When assessing international trade and Irish agrifood exports, the basic economic equation of supply and demand is the ultimate factor in dictating prices. However, the relative value of these prices to the exporter, and in turn what farmers receive, is very much set by the relative values of currency.

For Irish exporters and farmers, the two global currencies that matter most are the Sterling and the US dollar. The value of currency in countries that are major exporters is also important.

This is best explained by a series of examples.

Euro – Sterling

Prior to the UK voting to leave the EU in 2016, the value of Sterling against the Euro was particularly high. At one point in July 2015, the value of the Euro dropped to just 69p, but in the uncertainty leading up to the UK's departure, it was the value of the Sterling that weakened to 94p in May 2020. The rule of thumb is that for exporters, the weaker the currency they are selling in relative to the market they are serving, the more competitive they are. For example, a kilo of beef at €10 only cost a UK buyer £6.90/kg when Sterling was at its strongest point against the Euro, compared with £9.40/kg when it was at its weakest.

Euro – US Dollar

Currently, the Euro-Sterling rate is relatively stable, but the Euro has fallen in value compared with the US dollar to its lowest point in 20 years. That makes Irish dairy exports to the US particularly competitive, as it does for all Irish exports beyond the UK and EU, as this trade is conducted in US dollars. By the same token, it should mean that US meat exports to Asian markets would struggle, though there is little evidence of this in recent US export data. However, if a strong Dollar/weak Euro relationship continues for a prolonged period, we should see this reflected in values paid for Irish exports.

While Ireland may be gaining from a weak Euro compared with the dollar, we are also exposed to the relative value of currencies in other exporting countries selling into markets we are also present in. This has been most dramatically shown by the collapse in value of the Argentinian Peso relative to the Euro and to a lesser extent the Brazilian Real.

Argentina and Brazil

This time 10 years ago, the Euro was worth ARS 5.60, but by this time five years ago, its value had dropped to ARS 20. Today, it requires ARS 130 to purchase a Euro. It has been similar with Brazil, though to a less extreme level. A decade ago, a Euro was worth BRL 2.50, but by 2021, the Euro was worth BRL 6.96. It has strengthened this year and is currently trading at €1 = BRL 5.39.

The effect of this is that Argentinian and Brazilian beef is relatively much cheaper for EU buyers trading in Euro than it was previously. In turn, this creates further competition for Irish exporters selling in Euro to customers that are buying in Euro. The EU market has been protected from the worst effects of this currency collapse over the past decade with the explosion in demand from China, which has grown from a market for a few thousand tonnes of beef a decade ago to over two million today, with over 60% of this supplied by Brazil and Argentina.