Currency swings cause export headaches - The Packer

Currency swings cause export headaches

05/30/2012 09:53:00 AM
Tom Karst

(UPDATED COVERAGE, May 31) The declining value of the euro and other currencies against the dollar will make exported U.S. fruits and vegetables more expensive.

The exchange rate declined from $1.32 U.S. dollars per euro on May 1 to about $1.23 USD per euro on May 30. That 7% drop in the purchasing power of European importers in just a month is primarily linked to worries about the economic future of Greece and Spain in the European Union, and the resulting instability of the euro.

The U.S. Dollar Index which measures the dollar against other currencies, has risen 14% in the past year, from 73 a year ago to 83 on May 30.

“Currency swings in general are not good because it creates uncertainty and that always causes hesitation in the market,” said Rebecca Lyons, export marketing manager for the Washington State Apple Commission, Wenatchee.

The weakening euro is not the primary hindrance to sluggish apple exports to Europe, Lyons said. Exporters have experienced rejected loads in Europe because of a regulatory issue with a wax coating applied to Washington fruit. Shipments to the European Union in the 2010-11 season dropped by 47% compared to the previous year, and for the 2011-12 season, exports to the region are off another 21%. Resolving those access issues will take time, Lyons said.

“I don’t expect shipments to the EU to rebound quickly.”

Still, U.S. agriculture remains in a good position relative to most currencies, said Matthew Shane, economist with the U.S. Department of Agriculture’s Economic Research Service. Trade with Europe is limited to begin with, as most growth has occurred in Asia and developing countries.

“Basically, (Europe) will muddle through,.. I don’t see collapsing financial markets in Europe; they won’t let that happen,” he said. While total U.S. agriculture exports will cool somewhat compared to last year’s record sales, Shane said they will remain at historically high levels. “We are very competitive now and I don’t expect that to change soon.”

It is impossible to know if the euro could decline to $1.20 (U.S.) or even lower, said Robert Thomas, export sales manager for IMG Citrus, Vero Beach, Fla.

Still, Thomas said he is optimistic that European demand for Sunshine State citrus won’t be badly hurt because Florida’s supply of grapefruit reserved for the European Union is limited.

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