The fall in the value of Sterling against the euro is already causing problems for Irish exporters, according to Teagasc’s Trevor Donnellan.
Speaking at the Teagasc Annual Review and Outlook for 2017 this morning, the Teagasc Economist said Brexit has yet to happen, but the falling value of the Sterling is already having a big impact.
Analysis produced by Teagasc economists indicates that margins fell on most farms in Ireland this year.
Supplies of milk, beef and grain internationally have been running ahead of demand and this has led to a fall in farm prices.
Donnellan said that even though milk prices fell by an estimated 11%, Irish milk production is estimated to have increased by 5% in 2016.
While dairy production costs fell, Irish dairy farm margins were lower in 2016 due to the drop in the value of milk sales.
“However, a late season rally in milk prices, along with the additional volume of milk produced this year, has limited the drop in dairy farm income in 2016.
“Dairy sector competitiveness indicators produced by Teagasc also show that Irish dairy farms continued to be one of the lowest cost producers internationally in 2016, despite the fall in margins,” he said.
On Brexit and the issue of a weakening Sterling, Donnellan said that there has been significant movement on the currency markets since the result of the referendum became known in June.
“For every 1c change in the value of the euro against the Sterling, we see a change of €45m in the value of Irish exports.
“This is without any change in export volumes,” he said.
The Teagasc Economist also said that there is a clear message coming from Irish agri-food exporters, with many suggesting that many can cope with an exchange rate of 85p Sterling, but difficulties really occur when it hits the 90p mark.
However, despite the difficulties facing the euro/Sterling exchange rate, he said that the euro/US dollar exchange rate is helping the cometitiveness of EU trade with the US.
“Despite of the Brexit vote, it looks loke the EU economy will outperform the US economy, bt only slightly,” he said.