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UK farmers urged to prepare for more currency volatility ahead

Farmers need to be prepared for more currency volatility while the UK prepares to leave the EU if they want to carry on ‘business as usual’.



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UK farmers urged to prepare for more currency volatility ahead

Lee McDarby, managing director at Moneycorp foreign exchange (FX) specialist, said exchange rate fluctuations posed a particular risk to agricultural businesses, especially with the value of EU subsidies.

 

But Mr McDarby said many farmers were unaware they could use FX products to help them ‘hedge’ against fluctuation.

 

Lock-in

 

“Foreign exchange products such as forward-contracts allow businesses to lock in an exchange rate for a period ranging from three months to two years – helping to manage any potential risks when dealing with volatile currencies,” he said.

 

He added businesses needed to consider the strength of the pound when making decisions.

 

“While a weak pound can make it cheaper to sell goods abroad, weak sterling can also make the cost of purchasing overseas products, such as when purchasing large machinery, more expensive.

 

“Keep in mind that global currencies are affected by many factors, such as supply and demand, economic growth, interest rates and, as we have seen this year – politics,” he said.

 

“You can lock-in a spot rate or currency hedge at a preferred rate to ensure you get the best value for your money at the right time.”

 

Up to date

 

He advised farmers to keep up to date with regulation and trade negotiations as recent Office for National Statistics figures showed the industry was most affected by changes in regulatory trade permissions following the Brexit vote.

 

Mr McDarby added: “Consider early how the outcomes and changes in trade regulation may impact trade dealings, to stay ahead of the curve and make the necessary preparations in advance.”

 

He said farmers should seek expert opinions to help develop a strategy so they can carry on ‘business as usual’ while getting the most out of their EU subsidies.


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