Brexit is expected to have numerous after-effects for the UK, but the truth is that not only British people will be affected by this. In fact, Marc Soccio, Rabobank senior analyst, warns about the negative impact of Brexit on Australian agricultural exports.
How does Brexit influence our agricultural exports?
According to Marc Soccio, the first thing we should consider about the exit of Great Britain from the EU is represented by the currency impacts.
The senior analyst reveals that when the pound drops significantly, as it happens now, customers in the UK perceive the price of Australian products much more expensive so that they will need to look for similar products elsewhere.
He gave the example of a beef or lamb exporter who cannot level off those 10% that the pound lost recently, and therefore, he sells his goods for the same prices. But for the people living in the UK and paying for these with pounds, the price will suddenly seem 10% higher, which undoubtedly makes a difference.
In a nutshell, he explains that it is impossible for Aussie exporters not to be affected in a negative way by Brexit because the lower pound would lead to higher prices in Australian imports for the UK consumer. This would make them seek other sources for their groceries.
According to him, we can all expect the pound to be lower for longer, and consequently, Australian agricultural exports will be negatively affected by Brexit. There may be a silver lining in this field if the pound will rebound soon.
Mr Soccio considers that, in a response to the current situation, citizens will shift their capital around. He spoke about a “flight to safety” of capital. This consists in recoiling of the commodity markets. The analyst said that, at the moment, there are a few markets that already shifted to gold.
Also, he stated that the impact on the commodity markets would be a significant one, and before we even realise, these markets will be affected. It will also take a while for them to recover.
Prime Minister Malcolm Turnbull was a little more confident about the actual situation, and he considers that the negotiations with the UK will continue. He said that, in the case of stock markets, we have already witnessed significant falls, and a particular uncertainty will be there for a while. On the other hand, Mr Turnbull said that the strong bonds Australia has with the United Kingdom would not be affected by Brexit or by the strong relations we have with the rest of Europe.