Rabobank flags rising global dairy prices, warns of downside risks ahead
While global dairy commodity prices continue to climb in most key exporting countries, the second half of the year is expected to bring increased downside risks.
He was speaking last week to Rural News just as another Brexit deal vote was defeated again in the UK Parliament.
“Right now I think there could possibly be a delay in the process... scheduled to run until the end of this month when the UK would exit the EU.
“I think now the likelihood of a delay has just gone up and the likelihood of getting an organised soft Brexit might have just gone down a little bit.”
But from New Zealand’s point of view he sees no downside in our sheepmeat trade with the UK.
“The potential downside is food price inflation and whether you see the edge come off UK demand under a hard Brexit situation. If they are able somehow to engineer a delay or a soft Brexit outcome then we won’t see any change.”
Even if there were a hard Brexit then NZ would still be well placed, he says. Its relationships with UK retailers and food service have been well developed and nurtured by meat processors and exporters from NZ.
“Also, in sheepmeat it’s not like there are lots of other suppliers. There’s not a lot of exportable sheepmeat around the world, particularly the cuts British consumers want. You will see a little bit of change there but not a lot.
“Beef might be different: if there is a hard Brexit outcome you probably will see increased access to the UK market for South Americans and for Australia.
“The UK market will pay more for certain cuts than South East Asia, for example, so it will be an attractive market to export to.
“But I don’t think there will be change during 2019 because even though there is turmoil in the market I think people will try to keep all those supply relationships intact. There will be too much to worry about to be starting to think about additional opportunities. We will just have to wait and see exactly where this ends up.”
Meanwhile, Dave Harrison, Beef + Lamb NZ general manager policy and advocacy, says he has been in London to plan for a no-deal Brexit and ensure we are as prepared as we can be for the worst outcome.
“The assurances we are getting from both the European Union and the UK are that New Zealand food products shouldn’t be affected too greatly even in the event of a hard Brexit,” he told Rural News.
“The noises being made are they will be pragmatic and accept current certificates and the fact that we are already going into ports dealing with third-country imports should mean it will almost be business as usual,” Harrison says.
“The risk is that resources could be diverted from those ports in the UK to roll-on roll-off ferries between the UK and the Continent. If they had to do divert resources from the traditional ports to there, that would be problematic.”
Harrison admits there is still a huge amount of uncertainty.
“As much as we are getting these reassurances it would be really nice if they could have an orderly transition.”
