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Pound slump creates mixed issues for farm businesses

UK producers are in line to benefit from short-term opportunities created by the crash in sterling, analysts told the farm business community.


Alex   Black

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Alex   Black
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Pound slump creates mixed issues for farm businesses #brexit

Both exporters and those selling to the domestic market may be able to benefit, however the value of the pound, which went into freefall following last week’s Brexit vote, could bring big problems for importers.


Markets remained volatile throughout the week, despite reassurances from the Bank of England governor Mark Carney and the Chancellor George Osborne.


Sterling plunged to a 31-year low against the dollar.


Peter Hardwick, head of exports at AHDB, said the immediate outlook was positive, as imports would be less competitive, bringing opportunities on the home market.


"The pound has eased which is pretty positive for export competitiveness," he said, highlighting opportunities around red meat exports in particular.


"Already we have seen an improvement in the pig price."


AHDB said with up to 40 per cent of UK sheepmeat production destined for export markets, the exchange rate and lamb price were closely linked.


On average, for every 1p decrease in the value of the euro, the liveweight sheep price fell between 3p and 4p, according to the levy board’s figures.

 

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The UK price was also influenced by imports, especially from New Zealand. The pound falling against the New Zealand dollar could make imports more expensive to the UK market, bringing opportunities for UK producers, analysts confirmed.


In the machinery market, the fall in sterling will mean importers pay more for parts, but some British manufacturers could benefit with the import market allowing them to be more competitive.


European customers could also benefit, as British exports would be priced lower.


Chris Evans, from the Agricultural Engineers Association (AEA), said the big issue facing farm businesses was uncertainty.


He said: "Uncertainty is always unsettling, particularly around investments."


The weak pound could provide opportunities for sugar beet producers, as it may make it more difficult for sugar cane to be imported.


But William Martin, NFU sugar board chairman, said these opportunities were limited.


He said: "You cannot just grow beet then have sugar. We are constrained by processing plants’ availability."


Despite the uncertainty, Tate and Lyle Sugars’ cane sugar refinery declared its support for leaving the EU before the referendum, with concerns the EU discriminated in favour of sugar beet producers.


Speaking about the value of the pound, Charlie Mack, arable farmer and accountant, said he believed the pound could recover, similar to the recovery seen by the Swiss franc when the Swiss National Bank announced it would no longer hold the Swiss franc at a fixed exchange rate with the euro.


The franc fell dramatically to 0.85 against the euro before increasing sharply as people rushed to invest in it.


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