Falling British pound to impact Australian agriculture

The British pound has fallen to its lowest level against the Australian dollar this decade. Here’s what it means for ag.

A dramatic collapse in the pound sterling is expected to favour British farmers, whose product has now become far cheaper to export into Australia.

One of the sticking points of the recent UK-Australia free trade deal was the Australian dollar’s relative weakness to the British pound. However, there was a sudden collapse in the value of sterling last week, following sweeping new monetary changes implemented by new British Prime Minister Liz Truss.

Early last week one Australian dollar was buying more than 61 pence but that figure dropped overnight to 57 pence — the lowest exchange rate since the 2016 Brexit vote to leave the European Union.

British Prime Minister Liz Truss.

eastAUSdairy vice chairman Graham Forbes said while there had been a noticeable increase in British and European cheese in Australian supermarket refrigerators in recent years, record famgare prices meant local dairy farmers were unlikely to be troubled by any influx of cheap produce.

“I think people who are buying British cheese or French camembert or whatever were buying it regardless of the price,” Mr Forbes said.

“Obviously, with the pound falling, it makes British cheese cheaper to buy here in Australia. “The UK doesn’t export butter here, unlike the Danish (with Lurpak a top foreign brand).”

According to the latest commerce statistics, the UK is Australia’s fifth-largest trading partner with more than $40 billion in two-way trade last financial year.

Wine is Australia’s main agricultural export to the UK while British farmers return the favour with alcoholic spirits — with Scottish croppers the main beneficiaries.

The Bank of England is set to raise interest rates in the UK on the back of the currency slump, with inflation hitting British households harder than their Australian equivalents.

United Dairyfarmers of Victoria president Mark Billing said the ripple effect of a sinking sterling may indirectly hurt Australian agriculture.

“We have historically high levels of indebtedness in Australian ag at the moment,” he said.

“If there’s interest rate rises in the UK, EU, USA — Australia will follow and that’s looking likely at the next Reserve Bank meeting (today).”

Australian Council of Wool Exporters and Processors executive director Peter Morgan said the British-Australian wool trade had been rather weak in recent years. He said less prominent destinations such as South Korea and the Czech Republic now took more Australian wool per annum than the UK.

Originally published as Falling British pound to impact Australian agriculture