EURO NOTEBOOK
IN economic forecasts there are few more scary terms than ‘an uncertain outlook’.
However that is exactly what the European Commission is saying in its latest summary of agricultural markets. This uncertainty has less to do with the weather, or indeed anything farmers can control, than to what is describes as ‘geopolitical crises’ in Ukraine and the Middle East. The report says these aect trade, prices and the overall economy. It warns that the inevitable result is continuing economic pressure on farmers.
Take these global events out of the equation and things would be looking brighter for agriculture. We and much of northern Europe have had a dicult spring, but elsewhere, particularly in the south, conditions have been favourable, with a good combination of heat and moisture. However there is no getting away from uncertainty.
According to the EU report input costs and farm gate prices remain an issue. It says there has been some welcome easing of input costs, but these remain above pre-covid levels. This makes pressure on margins a continuing fact of life for most enterprises. The report concludes that returns are continuing to decline faster than any fall in input costs, with an inevitable impact on profitability.
To add to the gloom the report says the hangover from the months of rampant food price inflation is still causing pain. It says this and limited prospects for economic growth are acting against farm gate prices settling at levels that reflect input costs. This goes back to a problem well flagged up during the time of maximum inflation the art of trading down from premium to basic products to stretch shopping budgets. As analysts warned then, people have got used to these lower prices and it is proving dicult to rebuild premium markets.
Without these it is a big challenge to get prices back up for farmers. This is a problem that will not be easily solved and what