Wednesday, 17 August 2011

Currency fluctuations should not affect export confidence

Exports of beef and lamb from England are doing exceptionally well. Latest figures show beef is 42% up on last year (year to date - HMRC) while lamb has risen slightly by 5.6% (year to date - HMRC). By the end of 2012, EBLEX has committed to pushing beef exports to 20% of total production. From a standing start in May 2006 when we were allowed back into the export market, this is a significant achievement and a testament to the quality of the beef and lamb produced. Beef from the UK is again a major player on the world market, while our lamb is being exported to an increasing number of overseas markets.

However, the fact that this is set against a background of tightening supply and the potential for slowing demand on the domestic front, has prompted some to ask if it is healthy to be putting such an emphasis on exports. This debate has been fuelled by the Eurozone crisis and perceived volatility in the currency market. The natural question this prompts is: what if exports collapse tomorrow because of a currency crash?

Inevitably, there are daily fluctuations in the currency market, specifically in Sterling against the Euro, but these remain relatively minor. Sterling has remained weak against its closest neighbour for the past year, with a general downward trend over the past 12 months, and has mirrored its movements against the US Dollar. And most farmers will understand that a weak Pound relative to the Euro means a higher Single Farm Payment.

Much of the meat on the global market is traded in Dollars and both Sterling and the Euro have remained relatively stable against it, gaining slightly in strength since the start of the year.

The reality is that all three appear to be competing to out do each other in a “which performs worst” contest. All three are in the same boat which means it is unlikely that any single currency will suddenly gain enough ground from one of the others to significantly alter the balance of currency valuations and thus significantly affect exports – although without the benefit of crystal ball, nothing can be ruled out absolutely.

We should take heart though that all forecasts point to a tightening of the global supply of meat while the population continues to grow, logically pointing to continued robust, if not increased, demand for quality beef and lamb around the world.

You can read EBLEX latest beef and lamb market outlook reports by clicking here.

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