High inflation and the impact of the cost of living on consumer demand will continue to impact farm business planning in 2023, according to the latest AHDB agri-market outlook.
The damaging effects of inflation, reduced spending power and the lack of flexibility in the labour market will continue to affect farm business margins.
Farmers are particularly hard hit, facing higher input costs while facing a price sensitive consumer market for their produce.
Sarah Baker, AHDB economic strategist, said: “The main issue with inflation is it drives down the 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.
“As inflation subsides, it doesn’t mean that prices are dropping, rather that they have stopped rising as quickly as they were before. 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.”
Key findings from the report revealed that beef production is to grow by an estimated 0.6% due to higher cattle availability and imports are expected to fall by around 2%.
Exports could grow slightly by around 3%, reflective of the domestic market balance.
Lamb production is also forecast to increase, driven by higher carry-over and a broadly stable lamb crop, but consumption is expected to weaken..
Imports could ease year on year and exports are expected to grow, reflecting the projected domestic market balance and supported by continued demand from the EU.
Pig meat production will see the largest decline by up to 15% year on year in 2023, driven by a 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 expected, with numbers predicted to increase by 7,000 head between June 2022 and June 2023.
Despite an increase in domestic wheat and barley availability this season, global price strength continues to provide a support level for domestic grain values.
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.
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.
Animal feed demand, and cereal usage, is expected to fall this season considering sector challenges from high input costs to Avian 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.
