Cost of living puts pressure on farmgate prices in 2023

The cost-of-living-crisis and changes in consumer behaviour are expected to reduce overall spending on red meat during 2023, according to the latest AHDB Agri-Market Outlook report.

And while increased export volumes should help to offset some of the losses from the domestic market, high on-farm input costs and lower farmgate prices will eat into profit margins for some sectors, say analysts.

See also: Strong demand for beef and pork predicted in 2023 – QMS

AHDB economic strategist Sarah Baker said: “The main issue with inflation is that 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.”

Lamb

The outlook suggests consumption of lamb will be affected by consumers trying to reduce spending. A larger carryover of lambs from 2022 could also lead to higher production during the first half of the year.

The AHDB has forecast that weaker demand from the UK market and better demand from the EU will lead to fewer imports and more exports. However, import volumes of lamb have been high in recent months.

NFU Livestock Board chairman Richard Findlay said volumes of New Zealand lamb were up by 30% on the year in value terms, and he expressed concern that the government had not fully understood the potential consequences of trade deals on UK producers.

Mr Findlay said: “While we see some strong commitments from UK retailers in support of British for fresh, we don’t see those same commitments for frozen.”

Beef

UK beef production is expected to grow by 0.6% in 2023 due to higher cattle availability. However the outlook indicates consumer spending is likely to be lower due to the cost of living.

Lower domestic demand will discourage imports, which are forecast to drop by 2%, according to the AHDB, while export volumes could increase by 3% on the year.

Pork

Following a decline in the UK breeding herd, pork production is forecast to fall by 15% in 2023, though the breeding herd is expected to start to recover later in the year.

Tighter supply of UK pork is set to be replaced by increased volumes of pork imports.

Dairy

GB milk production is expected to grow by 0.3% in 2023, according to AHDB figures. However, with farmgate milk prices already falling, this could lead to production contracting later in the year as some producers leave the sector or downsize.

Domestic demand for dairy products may struggle in 2023, but import demand from China should offer some support.

Cereals and oilseeds

Increased supply of UK-grown wheat and barley is likely to encourage exports come harvest 2023.

The outlook suggests price volatility will continue due to tight global supply and demand, exacerbated by the war in Ukraine.

Demand for cereals in animal feed is projected to be lower in early 2023. However, demand from the brewing and malting sectors is reportedly strong.

The UK will remain a net importer of rapeseed products, with demand outweighing supply despite a larger domestic production. The planted area for 2023 is also higher than the previous year.