Figures from Eurostat show that European Union (EU) imports and exports were both higher in value terms last year, even though import volumes were slightly down. While fruit imports fell 1.56 per cent and vegetable imports were down 4.38 per cent, the value of those imports rose 2.72 per cent and 10.1 per cent respectively, implying gross margin increases of 4.3 per cent and 15.1 per cent. For fruit exports it was a similar story: they grew 13.1 per cent, more than the 8.92 per cent increase in vegetable exports. Vegetable importers won by a landslide, with a 25.6 per cent rise for gross margins, while fruit exporters achieved a 17 per cent rise. Oddly enough, there was not such a wide gap between the groups’ proportional performances. Vegetable importers enjoyed a 10.3 per cent advantage over the fruit importers and among exporters it was 7.4 per cent.
As usual, bananas led the way on imports at more than 4.5m tonnes. Major distributor Fyffes confirmed the going had been tough, reporting “difficult market conditions” in the first half. Importantly, the company also said it had been “significantly impacted by adverse exchange rates as a result of the relative strength of the US dollar against the euro and sterling”. In 2009, the euro averaged US$1.40, whereas in 2010 that was down to US$1.32. The reason it took Fyffes until the second half of the year to begin to feel comfortable was the shape of the exchange-rate curve. In the first six months, the dollar was broadly strengthening and bananas became more expensive; in the second half of 2010, it moved mainly in the other direction. With the euro at US$1.1875 in mid-June, buying prices of US$1.43 were a fifth higher than at the beginning of the year and in early November. For Fyffes, this was not all bad, with the weak euro contributing a translation profit of €5.4m thanks to a revaluation of non-euro assets.
Dole Food Company was less fortunate on the financial front in the first quarter of this year. The firm almost did well – although it apparently also struggled with bananas in Europe – and saw its ongoing operations return US$45m. But its first-quarter trading profit was all but wiped out by the cost of refinancing a yen currency swap, leaving just US$2m in the kitty. Dole ceo David DeLorenzo claims to “remain optimistic about achieving significantly improved results” this year and next, but it looks as though he could do with some help from the FX market. Given the firm lost money during a three-month period in which the dollar rose, Dole is presumably short of the US currency in the expectation it will weaken. Lots of other investors are of the same opinion. Or at least they were.
The mood changed in early May from contempt for the dollar to renewed nervousness about the euro. The ecb hinted that interest rates would be on hold at least until July. Greek government bonds had their credit rating lowered to lottery ticket level. And the Federal Reserve announced it would be putting a full stop to quantitative easing in June. The first two were bad for the euro and good for the dollar. The third should be positive for the dollar too, as the ultra-cheap money that flowed out of the US over the last 18 months returns. As for when that reversal begins though, nobody really knows.
Meanwhile, sterling ploughs a lonely furrow. When the euro falls against the dollar, the pound does the same; when the euro rises against the dollar, it does so against sterling too. The pound does not have the smallest interest rate carrot to offer investors and the UK economy has been static for six months. At present, it seems the pound prospers only from other currencies’ misfortune.
