Oil price fall forecast to have far reaching impact on farming margins

A new BPEX analysis of the fall in oil prices since mid-June 2014 concludes that agriculture, both in the UK and worldwide, is likely to encounter “far reaching effects”.

“Despite currency movements, crude oil prices in sterling terms have lost over half their value since June,” said BPEX, adding that such movement is likely to affect farmers’ margins through links with both input and, to a lesser extent, output prices.

“On top of this, the potential effects on the wider global economy could be noticeable and, if it is an indicator of slowing global growth, could mean a slower pace of growth for agricultural products, including pig meat. On average, however, and for the UK and Europe particularly, lower oil prices themselves are expected to benefit economic growth.”

Focusing specifically on livestock production, BPEX commented that the effects of lower oil prices on grain and oilseed prices have a significant influence on feed costs, adding that this could have a greater impact on margins than what farmers may experience in terms of lower energy costs.

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