The latest AHDB Agri Market Outlook said that high inflation and the impact of the cost of living on consumer demand will continue to impact farm business planning in 2023, according to
The damaging effects of inflation, the suppressed economic activity as a result of reduced spending power and the lack of flexibility in the labour market will converge to continue affecting farm business margins.
Farmers are particularly hard hit, facing higher input costs while simultaneously facing a price-sensitive consumer market for their produce.
Sarah Baker, AHDB’s economic strategist, said: “The main issue with inflation is it drives down the real rate of growth in an economy, erodes households’ disposable income and leads to more cautious spending patterns. Coupled with rising input costs for farmers, the industry will face ongoing dual challenges this year.
“As inflation subsides, it doesn’t mean that prices are dropping, rather that they have stopped rising as quickly as they were before. Therefore, peoples’ living standards will take some time to catch up, depending on income growth. Consumer confidence, along with demand, will take some time to recover, despite inflation dropping as it is expected to during 2023.”