The strength of the pound over the euro has effectively made pig meat imports into the UK 5p a kg cheaper since the beginning of 2014 than if currency rates had remained static according to BPEX.
By the same token, the current 22p/kg gap between the EU and UK average pig reference prices would have been just over 10p/kg if today’s pound/euro exchange rate was currently at July 2013 levels.
While acknowledging that exchange rates move upwards in a positive response to the strength of a country’s economy and its relative outlook compared with other nations, BPEX said that the way pound/euro rates have shifted in the last year had led to imported products being cheaper on the UK market. At the same time, of course, UK exports had become more expensive to overseas buyers.
“For the UK, the economic recovery appears to be well-established now, following consecutive quarters of economic growth, rising employment levels and signs that productivity is starting to pick up,” said BPEX. “In comparison, while the Eurozone is showing signs of having finally emerged from recession, growth continues to be weighed down by high unemployment levels, high levels of debt, low rates of investment and low inflation. The result is that, while the UK is projected to hit 2.9% annual GDP growth for 2014, the Euro area is expected to reach just 1.2%, according to the latest IMF World Economic Outlook.”
In fact, continued BPEX, the pound has risen by 9% against the euro since July 2013. As a result, the EU average pig reference price, which stood at 164.65 per 100kg in the latest week, was worth just under 132p/kg when viewed from a UK perspective. Had the pound remained at its low point against the euro, however, the same UK-based calculation would produce a value of 143p/kg.
“Even just since the start of 2014,” added BPEX, “currency movements have knocked over 5p off the import price, although a recent modest strengthening of the euro has reduced this by a penny.”