Weak euro rate remains a challenge for farming exporters, says banking chief
PUBLISHED: 08:57 12 May 2015 | UPDATED: 08:57 12 May 2015
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A weakened euro is proving challenging for farmers, according to a leading East Anglian banking chief.
Simon Lubbock, director of commercial banking for Natwest in Norfolk, said analysis of the business climate for agriculture since the start of the year pinpointed how a weakened euro was making life particularly difficult for exporters, with sterling prices for all commodities coming under pressure.
“These exchange rates are also making imports cheaper – better news if it’s inputs that are being purchased, but not such good news for farmers with products to sell into markets where they are competing with imports,” said Mr Lubbock. “A weaker euro will also lead to lower single payments in the coming year.”
Meanwhile in East Anglia, where the arable sector was key, he said it had been a “difficult season for many”. “The potato market has been oversupplied following last year’s good growing conditions and prices are likely to remain weak until the end of the season,” he said. “There is also considerable concern about the future profitability of sugar beet as the sugar support mechanism unwinds and the market deals with considerable oversupply.
“The largest crop in the region, by area, is grain. Our current market has been influenced by good production last year, which coincided with a bumper world harvest, for the second year running. Last year, course grain (barley and maize) and wheat supplies outstripped demand by some 25 million tonnes. This followed a 50 million tonne surplus the previous year. As a result world grain stocks have increased by over 23pc in the last two years, to 420 million tonnes. These stocks are clearly overhanging the market and, as a result, futures prices are relatively weak. November prices for wheat, for example, are currently around £125/t.
“Despite this, it is important to remember that last year’s surplus was equivalent to only a little over 1pc of total production. Yields can vary by considerably more than that from one year to the next, so it would not take a huge swing to move this market from surplus to deficit. So, grain prices are expected to remain weak after harvest, but it is early in the production season and there is an upside price risk, if world production is adversely affect by poor weather conditions.”
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