AHDB’s latest Agri-Market Outlook tells that increasing input costs and the ongoing impact of inflation will play a key role in farm business planning for the remainder of 2022; if farm business margins are to remain viable amid challenges.
In the livestock sectors, rising energy and input costs are continuing to negatively influence the rising price of food. As such, UK pig meat production is expected to fall by 6% in the second half of 2022, due to a reduction in breeding herd numbers.
The UK demand for pig meat is also following a similar trend, as pre-pandemic trends and the cost of living squeeze change consumer buying trends. While the overall UK beef consumption is forecast to drop by 4% in 2022, as consumers switch to the purchase of cheaper protein options. Although, beef exports are predicted to increase, due to higher domestic production and the tight supply situation across Europe.
With continuing labour shortages in the dairy sector, alongside the impacts of price volatility, the 2022/23 GB milk production season is predicted to end between 1% and 3.8% lower year on year – unless cash flow pressures improve.
AHDB’s lead analyst, Patty Clayton, said: “All livestock sectors will face challenges in the coming months as cashflows are put under pressure in preparation for overwintering. It’s no surprise that we see a contraction in the pig herd given the profitability challenges this sector has faced in recent months. Dairy may be the next livestock sector seeing financial challenges as we head out of summer and higher feed costs bite at a time when demand could start to wane.”
She added: “For the beef and lamb sectors, production looks set to increase following a period of favourable prices. However, these sectors will also face headwinds as demand will suffer on the back of food inflation and the shift in changing consumer preferences, as we move towards lower economic growth.”
According the Market Outlook data, the 2022 lamb crop is forecast to be higher, following a growth in the breeding stock; total sheep meat production is also expected to rise and rebound to 2020 levels; and a shift from a pre-Brexit kill pattern has led to an increase in the number of lambs available to kill. But, AHDB predict that the demand for lamb meat will remain extremely sluggish due changing consumer preferences and rising living costs.
As such, farmers need to think ahead in order to produce viable business plans for the rest of 2022; to combat ‘squeezing business margins’.
“Inflation is undoubtedly the biggest issue in the UK, with serious ramifications for our agricultural economy,” said Sarah Baker, AHDB economic strategist. “Retailers are working hard to keep the costs of food down for consumers, but this has consequences for agricultural producers who are already being affected by the fuel and input cost rises.”
The Market Outlooks for Cereals and Oilseeds are due to follow in early August. To read AHDB’s full Agri-Market Outlook report for livestock, head to the AHDB website: ahdb.org.uk.