Ster­ling slide is cost­ing our beef farm­ers €2m a week com­ment

DWYER

Irish Independent - Farming - - NEWS -

THE se­vere weak­en­ing of ster­ling in re­cent months is hugely neg­a­tive for the com­pet­i­tive­ness and vi­a­bil­ity of Ir­ish farm­ing.

The last time we saw this level of ster­ling weak­ness was in 2009. In the midst of do­mes­tic and in­ter­na­tional eco­nomic collapse, farm in­comes fell by 30pc, av­er­ag­ing €12,000 that year.

The eco­nomic fun­da­men­tals are com­pletely dif­fer­ent this time around — the ster­ling weak­ness is be­ing driven pri­mar­ily by po­lit­i­cal un­cer­tainty aris­ing from the neg­a­tive state of the Brexit ne­go­ti­a­tions.

Un­for­tu­nately, it has real eco­nomic con­se­quences for af­fected sec­tors. At farm level, our beef farm­ers and mush­room pro­duc­ers are be­ing hit hard­est.

Since April, the UK beef mar­ket is up 7pc. It’s our most im­por­tant mar­ket so this should be good news.

The prob­lem for us is that ster­ling is down 8pc in the same time pe­riod. At the time the UK elec­tion was called, ster­ling was at 85p:€1. It had been at, or close to that level, in pre­vi­ous months. To­day it’s 92p:€1.

Based on the ster­ling de­pre­ci­a­tion and the vol­ume of cat­tle ex­ports to the UK, we es­ti­mate that the ster­ling im­pact on the price of beef is about 15c/kg. This is a loss to beef farm­ers of close to €2m per week. Farm­ers can­not keep go­ing at cur­rent loss-mak­ing prices.

Any pos­si­bil­ity of profit from sum­mer graz­ing is gone. The price cuts have un­der­mined con­fi­dence at farm level, which is work­ing its way into the store and wean­ling trade.

With its high de­pen­dence on the UK mar­ket, the mush­room sec­tor has al­ready lost a sig­nif­i­cant num­ber of pro­duc­ers from the ini­tial cur­rency im­pact of the Brexit vote. Since then, all grow­ers would have taken mea­sures to mit­i­gate the im­pact of ex­change rate volatil­ity such as cur­rency hedg­ing. How­ever, at cur­rent ex­change rates it is sim­ply not eco­nom­i­cal to hedge.

It is a high vol­ume, low-mar­gin busi­ness. With the ma­jor­ity of con­tracts paid in ster­ling, the 8pc de­cline in ster­ling over the past six months wipes out what­ever mar­gins may have been in the sys­tem be­fore this.

Pro­duc­ers are now at break­ing point, with grow­ers giv­ing com­posters com­mit­ments on a weekly ba­sis only. The loss of fur­ther pro­duc­ers would in­evitably threaten the over­all fu­ture of an in­dus­try that ac­counts for over 3,000 ru­ral jobs and over €100m in ex­ports.

We need to see strong ac­tion from the Gov­ern­ment. It’s good to see the Fi­nance Min­is­ter Paschal Dono­hoe talk about Bud­get mea­sures for those ex­posed to Ster­ling. They have to be tar­geted at farm­ers.

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