How did currency affect prices in 2019?

Thursday, 16 January 2020

By Kat Jack

The sterling to Euro exchange rate had two significant swings in 2019, roughly in line with the change in leadership and landscape around Brexit. Between April-August the exchange rate trended down, switching to an upwards trend through August-September. With the pound ranging between €1.077 and €1.199 across the year, this has given extra swing to the relative price of European and British dairy commodities.

One example of this swing can be seen in butter wholesale prices. If the exchange rate had stayed steady at the 2019 average (€1.140), the trend in the EU butter price between May and August would have been in line with trends in UK butter prices. Instead, the falling exchange rate lessened the initial decline over the summer, keeping EU prices high relative to domestic prices. By August this meant the gap between the EU and UK wholesale butter price was nearly £280; if converted at the annual average the gap would have been only £140.

This gap has since closed, partly from a rise in UK butter prices and partly from sterling regaining value. The average butter price per tonne was €3,690 in both September and December, but in sterling terms the price was £3,287 in September and just £3,126 in December. Although a strong pound increases our buying power overseas, it has also reduces the UK price for imported goods.

Image of staff member Katherine Jack

Katherine Jack

Senior Analyst - Dairy

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