Rising costs to continue to plague livestock sectors

High inflation and rising input costs remain key issues facing the livestock sectors during the remainder of 2022, the AHDB warns in its latest Agri-Market Outlook.

The agricultural price index increased by 28.4% in the 12 months to April 2022 for inputs, according to Defra.

During the same time period, the price index for agricultural outputs increased by 15.7%. On-farm input costs have continued to rise dramatically since then, especially for feed and fertiliser.

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Ex-farm feed wheat prices are currently up by about £40/t on the same week last year to average £240/t.

Beef

The outlook forecasts beef production to increase overall during 2022, driven by higher cull cow throughputs.

Trade volumes are expected to increase, with both higher imports and exports.

Heightened demand from the food-service sector is reportedly encouraging imports into the UK, while a tight supply of beef in Europe is helping to support export demand, especially with increased domestic production leaving more available for export.

Retail sales of beef have dropped back in the last year. For the 12 months ending 10 July, total spend on beef dropped by 5.6% to £4.4bn and total volume was down by 10.6% to 600,000t.

Average retail prices remain high at £7.34/kg, up 5.6% on the previous year, encouraging some consumers to switch to cheaper sources of protein.

Beef consumption during 2022 is forecast to fall by 4% in total, according to AHDB estimates.

Patty Clayton, AHDB lead analyst, said demand would suffer for the red meat sectors as a result of food inflation and the shift in changing consumer preferences as the UK moves towards lower economic growth.

Lamb

Sheepmeat production during 2022 is expected to increase on last year’s diminished levels and return to near 2020 levels, according to AHDB forecasts.

Trade for sheepmeat has been up for the year to date for both imports and exports. Exports for this year up to May totalled 29,700t, with shipments to the EU accounting for 94% of this.

UK sheepmeat imports reached 33,400t during the first five months of the year.

Higher numbers of breeding stock have also led to a larger forecasted lamb crop for the year.

Elevated prices are limiting retail sales and demand from retailers for lamb remains low, while sales in the food-service sector are reportedly very steady.

Retail sales of lamb for the 12 months ending 10 July dropped 11.1% to £833m for total spend and total volume was down 17% at 87,000t.

Hannah Clarke, AHDB senior analyst, said: “A portion of the drop in retail is expected to be offset by growth in the eating-out market through the rest of the year.

However, growth is not expected to get back to pre-pandemic levels due to pressures on spending.

“Lamb exports are forecast to remain in growth in 2022, which may work to offset some of the decline in domestic demand.”

Pork

The outlook for the pork sector includes a forecast 6% fall in pigmeat production during the second half of 2022, due to a contraction in the breeding pig herd.

Reduced production is expected to encourage more imports of pork products into the UK towards the end of the year.

Limited demand for pork in China and lower domestic production are projected to restrict growth in export volumes.

Demand for pork has fallen during the past 12 months, with total retail spend down 3.8% at £5.8bn and retail volume dropping 6.7% to 1m tonnes.

Dairy

The latest AHDB estimates predict milk production for the 2022-23 season will finish between 1% and 3.8% lower than the previous year.

Labour shortages, input price volatility and milk price uncertainty are all contributing to this decline in production. Despite rising milk prices, margins remain tight, with exceptionally high on-farm costs of production.

Ms Clayton said: “Dairy may be the next livestock sector seeing financial challenges as we head out of summer, and higher feed costs will bite at a time when demand, and hence milk prices, could start to wane.”

Retail milk sales fell 6.6% in volume during the past 12 months. Average retail prices for dairy products have gone up across the board, but the total spend has fallen because of the lower volumes.

Average prices for cheese increased by 2.7% during the 12 months, but total spend was down 3.1% and volumes were down 5.7%.