Sterling fell to its lowest level against the Euro since 10 November and hit a 31-year low against the US dollar on Monday of this week.
Gains made in the value of Sterling over the past couple of months were reversed following renewed speculation that the UK could leave the EU single market, or so-called ‘hard Brexit’.
According to the Agricultural and Horticultural and Development Board (AHDB), a weaker currency would serve to support wholesale market prices, as Sterling-based products become more competitive. However, they also have the impact of putting upward pressure on input costs such as fuel, fertiliser and some feeds.
Evidence of input price increases is becoming apparent. The Irish Farmers Association (IFA) is reporting that a number of leading European nitrogen fertiliser manufacturers are attempting to push through further price increases. This follows a series of hikes since the beginning of the new fertiliser year last July.
IFA cites the lack of competition in Europe’s highly protected fertiliser market which has enabled leading manufacturers to manipulate prices particularly for CAN and ammonium nitrate (AN) regardless of the price movement of the main raw materials.
The organisation also points out that EU wholesale gas prices, which account for 70% to 80% of the cost of production of AN and CAN, have fallen by 61% since 2013, rising marginally over the last three months. Despite this, leading European N manufacturers have pushed through a series of increases for CAN and AN, the main N fertiliser products used by EU farmers.
Further weakening of Sterling will depend on how markets react to the messages sent by Prime Minister Theresa May in parliament yesterday (Tuesday), as well as the outcome of the Supreme Court ruling on parliament’s place in the Brexit process.
Meanwhile, Food and Drink Industry Ireland (FDII) is not ruling out the possibility that the Euro could achieve parity with the £pound over the coming months. This is according to the organisation’s director Paul Kelly.
“Uncertainty over Brexit is fuelling the trends we are now seeing on the world’s currency markets. There is some indication that Donald Trump’s commitment to strengthen the US economy, as soon as he takes office, might act to strengthen the £pound. But we have seen the Euro further strengthen against Sterling this week: it is currently standing at 88p.
“Figures published recently by Bord Bia indicate that the Irish food exports to the UK will fall by approximately €700m, if the Euro reaches a value of 90p.”