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, and the domestic market is appearing resilient. We see limited growth for the sugar and dairy industries, and note that the recent signature of the EU-Canada free trade agreement will favour the local poultry industry.
- 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.
- Poultry consumption growth to 2017: 5.2% to 1.9mn tonnes. This will come as the meat is often viewed as a cheaper and healthier alternative to beef, for which consumption per capita is largely saturated.
- Milk production growth to 2016/17: 7.7% to 14.6mn tonnes. We expect production to recover moderately; however, we note that EU CAP reforms could make UK farmers less competitive.
- Real GDP growth: 1.8% year-on-year (y-o-y) in 2014 (from 1.5% y-o-y in 2013).
- Consumer price inflation: 2.9% y-o-y in 2014 (up from 2.8% y-o-y in 2013).
- BMI universe agribusiness market value: 1.4% y-o-y decline, to US$17.6bn in 2013/14, forecast to grow on average 0.2% annually between 2011/12 and 2016/17.