Page 1 - United Kingdom Agribusiness Report Q3 2012 Published: July 2012

No. of Pages: 65

Price: Single: US $ 1175

Improving rainfalls in April helped grains yields to recover and we maintain our view for production to increase in 2012/13. This will help the country to increase its export capacity, especially as the Black Sea region is forecast to have a slightly smaller output next season. We have slightly upgraded our outlook for the UK pork industry as recent export deals with China could boost the industry’s revenues and therefore encourage pork production in the medium term. The recent offer by Nordic company Arla Foods to buy the UK''s fourth largest dairy, the cooperative Milk Link, should benefit the UK dairy sector, where farmers are experiencing tight margins and pressure from supermarkets to decrease prices. Key Forecasts Wheat production growth to 2015/16: 12.6% to 17.1mn tonnes. This will be driven by increasing export demand, especially to step in for changes in output from the Black Sea region. Also, three new biofuel plants are set to be fully operational by 2014, which should encourage plantings in the medium term. Milk consumption growth to 2015/16: 4.4% to 7.8mn tonnes. Growth will be subdued because consumption per capita is already high, which means that further increases will come from population increases. Pork production growth to 2015/16: 1.3% to 768,900 tonnes. The recent supply agreement with China should boost production growth in the sector, as well as voluntary labelling agreements from the EU. Real GDP growth: 0.6% year-on-year (y-o-y) in 2012 (decreasing from 1.0% y-o-y in 2011). � Consumer inflation: 2.9% y-o-y in 2012 (down from 4.5% y-o-y in 2011). �BMI universe agribusiness market value: 2.1% y-o-y decline to US$18.6bn in 2011/12, forecast to grow on average 0.2% annually between 2010/11 and 2015/16. Industry Outlook Lower output in the EU-27 will prevent a recovery in wheat exports from the union in 2012/13, leaving the union unable to step in again for the decrease in exports from the Black Sea region. This will come even though the EU-27 managed to replenish stocks on the back of a bumper crop and lower exports in 2011/12.The US Department of Agriculture (USDA) estimated 2011/12 ending stocks at 13.3mn tonnes, 13.6% higher than in 2010/11. As we forecast the EU-27''s production balance to fall from 9.6mn tonnes in 2011/12 to 3.7mn tonnes in 2012/13, most of the EU''s export capacity will come from depleting stocks. The USDA forecasts the EU-27 to export 14.5mn tonnes in 2012/13, compared with 16.5mn tonnes in 2011/12. We have revised our production forecast for pork production in the UK in line with the GBP50mn trade deal, as we believe this will help boost output in the medium term. However, we stay cautious as British producers could face competition in accessing the market, and we believe China aims to boost domestic production significantly in the coming years, in order to reduce import dependence. This could close opportunities to the UK pork sector in the longer term. The inclusion of Milk Link into the Arla Foods group should be of particular benefit to the UK dairy sector, where farmers are experiencing tight margins. This is linked to price wars between the country''s supermarkets which recently cut their milk prices by 2p/litre, while hard discounters cut them by 3p/litre.

This meant that with global prices already in a downtrend, prices in the UK market are being squeezed further, discouraging production. In this context, Milk Link would benefit from its inclusion in Arla Foods as it would share the company''s financial returns on an equal rank with other European cooperatives, strengthening margins and enabling better investment in capacity over the medium term.

Agribusiness of United Kingdom Table of Contents Executive Summary ... 5 SWOT Analysis 7 United Kingdom Agriculture Swot . 7 United Kingdom Business Environment SWOT 9 Supply Demand Analysis .. 10 United Kingdom Grains Outlook 10 UNITED KINGDOM Wheat Production, Consumption & Trade. 16 UNITED KINGDOM Corn Production, Consumption & Trade .. 16 UNITED KINGDOM Barley Production, Consumption & Trade 16 United Kingdom Livestock Outlook 17 United Kingdom Dairy Outlook .. 22 United Kingdom Sugar Outlook .. 28 United Kingdom Rice Outlook 30 Commodity Price Analysis ... 33 Monthly Softs Update .. 33 Cocoa: Signs Of Life 34 Coffee: Holding Key Support . 36 Palm Oil: Uptrend Intact . 38 Sugar: Watching Brazilian Yields 39 Cotton: Downside Risks ... 41 Monthly Grains Update 43 Wheat: Upside Risks Materialising .. 44 Corn: Moderation In Place 46 Soybean: Looking Weak ... 48 Rice: Temporary Strength 50 Upstream Analysis .. 51 GM & Europe: Growth In Plantings Restricted But Imports To Pick Up ... 51 EMEA Machinery: Emerging Europe Has Strong Potential ... 55 Country Snapshot: Romania Demographic Data ... 58 BMI Forecast Modelling 62 How We Generate Our Industry Forecasts . 62 - United Kingdom Agribusiness Report Q3 2012  

Improving rainfalls in April helped grains yields to recover and we maintain our view for production to increase in 2012/13. This will help...

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