Friday, 22 July 2016 11:01

Foreign exchange headwinds for meat exporters

Written by 
Meat Industry Association chief executive Tim Ritchie. Meat Industry Association chief executive Tim Ritchie.

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.

This will significantly affect prices our exporters receive in the European market, he says.

"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."

More like this

Red meat's China push

The red meat sector is launching a new campaign to lure Chinese consumers to New Zealand grass-fed beef and lamb.

Primary sector chuffed

Meat Industry Association chair Nathan Guy says his organisation welcomes the new trade deal with the United Arab Emirates (UAE), noting the UAE is the second largest market for the red meat sector in the Gulf Cooperation Council after Saudi Arabia.

Featured

Better animal genetic gain system

A governance group has been formed, following extensive sector consultation, to implement the recommendations from the Industry Working Group's (IWG) final report and is said to be forming a 'road map' for improving New Zealand's animal genetic gain system.

SIDE 2025's new schedule, venue

Annual farmer gathering, the South Island Dairy Event (SIDE), is set to make history as it heads to Timaru for the first time.

Taranaki piggery goes solar

Installing 400 solar panels at their Taranaki piggery and cropping operation will have significant environmental, financial and animal welfare benefits for the Stanley family.

Editorial: Keep FTAs coming

OPINION: The dairy industry will  be a major beneficiary of a new free trade deal between NZ and the Gulf Co-operation Council (GCC).

National

Food charity to hold online auction

Meat the Need, New Zealand’s dedicated charity delivering locally sourced protein meals to food-insecure communities, is launching an online National…

Machinery & Products

An ideal solution for larger farms

Designed specifically for large farms that want to drill with maximum flexibility, efficiency and power, the new Lemken Solitair ST…

Landpower increases its offering

Landpower and the Claas Harvest Centre network will launch the Claas Scorpion and Torion material handling solutions to the market…

» Latest Print Issues Online

The Hound

Leaky waka

OPINION: Was the ASB Economic Weekly throwing shade on Reserve Bank governor Adrian Orr when reporting on his speech in…

Know-it-alls

OPINION: A reader recently had a shot at the various armchair critics that she judged to be more than a…

» Connect with Rural News

» eNewsletter

Subscribe to our weekly newsletter