Rabobank has warned that the weakened value of sterling against the Euro means consumers in the UK should expect “upward pressure” on meat prices, with bacon tipped to take a hit.
The UK is a net importer of meat – its value of meat imports is greater than the export value. Over two million tonnes were imported last year and 80% came from the EU. Trade itself is not expected to be disrupted by the Brexit vote in the short-term, but analysts fear changes in the value of sterling will have an impact.
Currently around half of the bacon in the UK is imported from pork producers in Denmark, Germany and the Netherlands.
Justin Sherrard, global strategist of animal protein at Rabobank, said: “It’s not possible to say by how much bacon prices will rise – but euro-denominated exporters will expect to be paid as before by sterling-denominated buyers.
“Retailers negotiate with suppliers over price, and usually have term contracts where prices are fixed for a period of several months. The retailers and suppliers probably hedge their foreign exchange exposure, and this is also likely to be sorted for a period of months. These factors suggest no change in prices until contract prices are re-negotiated and currency swaps mature.”
Danish Crown - which exports a large volume of bacon to the UK - described the Brexit result as “completely unimaginable” but said it would be able to navigate the currency challenges.
“[In the] short term we will surpass most of the foreign exchange unrest as a large share of our sales to Great Britain will be by contract, which will be set for some months to come,” said Soren Tinggaard, associate vice president at Danish Crown Exports.
He added: “We strongly believe that the British people will have an appetite for Danish bacon and we therefore take the liberty of being relatively optimistic.”
Sherrard has also predicted the fall in the value of sterling could lead to a rise in mergers and acquisitions in the meat sector. UK meat firms may now look more attractive to non-UK buyers.
“The only thing we know for certain is that the coming months will be a period of change for the meat sector in the UK. And this type of change is bound to bring new areas of opportunity and risk that haven’t been seriously contemplated before,” he said.