AHDB has launched its biannual forecast of UK production, consumption and trade across livestock and arable sectors, putting Covid, Brexit and the the pervasive influence of China on global commodities markets under the microscope to determine their impact for the year ahead.
Phil Bicknell, market intelligence director at AHDB, said the Outlook, which 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, was one of the most challenging AHDB has ever produced.
“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,” said Mr Bicknell.
“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.
He added that 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.”
Outlook report key insights
Pig meat: There was a four per cent rise in UK pig meat production in 2020, exceeding one million tonnes for the first time. There was also 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; and pig prices are expected to remain under pressure across 2021.
Beef: The UK experienced 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; and a three per cent fall in exports, largely due to lower domestic production.
Sheep: There was 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 is unlikely to maintain the growth seen in 2020 but limited global supplies may offer some price support
Dairy: Milk production is expected to total 12.56 billion litres for the 2020/21 season, up 0.2 per cent. Demand dynamics are still uncertain due to Covid, given the importance of the out-of-home market; but downwards pressure on prices is anticipated in first half of the year. Global demand is mixed, depending on each country’s pandemic management and economic recovery; and trade friction with EU is likely to impact short shelf-life product.
Potatoes: 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 are up year-on-year for packing and bags but 12 per cent lower for processing material, suggesting processors are holding stocks. Draw-down rates were lower than five-year average. The challenging environment, including loss of foodservice due to Covid, may result in loss of CIPC and phytosanitary barriers to seed potato exports to EU may see a contraction of planted area for 2021
Cereals: Rebound in UK wheat production is expected following smallest crop since 1980s for 2020/21 marketing season, with new crop estimated at 12.4-15.8 million tonnes. Global prices are supported by weather impacts on South American maize crop, with Covid concerns and exporters protecting domestic supply, and minimal carry-over stocks or deficit anticipated. Barley prices supported by wheat but still at significant discount; with a price ceiling due to maintaining export competitiveness and sizable 2019/20 crop. Production for 2021 harvest has been estimated to fall back slightly to 6.55-7.98 million tonnes, plus a switch back from spring to winter planting.
Oilseeds: 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 are expected to continue to offset lower production, with Ukraine an increasingly important supplier.
For the full report visit ahdb.org.uk/agri-market-outlook