The current Euro crisis and the uncertainty of Greece’s future is something we have all been aware of over the last month. But do we really understand the possible effect it may have against UK agriculture?
Subsidy payments are calculated in Euros. Farmers have been watching the euro-pound exchange rate over many years as it has a big impact on their income.
If Greece is forced to leave the Euro it is possible the currency could decline, making it weaker than the pound, causing subsidy payments to fall. These payments are a source of income on which many farmers rely, in some cases making a difference between a profit and a loss. So it is something which needs to be considered.
The exchange rate also has an effect on foreign trade. Importers will be able to get goods at cheaper prices and therefore become more competitive. The price of pig meat has been unstable recently. This is thought to be at least partially due to the fall in the value of the Euro, causing pig meat importers to become effectively another 2% cheaper. Crop prices are also highly sensitive to currency exchange moves.
If the Euro devalued by 5% what affect would this have on your profit margins or your cash flow? Doing a currency risk assessment would take a little time but may give you peace of mind or at least an understanding of the possible scenarios ahead.