Europe must weigh up its options on
the Euro
01 January 2008 09:54
Mike Knowles
Currency is very much a current affair for the fresh produce trade in Europe. Strip away all the marketing initiatives and public relations drives, the traceability and agricultural certification schemes, the research and development spending and the fancy packaging, and what you have left is a simple transaction by which a supplier is looking to earn a certain return. Spending a bit extra on such things might of course guarantee a better return, but the thing that makes or breaks the whole deal is what the various players in the chain ultimately earn.
When several of the European Union’s member states adopted the euro, what very few people accounted for was the fact that exchange rates would still have a massive impact on trade in Europe, particular where currencies like the dollar and the euro ended up being under- or overvalued. Europe is now playing a waiting game. Will we see an influx of fruit into the market this season as overseas suppliers divert their produce from markets paying in dollars? Only time will tell.
In the past, exchange rates used to have a big influence on the nature of the European fresh produce trade. The Italian lira, for example, was so weak that, to a certain extent, it helped Italian exporters maintain their competitive position in the market. Of course, its products had a reputation for quality too, but money made their world go round just that bit more smoothly. That competitive advantage is now gone. Its biggest competitor, Spain, now sells its wares on a level playing field, and has made up a lot of ground as a result.
As we head into a particularly uncertain 2008, suppliers must resist cashing in on the short-term benefits of currency fluctuations, because what will actually make or break companies in the long run is service to the customer and the strength of their long-term partnerships.
What’s more, everything could look completely different in a year’s time. Economics has a marvellous way of straightening itself out, albeit through painful correction from time to time. Consult two economists and you’ll get three opinions on what will happen in the future.
Of course, suppliers have to consider their returns, but it would be wrong, for the sake of a quck buck, to jeopardise all the hard work that’s gone into the creation of stable markets, along with proper development of supply chain relationships, customer loyalty and product quality, over the past few years.
Europe’s traders need to weigh up their options and make the right choice.
Currency is very much a current affair for the fresh produce trade in Europe. Strip away all the marketing initiatives and public relations drives, the traceability and agricultural certification schemes, the research and development spending and the fancy packaging, and what you have left is a simple transaction by which a supplier is looking to earn a certain return. Spending a bit extra on such things might of course guarantee a better return, but the thing that makes or breaks the whole deal is what the various players in the chain ultimately earn.
When several of the European Union’s member states adopted the euro, what very few people accounted for was the fact that exchange rates would still have a massive impact on trade in Europe, particular where currencies like the dollar and the euro ended up being under- or overvalued. Europe is now playing a waiting game. Will we see an influx of fruit into the market this season as overseas suppliers divert their produce from markets paying in dollars? Only time will tell.
In the past, exchange rates used to have a big influence on the nature of the European fresh produce trade. The Italian lira, for example, was so weak that, to a certain extent, it helped Italian exporters maintain their competitive position in the market. Of course, its products had a reputation for quality too, but money made their world go round just that bit more smoothly. That competitive advantage is now gone. Its biggest competitor, Spain, now sells its wares on a level playing field, and has made up a lot of ground as a result.
As we head into a particularly uncertain 2008, suppliers must resist cashing in on the short-term benefits of currency fluctuations, because what will actually make or break companies in the long run is service to the customer and the strength of their long-term partnerships.
What’s more, everything could look completely different in a year’s time. Economics has a marvellous way of straightening itself out, albeit through painful correction from time to time. Consult two economists and you’ll get three opinions on what will happen in the future.
Of course, suppliers have to consider their returns, but it would be wrong, for the sake of a quck buck, to jeopardise all the hard work that’s gone into the creation of stable markets, along with proper development of supply chain relationships, customer loyalty and product quality, over the past few years.
Europe’s traders need to weigh up their options and make the right choice.
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