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Are new year exchange rate moves finally going to lift farm exports?

Issues in the Chinese stock market and uncertainty surrounding sterling ahead of the upcoming referendum vote have weakened the pound against the euro in recent weeks


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Uncertainty over Britain’s potential exit from Europe is keeping a lid on the pound, providing an opportunity to increase farm exports.

 

But any potential boost from the looming El Nino weather phenomenon, particularly its ability to increase the value of crops or dairy products in the short-term due to trader fears of supply shortages, has been dismissed.

 

Exports into Europe could also be aided by a strengthening of the euro due to investors moving money from China amid another fall in the country’s stock market this week.

 

Trading was halted in Chinese shares on Monday after two significant indexes fell about 7 per cent. A newly-introduced mechanism means falls of 7 per cent from the previous day’s close of trade triggers a suspension in trading for the day.

 

Jeremy Cook, chief economist at international payments company World First, said: “The pound is a little bit weaker for a couple of reasons. We are in the year when people expect a referendum on Britain’s inclusion in the EU.

 

“The [China] news did not have much of an impact on sterling but it has had an effect on the euro. Wobbles and falls in the stock market in China mean people see Europe as a safe haven.”

 

Movements over the past month have meant the euro has strengthened from €1.425 against the pound, at the end of November, to €1.351 on January 4.

 

Mr Cook said a weaker pound would aid exports and suggested pressure may remain until the EU referendum, which is expected at some point later this year or early 2017.

 

Richard King, partner and head of business research at farm business consultant Andersons, said the changes could help agricultural exports but were not yet be big enough to have a sizeable impact.

 

Currency movements often impact the UK arable sector, but experts said grain prices were likely to remain depressed over the coming months, with El Nino expected to have little impact.


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