UK farmers across various sectors have had a good year in 2021, but the prospects for 2022 are less positive, industry experts maintain.
In their annual outlook for the year ahead, farm business consultants from the Leicestershire-based Andersons Centre expect the full effects of cost increases in fertiliser, fuel and seasonal labour to have a negative impact.
While it is possible that some of these cost pressures may be short term, with the price of fuel and fertiliser coming down in 2023, other recent increases in input costs are less likely to turn.
“Labour and machinery costs seem more structural and could well be present for the long term,” notes the Andersons report.
Looking at individual sectors, Andersons maintains that the outlook for 2022 milk prices “looks reasonable”, with global demand robust and supply constrained by weather issues and high input costs which are being felt by dairy farmers around the world.
When it comes to individual UK dairy farm performance, “average won’t be good enough,” notes the Andersons analysis.
On beef, Andersons points out that strong prices in 2021 have primarily been on the back of major UK retailers buying and supporting UK beef.
That worked to the advantage of producers during the COVID-19 lockdown, as consumption moved away from the food service sector (where imported beef tends to do well).
While the Andersons analysis questions whether red meat markets can remain at the historic highs seen in recent months, the report points out that UK finished cattle numbers are set to remain tight in 2022, and the country is only around 70% self-sufficient in beef.
Sheep markets are also at historic highs for the time of year and Andersons predicts that these high prices could result in a limited expansion in the UK breeding flock in 2022 and therefore more lambs on the ground.
All the factors which came together to drive up sheep prices in 2021 are unlikely to disappear in the year ahead
That scenario would usually put some downward pressure on prices, but imports from the likes of New Zealand are likely to remain constrained in 2022 due to high shipping costs and continued demand from China.
“All the factors which came together to drive up sheep prices in 2021 are unlikely to disappear in the year ahead,” notes the report authors.
They also point out that sheep producers are not as exposed to price hikes in fuel and fertiliser than beef or dairy.
On pigs, Andersons paint a fairly gloomy picture, with the sector under significant pressure in Britain due to ongoing issues with labour in slaughter plants. In addition, producers are faced with rising feed costs.
“This will signal the end for some, with a significant contraction of the breeding herd expected,” states the report.
It points out that UK producers cannot compete with North and South America on costs of production, suggesting that the sector should instead opt for radical change and focus on becoming the first carbon-neutral meat.
That leaves cereal and oilseed crops, with Andersons noting that prices are at historic highs, but costs are rising quickly.
While fertiliser might be of immediate concern, the bigger long-term issue may actually be the cost of machinery and labour, with the example given of a 200hp tractor which has virtually doubled in price in the last 10 years.
“Most businesses understand their variable costs well, but rarely spend much time examining overheads,” notes the Andersons report.