Chancellor Quasi Quarteng announced a “mini-budget” on 23 September that sent sterling to an all-time low against the dollar, falling to 1.079 against the euro. This will have a huge impact on the import of fresh fruits and vegetables into the UK as contracts are already agreed with retailers and buyers.
Freight rates, which have skyrocketed since the pandemic, also agree in dollars and will rise further in markets where the dollar is not used. Interest rates are also likely to rise, while energy costs are also skyrocketing.
Nigel Jenney, CEO of the Fruit and Vegetable Consortium explained: “This is a fundamental challenge for the sector, and it will certainly have an impact on imports and foreign exchange purchases. In addition, households and businesses may face further increases in fuel costs, including aviation, which will increase costs. And life will be made more difficult.”
“The situation is beyond the control of the fruit and vegetable sector and is at the government level. Even when all this calms down, imports will continue to be more expensive. The question is: to what extent?”
“This means that exports will become more attractive, but the UK doesn’t export as much at this time of year. The fruit and vegetable sector is resilient, but things are getting tougher and consumers are controlling their spending.” … This is worrying. We try to be optimistic, but it’s another challenge above everything else.”
Mark Wright, Senior Commercial Director, Davis Worldwide continued: “This will have a huge impact on businesses. It will affect not only trades taking place today, but also trades that take place weeks, months and even a year from now. Retailers want quotes ahead of the season. and people are forced to speculate on the value of currencies.
Deals that were agreed months ago have to continue to be executed at the agreed price, which means additional costs will have to be borne, and the consumer is yet to feel the impact of it all.
“We had forecast with the worst-case scenario in mind, but the situation is worse than we thought, and it keeps getting worse. Some companies will lose a lot of money, and if companies are able to supply their products If not, the shelves will be empty”.
“At Davis we do not deal directly with retailers, so we focus on helping other businesses with supplies when they need it. We have helped suppliers to get the lowest cost price for their products. But it’s not sustainable for anyone; it’s a no-win situation. I don’t see how we can overcome this. I’ve never seen a situation so bad. We’ve got Brexit, COVID, Ukraine has had to deal with high fuel costs, lack of transportation, war on the port and, of course, the current energy crisis”.
“A large UK company has already gone bankrupt this year, and I would even go so far as to say that we are likely to see more cases.”
Rob Cullum of Pacific Produce added: “If your competitor is supplying from a country that does not use dollars, but you are supplying from a country that does, you will have to raise your prices and risk losing competitiveness.”
“Let’s look at the case of a product like mango. From November to April they are supplied from Brazil and Peru, which mainly use dollars. Freight costs are already stifling, and they are in dollars The only option these suppliers would have would be to raise prices, or the farm would not survive, but a price increase could kill consumption.
“No one can get rid of the cost of freight, which depends on the dollar value. This will reduce the demand for luxury goods and increase the demand for basic products. Producers have the ability to survive difficult years. or difficulties in some markets that are pulling averages down, but high freight prices are hurting all markets while we are still trying to recover from the pandemic, and now, all currencies fall against the dollar. However, especially the euro and sterling, it seems as though the problem will affect many products.
“In the UK, we have had fruits and vegetables at the cheapest prices for years due to retailers keeping prices low, but this is not sustainable in the current environment. Producers are trying to avoid the risk of over-supplying markets in Europe. And even more so, for the British market”.
“We don’t know how long this will last. If we did, we could try to reduce it, but no one knows when it’s going to end. That being said, the industry is very resilient, and it all kinds of things.” been through the experiences of the past few years.”