Last month, the British pound fell six per cent in value against the euro. Today, the euro is worth 0.9027 pound. According to commercial manager Marcel Paul of QPI and Johan Vrijland of JNV Produce, the consequences for the trade in fresh produce are limited in the short term, but the drop in currency values will cause victims in the long term.
“You cannot tell in day trading, because everyone has to deal with the same exchange rate, but the low pound is causing much unrest for the future. I wonder how many victims, especially in the UK, there will be, and they will not be the smallest players. If you are not insured, things are going very fast all of a sudden,” Marcel says.
“When the pound went in the other direction, customers wanted maximum result from the savings. Now it is headed in the other direction, and you notice some companies are playing ostrich and are refusing to listen to what the consequences might be. Other companies thought very far ahead and took their position and have, dependent on the agreements made, no negative results. But a number of companies will definitely have to face the consequences, dependent on the agreements made. For example, if you have not contractually fixed the pound, it is going to be very painful.”
“Many companies are now switching to trading in euros, but that does not mean it is cheaper, because you use the same calculating method in the end. The consequence is that the drop in currency values makes imports so much more expensive, so British cultivation becomes more interesting. That expansion will not be realised in a year, but can offer opportunities to the British in the long term, at the cost of Dutch horticulture,” Marcel expects. “That will definitely not be good in the long term, but no one knows how the market will develop. The market could just as easily go into the opposite direction in two years.”
British economy basically strong enough
Johan Vrijland of JNV Produce has the same opinion. “I really think it is a conceivable scenario that the pound will recover, you cannot rule that out. The British economy is basically strong enough. The current drop in currency values is purely based on sentiment and not on reality.”
Johan does not notice it much in day trading. “There is some unrest, but I wonder if everyone realises what is actually happening. Under pressure from the discounters, prices should actually be dropping, and that is in contrast to the development now happening. Given the currency, prices should be increasing significantly. Eventually the market will decide whether that price increase can be made or not.”
“It is not just about the value of the pound, but also about the cost price for the farmer. When you start calculating that, not much remains at the source,” Johan continues. That this offers opportunities for British cultivation, is only partially true according to him. “Those cultivators also have to deal with the import of plant material, packaging and other accessories that have to come from EU countries. That also increases their cost price. Cost of labour is also increasing sharply. The Polish labourers are paid in pounds, so it will not be profitable for them anymore, and the British often do not want to do that work.”