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Industry reaction to Sterling crash

Deals that were agreed upon months ago still have to be honored at the agreed price

The UK Chancellor Kwasi Kwarteng announced a 'mini budget' on the 23rd of September, which has resulted in the Pound dropping to an all-time low against the US Dollar and hit 1.079 against the Euro on Monday. This will have a massive impact on the imports of fresh produce into the UK as contracts with retailers and buyers are agreed well in advance. Freight rates, which have skyrocketed since the pandemic, are also agreed in dollars and will increase further in the non-dollar markets. Interest rates are also likely to increase, while energy costs are also soaring.

Nigel Jenney, CEO – Fresh Produce Consortium
"It is a fundamental challenge for the industry, and it will certainly have an impact on importing and buying foreign currency and, over and above this, households and businesses may face a further increase in fuel costs, including aviation fuel, which will lead to increased costs and will make life harder."

"The situation is beyond the control of the fresh produce industry and is at a Government level. Even when this settles down, importing will remain more expensive. The question is, by how much?"

"It does mean that exports will become more attractive, but the UK does not export much at this time of the year. The fresh produce industry is resilient, but it gets ever more challenging, and consumers are watching what they spend. It is concerning. We try to remain positive, but it is just one more challenge on top of everything else."

Mark Wright, Senior Commercial Manager, Davis Worldwide
"This will have a massive impact on businesses. It will not only affect deals done today but also deals done for weeks, months, and into next year. Retailers want quotes before the seasons starts, and people have to speculate on what currencies will be worth." 

Deals that were agreed upon months ago still have to be honored at the agreed price, which means costs have to be absorbed, and the consumer isn't yet feeling the full pinch of this. 

"We have quoted on the worst-case scenario, but the situation is even worse than we thought, and it's still getting worse. Some companies will lose a lot of money, but if companies can't supply produce, then the shelves will be empty." 

"At Davis we don't deal with retailers directly, so we focus on aiding other companies with supply when it's needed. We have helped suppliers to at least achieve cost prices for their goods, but this is not sustainable for anyone; it is a no-win situation. I can't see how we can get out of it. I have never seen a situation as bad as this. We have had to deal with Brexit, Covid, high fuel costs, haulage shortages, the war in the Ukraine, port strikes, and, let's not forget, the current energy crisis, which will see 3rd party sites increasing their costs soon to all who use their sites."  

"One big UK company has already folded this year, and I would speculate that there will likely be more casualties to come." 

Rob Cullum, Pacific Produce
"If your competitor is supplying from a non-dollar country, but you are supplying from a dollar country, then you have to go up and could be uncompetitive."

"Looking at a product like mangoes: from November until April, they will be supplied from Brazil and Peru, which are predominantly using the dollar. The freight rates are already crippling and are in dollars, the only choice these suppliers have will be to increase prices, or the farms won't survive, but a hike in price could kill consumption." 

"No one can eliminate the cost of freight which is dollar-based. This will lead to a decline in demand for luxury items and an increase in demand for the basics. Growers can survive tough years or when some markets are difficult and drag down the averages, but unnecessary freight hikes are damaging all markets as we try to bounce back from the pandemic and now with all currencies dropping against dollar strength, but particularly the Euro and GBP, this is really looking like a problem for many products."

"In the UK, we have had the cheapest fruit and vegetable prices for years due to retailers keeping prices down, but this is not sustainable in the current climate. Growers are trying to de-risk from supplying the European markets and more so from the UK market." 

"We have no idea how long this will go on. If we knew, we could try to mitigate, but no one knows when it will end. That said the industry is pretty resilient, and it has been through a lot in recent years." 


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