The margins of already struggling livestock businesses look set to take a further hit during the second half of the year and beyond, research from AHDB has suggested.
Producers will continue to feel the effects of rising energy and input costs, as well as wider food price inflation, according to the levy board’s latest agri-market outlooks for the beef & lamb, pork and dairy sectors, published this week.
UK pigmeat production is expected to fall by 6% in the second half of 2022, which may affect export growth volume, while UK demand is also expected to weaken, AHDB said.
The impact of price volatility and uncertainties around milk prices and labour shortages are also expected to contribute to GB milk production finishing the 2022/23 season between 1% and 3.8% lower year on year.
And while beef production is expected to be up for 2022 – bolstered by higher-than-anticipated cow throughput – consumption is forecast to fall by 4%, as foodservice demand slows and retail sales suffer from consumers switching to cheaper proteins.
Demand for lamb is also expected to remain “sluggish … on the back of changing preferences and rising prices”, AHDB said, despite lamb production rebounding to 2020 levels.
Input price volatility and uncertainties around milk prices and labour shortages would also discourage most dairy farms from pursuing yield growth, AHDB added. While farmgate prices are at record highs, it stressed they were “only just keeping pace with rising production costs”.
Low economic growth and food price inflation look set to weaken demand over the coming months, potentially limiting further milk price increases, it suggested.
“All livestock sectors will face challenges in the coming months as cashflows are put under pressure in preparation for overwintering,” said AHDB lead analyst Patty Clayton.
“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, and hence milk prices, could start to wane.”
“The impact of the Russian invasion of Ukraine is continuing to challenge global growth and is driving inflation across the board,” said AHDB economic strategist Sarah Baker.
“Combined with the impact of leaving the EU and the Covid pandemic, inflation is undoubtedly the biggest issue in the UK, with serious ramifications for our agricultural economy.”
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