses. The analysis features market outlooks for each levy-paying sector covered by AHDB’s remit: beef and lamb; dairy; pork and cereals and oilseeds.
Sarah Baker, AHDB’s economic strategist, said: “The main issue with inflation is it drives down real rate of growth in an economy, erodes households’ disposable income and leads to more cautious spending patterns.
“Coupled with rising input costs for farmers, the industry will face ongoing dual challenges this year.
“Therefore, peoples’ living standards will take some time to catch up, depending on income growth.
“Consumer confidence, along with demand, will take some time to recover, despite inflation dropping as it is expected to during 2023.”
Beef
AHDB’s agri-market outlook found that beef production is to grow slightly in 2023 due to higher cattle availability, by as estimated 0.6%.
Consumption, however, is forecast to ease by around 2% as the cost-of-living puts pressure on consumer budgets.
Imports are expected to fall by around 2%, driven by easing domestic demand, and exports are forecast to grow by around 3% which is reflective of the domestic market balance.
Lamb
An increase in lamb production is forecast for 2023, AHDB said, driven by higher carry-over and a broadly stable lamb crop.
Consumption is expected to weaken which, like beef, is linked to recessionary pressures and tighter consumer budgets.
Lamb imports are forecast to ease year-on-year, the board said, and this is driven by weaker domestic demand.
Exports, on the other hand, are forecast to grow, reflecting the domestic market balance and supported by continued demand from the EU.
Pork
Pig meat production is forecast to decline by up 15% year-on-year in 2023, driven by reduction in clean pig kill in the first half of the year, following a significant drop in the breeding herd.
A gradual recovery in the breeding herd is then expected, with number predicted to increase by 7,000 head between June 2022 and June 2023.
Imports are expected to grow to match the gap left by reduced domestic supplies, meanwhile exports are projected to decline as available domestic supplies tighten.
Domestic demand continues to ease, driven by the cost-of-living crisis reducing retail sales and eating-out demand, AHDB said.
Dairy
Great Britain’s milk production is forecast to record marginal growth in 2023 in the region of 0.3%, according to the market outlook.
However, AHDB said, there is some risk of a contraction in production if margins deteriorate.
Despite some recent signs of lower inflation in agricultural input costs, it said, replacement costs through 2023 will remain high, putting pressure on cash flows.
Global dairy demand is likely to remain challenged by low economic growth, although there is potential for improved import demand from China later in the year.
Domestic demand is also expected to be impacted by a squeeze on consumer incomes, with all dairy products seeing lower sales.
Farmgate prices are expected to decline in the first half of 2023, with some potential for this to abate in the second half if inflation subsides and demand recovers.
Cereals
Despite an increase in domestic wheat and barley availability this season, global price strength continues to provide a support level for domestic grain values, AHDB said.
Price volatility is expected to continue, with a finely balanced global supply and demand, and the war ongoing in Ukraine.
Domestic winter crops for harvest 2023 are faring well, though fertiliser cost and application remain a key watchpoint, according to the market outlook.
Exports are forecast stronger year-on-year for wheat and barley, due to increased domestic grain availability. Oat export forecasts remain historically strong, though this season’s levels will be led by farmer selling and competitiveness on the global market, AHDB said.
Animal feed demand, and cereal usage, is expected to fall this season considering sector challenges from high input costs to avian influenza (bird flu).
Brewing, malting, and distilling cereal usage is forecasted strong, with increased capacity coming online. A key domestic demand watchpoint remains bioethanol cereal usage, considering high costs and lower ethanol prices.
Oilseeds
AHDB has predicted an increase in domestic production for rapeseed will slightly reduce the demand for imports. However, it said, imports are forecast to remain historically high due to the UK domestic demand outweighing domestic production.
A sizable increase in area for harvest 2023 is forecast in reaction to the historically high prices over the past 18 months.
Crops are faring well, according to the market outlook, although there are reports of area loss due to on-going pest pressure.
Global supply and demand of rapeseed have both increased on the year and increased availability in the EU is adding to price pressure and improving processor margins.
The post Cost-of-living to continue to impact farm business plans in 2023 appeared first on Agriland.co.uk.
Continue reading on the Agriland Website...