Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Meat exporters facing foreign exchange headwinds

MEAT EXPORTERS FACING FOREIGN EXCHANGE HEADWINDS

Meat Industry Association Chief Executive Tim Ritchie says uncertainty in the EU as a result of Brexit is one of the causes of a higher exchange rate, which will significantly affect prices our exporters receive in the European market. This, in turn, affects the prices meat processors can pay farmers for their livestock. Volatility in exchange rates has already had a significant impact on meat exporters, which led to eroded margins in the last season.

This year, the volatility looks like it will get worse. A year ago, a NZD was worth 0.43 GBP, but is currently 0.53 GBP, with the NZD rising sharply against the GBP since the Brexit referendum. How the future of Brexit from the EU will affect the currency is highly uncertain. Similarly, in the Eurozone the NZD was worth 0.56 Euro a year ago, but it is currently trading at around 0.64 Euro. Again, future events in the Eurozone are unpredictable. This global economic uncertainty is also affecting our other main sheepmeat market – China. A year ago, the NZD was worth 4.0 Chinese Yuan Renimbi, but is now 4.7.

In some cases, prices in overseas markets have gone up, but gains have been wiped out by the exchange rate. Exchange rate movements have a significant flow on effect onto farm-gate prices. The Beef + Lamb NZ Economic Service has estimated that a 10% appreciation of the NZD against currencies in which meat is traded would result in about a 14% decline in the lamb price at farm-gate paid by processors (all other things being equal and that the exchange rate was at that level for the full season).

This is not only reducing the margins for meat exporters and their suppliers. The volatility in the exchange rates also means that it is not possible to provide farmers with an accurate picture on the actual price in overseas markets, as any change in the market price gets completely distorted by the frequent changes in the exchange rates. Unfortunately, the reasons for the current volatility are outside New Zealand’s control, and meat exporters have to take these changes in exchange rates on the chin.

For this reason, the coming season means meat exporters are likely to face considerable headwinds from a volatile exchange rate once again.


ends

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Reserve Bank: Official Cash Rate Unchanged At 1 Percent

The Monetary Policy Committee has decided to keep the Official Cash Rate (OCR) at 1.0 percent. Employment remains around its maximum sustainable level while inflation remains below the 2 percent target mid-point but within our target range... More>>

ALSO:

Food Prices: Avocados At Lowest Price In Almost Three Years

Avocados are at their cheapest average price since February 2017, with tomato, lettuce, and cucumber prices also falling, Stats NZ said today. More>>

Auckland Port Move: Cabinet Ministers Deliberate On Report

Cabinet ministers now have a copy of a report urging the government to move the Auckland port up north, but say no final decisions have been made. More>>

ALSO:

Toxicology Tests Planned: Dead Rats Washed Up On Beaches

As many as 600 rats washed up on Westport's North Beach over the weekend to the horror of locals. DOC said they may have been killed by a recent 1080 poison drop 140km away and washed down the Buller River after heavy rain battered the coast. More>>

ALSO: