Agriculture claims rise as food supply chain enters winter under pressure

New sector analysis from trade credit insurer Atradius points to a more cautious outlook for Britain’s food and agriculture businesses as cost, cashflow and weather pressures build across the supply chain.

The report identifies elevated input and employment costs, food-price inflation, geopolitical disruption and retailer resistance to price increases among the pressures facing the sector.

Atradius data shows claims received in agriculture rose by 73% between June and August compared with the preceding three months, while food claims increased by 9% over the same period. The movements come against a backdrop of continued cost and cash-flow pressures across the supply chain, including higher energy, fuel, fertiliser and employment costs.

Although claims received in both sectors eased in August, Atradius says the broader three-month picture supports continued caution.

Following the driest July on record in England and Wales, Atradius warns that the financial effects of weather disruption may take several months to emerge. Its historical data shows that agriculture claims rose noticeably during the winter following the hot, dry summer of 2022 and subsequent wetter-than-average autumn. Monthly claims between December 2022 and February 2023 were often more than double the levels recorded during the preceding summer.

Although weather is only one factor affecting claims, the 2022–23 pattern suggests that disruption experienced during the summer can move through the supply chain and emerge as late or missed payments during the autumn and winter.

The sector presents a mixed picture. Strong demand and farmgate prices are supporting livestock producers, including beef, dairy and poultry farms. Arable businesses, however, face weaker commodity prices and continued weather-related uncertainty over yields.

Pressure is also being felt further along the supply chain. Food and drink manufacturers are managing higher energy, fuel, employment and commodity costs. At the same time, pressure on household budgets and resistance from large retailers to further price increases are limiting businesses’ ability to pass those costs on.

James Napier, senior underwriter for Food and Agriculture at Atradius, said: “The outlook for food and agriculture remains moderate, but we are becoming more cautious. Britain’s food and agriculture businesses continue to see resilient demand but have less room to absorb further disruption. Higher employment, energy, fuel and fertiliser costs continue to squeeze margins.

“There is no single story across the sector. Strong farmgate prices and demand are supporting livestock producers, while arable businesses face weaker commodity prices and uncertain yields. Food manufacturers are also struggling to pass on rising costs as consumers focus increasingly on value.

“Extreme weather is likely to have contributed to the rise in claims after summer 2022, alongside wider cost and trading pressures. It shows how disruption at farm level can take months to reach manufacturers, wholesalers and retailers before emerging as late or missed payments.”