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Currency swings provide good news for commodities

The pound has fallen sharply in recent weeks due to concerns in the run up to this summer’s EU referendum


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Significant falls in the strength of the pound have provided a much-needed boost to some commodity values amid a difficult time for UK farmers.

 

Uncertainty about a potential UK exit from the EU has hit the value of the pound this year and this has continued since details of what a reformed EU would look like have emerged.

 

In recent weeks, the pound fell to a seven-year low against the single currency, hitting about €1.26 on February 25.

 

Anand Dossa, economist at the NFU, suggested, in light of the current price situation across various farm commodities, good news was ’hard to come by’ and the recent exchange rate developments provided reassurance.

 

"It is not just supporting export [numbers] but prices as well," he said. "A couple of weeks ago [the pound-euro exchange rate] was the lowest for seven years.

 

"Lamb has been struggling but if you look at liveweight prices they have risen over the past seven weeks on the back of the weaker pound."

 

A large proportion of UK sheepmeat is exported to the continent and the exchange rate is regarded as a driving factor in sheepmeat prices.

 

NFU livestock board chairman Charles Sercombe underlined the views that uncertainty causing a weak pound was being driven by worries of a UK exit from the EU.

 

"[The weaker pound] is always a positive thing for sheepmeat. It strengthens our ability to export," he said. "It has been a negative for the economy but there has been strengthening of lamb prices off the back of it."

 

Andrew Hill, grain origination team leader at Frontier Agriculture, said the exchange rate changes had driven export activity from UK merchants.

 

Mr Dossa added there could be further weakening of the pound in short term due to continued uncertainty about a UK exit from the EU.

 

"There is further uncertainty in terms of trade and other relationships with the EU post-Brexit," he said.

 


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