HomeInternationalStrong demand for agri-commodities while high costs concerns remain - FarmersWeekly

Strong demand for agri-commodities while high costs concerns remain – FarmersWeekly

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Demand is set to remain strong for most UK agri-commodities in 2022 in a global market of tight supply and increasing consumption, according to the latest AHDB Agri-Market Outlook.
Interest is particularly high in wheat and oilseed rape, while fortunes are more mixed for livestock farmers.
Sky-high input costs, specifically fertiliser and fuel, are unlikely to drop any time soon, said AHDB advisers, causing concern for every sector.
See also: How farm collaboration can cut costs and increase efficiency
Sarah Baker, AHDB economic strategist, said the Covid-19 pandemic and Brexit have scarred the economy, causing permanent changes that are slowing down its ability to return to “normal”.
In agriculture, this can be seen in supply chain management and consumer behaviour, with customers having to be more careful about what they buy, especially during this period of inflation.
Inflation does not affect everyone or every sector equally, but food and non-alcoholic beverages have been affected more.
This comes at a time of higher costs for farming businesses and pressure to increase wages.
A good amount of fertiliser has already been bought, so the main challenge now will be with deliveries and whether they arrive on time, said AHDB economics and analysis director David Eudall.
A lower rate of application is anticipated, leaving yields dependent on how favourable weather conditions are in the key growing months, but other countries’ farmers are in the same boat.
In addition, incomes are facing the squeeze from Basic Payment Scheme reductions, which are set to decrease by another 20-40% this year.
Many businesses are still in the “wait and see” phase, but the AHDB has encouraged farmers to consider their options, such as looking at other income streams.
“This isn’t happening a few years down the line – we are in it now and people have to act accordingly,” said Mr Eudall.
Wheat supplies remain tight, both domestically and globally, supporting prices, said Vikki Campbell, arable market specialist manager. It is expected to remain this way until new-crop stocks start to come online later in the year.
The UK area for winter wheat has increased a touch due to good drilling conditions, resulting in spring cropping intentions dropping slightly.
Crops are looking in good condition, but any fertiliser application reduction or delay due to high costs could still have an effect on yields.
Across the three main markets, demand remains high, with animal feed producers preferring wheat to barley, and the backlog of animals on farm increasing demand.
The UK’s second bioethanol plant is set to come online in the next few months, which could boost the need for wheat, although imported maize might be easier to source than wheat.
A further increase in demand from brewers, maltsters and distillers is also expected.
Rapeseed supply looks set to be tight for the rest of the season, said Ms Campbell.
A slight rebound in the UK oilseed rape planted area for harvest 2022 has been recorded, but it remains the second-lowest acreage this century.
The increase is very regional, depending on the prevalence of cabbage stem flea beetle.
There are two main themes for livestock sectors, said Chris Gooderham, head of dairy and livestock market specialist, with the first being high input costs putting pressure on businesses.
The second involves the easing of Covid-19 restrictions and how this affects demand, with consumers preferring domestic products at retail, and more imports being consumed out of the home.
GB milk production is forecast to end the 2021-22 season on 31 March slightly down (1.2%) on the year, with only modest growth in the 2022 calendar year (0.3%), as high input costs and labour shortage affect yields, said Mr Gooderham.
Tight global milk supplies are expected to keep international markets supported, though milk price increases are only somewhat helping to counter costs.
UK imports will likely be up compared with 2021, as food-service demand returns.
Beef production is forecast to grow 1% this year as more prime cattle becomes available due to the one-time shift of more youngstock. A gradual decline in the herd size is predicted in the long term.
Overall beef consumption is expected to decrease 1% as pre-Covid concerns about health and the environment return.
Beef imports are expected to increase 1% due to increased food-service demand, while exports will rise by more than 10%.
Total sheepmeat production is expected to increase 12% on the year to 294,600t, but this is a lift on an unusually low 2021, said Mr Gooderham.
Despite the usual Easter surge and the easing of restrictions, domestic demand is expected to fall, as lamb has lost menu share and has a high price point.
Lamb imports are forecast to remain low as New Zealand continues to pivot towards China and shipping costs remain high.
Total global lamb supplies remain tight as New Zealand and Australia continue to rebuild flocks, and UK exports could grow by 5%.
“The current pressure on the pork sector is immense, with a high backlog at exactly the time of year you don’t want it in terms of costs, and unlikely to reduce any time soon,” said Mr Gooderham.
However, a decrease in the herd overall is expected by the end of 2022, leading to a 2% fall in UK pigmeat production.
Prices are forecast to remain low until numbers decrease in the UK and EU – which is starting to happen in Germany – but prices are still far higher in the UK than on the continent.
Export markets remain challenging, with Chinese demand slowing and a weak EU market.
UK demand is expected to weaken slightly (-2%) , although falling production, recovering food-service demand and increased exports (+9%) could all help.
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