2013-01-07 06:03:19 - Recently published research from Business Monitor International, "United Kingdom Agribusiness Report Q1 2013", is now available at Fast Market Research
We maintain our 2012/13 forecast for UK wheat production and believe the country will remain a net importer in the coming months, increasing costs for local mills and favouring the ones with the best import facilities. We continue to see difficulties for the livestock sectors, but we see better days ahead for the dairy sector as milk prices paid to farmers have increased in line with global prices, which should help margins. The outlook for the confectionary industry in the UK is looking quite resilient and efforts from the EU to ease tensions on the local sugar market by allowing some out-of-quota production in 2011/12 should help prices down in the medium term.
We maintain our 2012/13 forecast for UK wheat
production and believe the country will remain a net importer in the coming months, increasing costs for local mills and favouring the ones with the best import facilities. We continue to see difficulties for the livestock sectors, but we see better days ahead for the dairy sector as milk prices paid to farmers have increased in line with global prices, which should help margins. The outlook for the confectionary industry in the UK is looking quite resilient and efforts from the EU to ease tensions on the local sugar market by allowing some out-of-quota production in 2011/12 should help prices down in the medium term.
Full Report Details at
- www.fastmr.com/prod/523902_united_kingdom_agribusiness_report_q1 ..
¦ Wheat production growth to 2016/17: 11.8% to 17.4mn tonnes. Decreasing competitiveness for US ethanol plants because of a subdued corn crop could help some of the UK plants return to profitability. * Beef consumption growth to 2016/17: 5.2% to 1.6mn tonnes. This will come as the domestic market is saturated and consumption habits move away from red meat and to healthier alternatives. * Milk production growth to 2016/17: 4.0% to 14.1mn tonnes. We expect production to recover slightly; however, we note that EU Common Agricultural Policy (CAP) reforms could make UK farmers less competitive. * Real GDP growth: 1.7% 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: 1.4% y-o-y decline to US$18.3bn in 2012/13, forecast to grow on average 1.0% annually between 2011/12 and 2016/17.
Dairy production in the UK is set to fall slightly in 2012, as farmers' margins are being squeezed on the back of record grain prices. Global milk prices have increased, but by less than grain prices. Moreover, farmers have not been able to take advantage of the full increase in global milk prices, as retailers and dairy producers lagged in boosting their purchase prices. Overall, milk collection in the UK reached 6.8bn litres in September, compared with 6.9bn litres over the same period in 2011. This has led us to revise down our forecast for UK milk production to 13.2mn tonnes in 2011/12, compared with 13.5mn tonnes in 2010/11. This will contribute to a decline in butter production and stagnating cheese output in 2011/12.
The UK wheat crop, one of the largest in Europe, continues to face problems given the country has had its wettest summer in 100 years. Disease concerns have already become apparent, while recent specification tests have revealed that crop weight per given volume is the lowest in almost 35 years. Although we are maintaining our 2012/13 production estimates at 15mn tonnes, the weak specification results highlight the trend of poor production across the continent, and have caused feed customers to lower their standards in order to purchase wheat. Our view remains for prices to remain elevated by historical levels in 2013.
Associated British Foods' (ABF) sugar division performed really strongly in FY2012 thanks to increased sugar production from the UK as well as increased output in the rest of Europe (mainly Spain) and Africa. The UK sugar harvest rebounded strongly in 2011/12 on the back of favourable weather conditions, which increased the country's stocks. Similarly, the company, which controls Illovo Sugar, one of the main sugar producers in Southern Africa, benefitted from cheap import supply from the region.
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