The weakening of the euro is providing a welcome competitiveness boost for agri-food products, but the underlying uncertainties in the eurozone and overall weakness in the emerging economies, such as China, remain a concern for demand and underlying prices for the year ahead.

As a small open economy, Irish farmers are impacted significantly by the growth prospects of its main trading partners. The UK remains the most important destination for Irish food and drink, accounting for 40% of our €10.5bn total exports last year. While the US currently only accounts for 7% of exports, it is growing by 18%.

Taking today’s euro price for Irish beef, dairy, cheese and butter, and then converting it at today’s dollar/euro exchange rate, and that of one year ago, we can see that Irish produce is more competitive. This means that both international and UK buyers are getting better value – more volume for the same price.

Looking at beef, at a current market price of €4.25/kg (heifers), this translates to the UK consumer paying the equivalent of £3.17 today. This time last year, the consumer would have paid £3.53. Irish beef is therefore €0.47c/kg more competitive in the UK, where the consumer is now able to get 10% more beef for the same spend. It is a similar situation with Irish lamb in the UK, where the consumer can now buy 11 lamb chops for the price of 10 compared to this time last year.

For dairy products such as cheese and butter, it is not as simple. Exchange changes cannot be taken in isolation. As the UK is an open economy, the local sterling price for cheese and butter almost immediately falls as imports flow in. Therefore, any gain in a weak euro is lost in the actual product price and the gain is neutralised.

Dollar exchange

Looking at exports to the US, there is a net gain as market prices generally hold up locally. A kilo of beef is now 93c more competitive in the US than one year ago. Butter is 62c more competitive and cheese is 58c more competitive. Simply put, the US consumer can buy about 20% more Irish produce with the same money. Irish food is better value in that market.

The downside for Ireland is that the price of commodity imports, which are normally traded in dollars, gets more expensive. The obvious ones are fertilizer and feed for farmers. For example, on currency changes alone over the past year, independent of international prices, maize has increased by €36/t, soya meal has increased by €70/t, while urea has increased €90/t.

A euro that gives better access to the world where the dollar reigns is clearly an advantage. For anyone who exports products or services, this allows fatter margins, or bigger volumes. This is good for Irish food-exporting companies and the benefits should outweigh the negative input price increases overall for Irish farmers.