July 5, 2016

 

Brexit vote affects pig meat prices

In the wake of the Brexit vote last June 23, the UK currency will be closely watched as its value vis a vis other currencies, particularly the euro, affects the prices of pig meat.

 

According to AHDB Pork, this is due to the fact that around 60% of pork consumed in the UK is imported, mostly from eurozone. A decline in the value of the pound will make products from the EU less competitive on the UK market. For example, at the exchange rate (pound to euro) prevailing on referendum day, the EU average reference price was equivalent to around 116p/kg. At the following week's rate, it equated to about 125p/kg.

 

"Free trade with the UK's largest market can be expected in the short term but a weaker currency may limit imports by making UK products more competitive", the pork division of the UK Agriculture & Horticulture Development Board said, adding currency shifts also affect exports from the UK, with the weaker pound making them more price-competitive on all export markets.

 

Aside from currency, AHDB Pork cited other market drivers and underlying factors (such as supply and demand) that will continue to move markets for both outputs and inputs. "It will also be important to track the impact of economic and political uncertainty on consumer behaviour and demand", it said. 

 

As of June 29, six days after the Brexit vote, £1 bought €1.21, down 10 cents since immediately before the referendum result. It was the lowest level in over two years. Against the US dollar, the pound hit its lowest level since 1985, at £1: $1.32.

 

AHDB Pork said that although the poll decision will have widespread effects on the meat industry in the long term, much will depend on the terms of the UK's exit. "Full details will be unclear until negotiations are concluded", it said.

 

 

'Game changer'

 

Meanwhile, at the 12th annual AHDB Meat Export Conference on June 29 in Warwickshire more than 100 beef, sheep meat and pig meat exporters and other key industry stakeholders started the dialogue on how to maximise opportunities in the new, post-referendum political landscape.

 

AHDB chief executive Jane King described the referendum as a "game-changer" for UK agriculture. She outlined the priorities for AHDB as being to help levy payers make sense of the issues facing them and to help industry and government secure the best trading environment for agricultural products.

 

"Although we cannot understate the importance of the EU single market for UK food businesses, AHDB already has a strong track record in developing markets outside the EU, having successfully worked with Defra (UK Department for Environment, Food & Rural Affairs) and UKTI (UK Trade & Investment) to secure market access to China for pig meat and India for seed potatoes", she said.

 

"This area of work will become ever more important once Brexit takes effect", King added.

 

AHDB head of livestock exports Jean-Pierre Garnier, acknowledged challenges presented by tariff and non-tariff barriers but pointed to a positive future for exports in both EU and non-EU markets.

 

"Given Friday's result, I anticipate there will be three years of rough seas and uncertainty for the UK meat trade," he said.

 

"However, our core strengths and unique selling points, such as our natural production systems and the high quality and great taste of our products, remain in place and, therefore, the long-term prospects are highly favourable, provided we manage a smooth transition to a new, constructive trading agreement with the EU", Garnier added.