We continue to favour the grain and livestock industries in the UK because of good export opportunities and a strong domestic market. The country became a net importer of wheat in 2012/13, and this could still be the case in 2013/14. However, we believe this will be temporary and continue to expect the UK's wheat production balance to improve in the coming years. The pig industry could be boosted by a recent trade deal to export to China, while the domestic market is appearing resilient. We see limited growth for the sugar and dairy industries. We highlight strong results from pig producer Cranswick despite a weak economic environment.
- Wheat production growth to 2016/17: 5.7% to 16.1mn tonnes. We see a challenging environment for the UK wheat industry in the near term owing to increased competition for exports from the Black Sea region, decreasing direct payments to farmers as a result of Common Agricultural Policy (CAP) reform, and poor economies of scale on the back of a shift of the EU ethanol policy towards non-food biofuels.
- Beef consumption growth to 2017: 8.5% to 1.4mn tonnes. This will largely be a result of population growth, as well as economic recovery and the continued popularity of Sunday roasts.
- Milk production growth to 2016/17: 3.8% to 14.1mn tonnes. We expect production to recover slightly; however, we note that EU CAP reforms could make UK farmers less competitive.
- Real GDP growth: 1.1% year-on-year (y-o-y) in 2013 (from 0.2% y-o-y in 2012).
- Consumer inflation: 2.0% y-o-y in 2013 (down from 2.9% y-o-y in 2012).
- BMI universe agribusiness market value: 2.9% y-o-y decline, to US$18.4bn in 2012/13, forecast to grow on average 0.5% annually between 2011/12 and 2016/17.
Key Revisions To Our Forecasts:
- Wheat 2013/14 production revised down: from 15.2mn tonnes to 12.0mn tonnes, based on the latest estimates.
- Barley 2013/14 production revised up: from 5.2mn tonnes to 6.5mn tonnes, based on higher plantings than expected.
- Poultry 2012/13 production revised up slightly: from 1.5mn tonnes to 1.7mn tonnes, on the back of strong estimated output in the first six months of the year.
- Beef 2012/13 production revised down: from 969,000 to 864,400 tonnes, based on first slaughter estimates for the first six months of the year.