Covid, EU exit and the pervasive influence of China on global commodities markets are all explored in AHDB’s latest Agri-Market Outlook.
AHDB’s biannual forecast of UK production, consumption and trade across livestock and arable sectors went live online today (29 January).
It is intended to help farmers, growers and wider industry assess the potential impacts on their sector to help them plan, prepare and budget for the year to come.
Phil Bicknell, Market Intelligence Director at AHDB, said the Outlook was one of the most challenging AHDB has ever produced, given the huge impact of Covid on both domestic demand and the economies of key markets. Disruptions to trade following the end of the EU exit transition period and the knock-on effects on farm are also factored into the Outlook.
Phil added: “As 2021 gathers pace, the ongoing impact of Covid means that uncertainty is again the backdrop as we take our regular look ahead at our farming sectors.
“That said, we do have pockets of clarity, particularly in relation to some headline policy areas that impact our industry, such as the continuation of tariff-free and quota-free trade between the UK and EU. That has been a critical issue for agriculture – the EU-27 is both the UK’s biggest customer and biggest supplier of a range of agricultural products.
“As much as policy impacts farming, the fundamentals of supply and demand remain key drivers. These are increasingly international in their scope and impact. I have no doubt that our future outside the EU will bring both opportunities and competition but I’m also conscious that it will bring increased exposure to market volatility.”
The Outlook looks in-depth at what the future may hold at a sector by sector level, as well as some of the longer-term policy drivers.
– A four per cent rise in UK pig meat production, exceeding one million tonnes for the first time; an eight per cent drop in imports, pressured by large domestic supplies and a forecast decline in consumption; a seven per cent decline in export volumes, underpinned by weaker Chinese demand and disruption to UK exports to the EU; pig prices expected to remain under pressure.
– A five per cent fall in beef and veal production, due to tighter cattle availability; a three per cent fall in domestic consumption, due to easing retail sales; a four per cent growth in imports, assuming foodservice demand improves as Covid restrictions ease; a three per cent fall in exports, largely due to lower domestic production.
– A four per cent fall in UK sheep meat production to 285,000 tonnes; overall lamb throughput in 2021 forecast at 12.5 million head, four per cent below year earlier levels; imports and exports both expected to contract slightly. Domestic demand unlikely to maintain the growth seen in 2020 but limited global supplies may offer some price support.
– GB milk production to total 12.56 billion litres for the 2020/21 season, up 0.2 per cent; demand dynamics still uncertain due to Covid, given the importance of the out-of-home market; downwards pressure on prices in first half of the year; global demand mixed, depending on each country’s pandemic management and economic recovery; trade friction with EU to impact short shelf-life products.
– GB grower held potato stocks, as at end of November 2020, estimated at 3.27 million tonnes, 12.5 per cent more than 2019; stock levels up year-on-year for packing and bags but 12 per cent lower for processing material, suggesting processors holding stocks. Draw-down rates lower than five-year average; the challenging environment, including loss of foodservice due to Covid, loss of CIPC and phytosanitary barriers to seed potato exports to EU may see a contraction of planted area for 2021.
– Rebound in UK wheat production expected following smallest crop since 1980s for 2020/21 marketing season, with new crop estimated at 12.4-15.8 million tonnes; global prices supported by weather impacts on South American maize crop, Covid concerns and exporters protecting domestic supply; minimal carry-over stocks or deficit anticipated. Barley prices supported by wheat but still at significant discount; price ceiling due to maintaining export competitiveness and sizable 2019/20 crop; production for 2021 harvest estimated to fall back slightly to 6.55-7.98 million tonnes, plus a switch back from spring to winter planting.
– UK oilseed rape (OSR) production continues to fall, with an estimated 18 per cent fall back in planted area year on year for 2021 harvest; production estimated at 0.85-1.2 million tonnes; imports expected to continue to offset lower production, with Ukraine an increasingly important supplier.