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BMI View: Brexit will be a net negative for the UK agriculture industry due to short-term uncertainty
followed by lower revenues and increased costs owing to less favourable subsidies, trade and labour
conditions. We expect grains to be the most resilient sector due to its low production costs and greater ease
in diversifying trade relationships. In contrast, sugar will be a clear underperformer as the UK will struggle
to fully take advantage of the EU quota removal in 2017, while failing to offset this loss with sourcing
alternative trade partners. The livestock and dairy sectors will be able to supply a greater share of domestic
demand while benefiting from higher prices, although costs of production will also be higher.
? Sugar production growth to 2019/20 on the 2014/15 level: -31.6% to 6.5mn tonnes. Over the next ten
years, output will decline severely as the UK leaves the EU's protected sugar market, while domestic and
alternative export opportunities will only partially offset this loss.
? Sugar consumption growth to 2019/20 on the 2014/15 level: -1.8% to 2.3mn tonnes. We expect sugar
consumption in the UK to begin a steady decline in response to the introduction of a sugar tax by the
government in 2018, as well as higher domestic prices following Brexit.
? Wheat production growth to 2019/20 on the 2014/15 level: -6.7% to 15.5mn tonnes. Wheat
production will see a moderate decline over the next five years due to lower subsidies and wheat prices
only slowly bottoming-out from 2016 onwards.
? Poultry consumption growth to 2019/20: 13.5% to 2.4mn tonnes. Demand for poultry will be strong
as the meat is a cheaper and leaner source of protein than either pork or beef, which will make it appeal to
UK consumers over the coming years, especially as domestic prices increase after the UK leaves the EU.
? 2016 real GDP growth: 1.4% y-o-y (revised down from 1.8% since our last quarterly update), down
from 2.3% y-o-y in 2015, forecast to rise 1.5% on average annually between 2015/16 and 2019/20.
? 2016 consumer price inflation: 0.5% y-o-y average, up from 0.1% in 2015, forecast to rise to 2.1% on
average annually between 2016 and 2020.
? BMI universe agribusiness market value growth: USD30.3bn in 2015/16, down by 1.1% y-o-y from
USD30.6bn in 2014/15, forecast to rise 1.5% on average annually between 2015/16 and 2019/20.