Boston, MA -- (SBWIRE) -- 02/01/2013 -- 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.

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Key Forecasts

* 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.

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