HSBC outlines challenging market for agri-food sector

The economic environment faced by farmers and growers in the UK is now tougher than at any time for the past decade, claims HSBC’s head of food & agriculture Allan Wilkinson.

The report, HSBC Forward Planning 2016, claims that despite the UK farming industry grappling with low commodity prices, farmers who manage costs efficiently and seize overseas opportunities can be successful. It claims that sheep meat has seen a significant increase in production and its current forecasts for 2015 are for a 12% increase in production compared to 2012.
 
But the current forecast for beef is “more complicated” as approximately half of production comes from the dairy herd, the report said.
 
The 4% increase in dairy cow numbers in 2014 is likely to prove temporary and the long-term trend of a decline in the total breeding herd and falling beef production is likely to continue. However, the report claims that prime cattle availability is forecast to increase in 2016, recovering almost to 2014 levels.
 
The number of ewes being slaughtered remains at a low level and a large breeding flock “looks likely” to be carried through 2016, with the potential to produce another lamb crop, the report forecasts.
 
Domestic demand for lamb continues to fall, with British consumers preferring less expensive and more versatile meats.

The report said: “Exports of both beef and sheep meat are likely to be down in 2015 as the strength of sterling against the euro has made it harder to compete in European markets.”

Cheaper feed, fertiliser and fuel will give some relief in the year ahead, but trading conditions look likely to remain tough for beef and sheep producers in 2016, it predicted.
 
“The Forward Planning booklet is designed to help farmers to plan for next year. Businesses across UK agriculture can build the price forecasts and target cost-of-production figures into their models to manage market volatility and keep costs down,” said Wilkinson.
 
“Although it is a tough operating environment for agriculture, prices will recover. At the same time, global demand is growing for British food products. Those who operate on a low-cost model and who target overseas consumers are well-poised for long-term success.”

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