Euro's fall against the dollar could harm Brazilian fruit exports

 

Euro's fall against the dollar could harm Brazilian fruit exports

ITAÚBBA HIGHLIGHTS THAT BRAZILIAN EXPORTERS RECEIVE IN EUROPEAN CURRENCY, BUT HAS THEIR COSTS LINKED TO AMERICAN CURRENCY

Fruit exports from the São Francisco Valley to Europe, which already had a reduction in volume and revenue in the first half of this year due to weather problems, can now also be impacted by the devaluation of the euro against the dollar in recent weeks, according to an assessment by the ItaúBBA Agro Consultancy. This is because the Brazilian exporter receives in euros, but its production costs are pegged to the dollar.

In its report, the consultancy says that any political, logistical and economic risks in Europe can affect quotations and generate interruptions and/or decrease in the flow of commercialization of the fruit chain in the region of the São Francisco Valley and other fruit production hubs. . The current risks are the unfolding war between Russia and Ukraine and the Russian threat to reduce gas supplies to Europe.

“Given the scenario of uncertainties and volatility of international currencies, a lot of attention must be paid to the mitigation of exchange rate risks which, in the case of the fruit chain, focuses on the ‘mismatch’ between sources of revenue in euros and costs in dollars.”

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According to ItaúBBA, if there is a broad shock to gas prices in Europe, in the short term, the exchange rate could reach 0.90 dollars per euro, but it could still end the year with 1.05 dollars per euro, which would represent a appreciation of the European currency against the dollar. For this appreciation, it would be necessary to normalize the flow of Russian gas to Europe and a more reactive stance on the part of the European Central Bank in the fight against inflationary pressures.

With so many uncertainties, the bank's guidance is for producers and agro-industries in the sector to evaluate the use of management tools that contribute to controlling this risk of the devaluation of the euro in order to avoid significant unexpected losses.

Europe is the destination for around 80% of the sector's exports and the São Francisco Valley is the main fruit exporting region in the country. According to the Brazilian Association of Producers and Exporters of Fruits and Derivatives (Abrafrutas), the heavy rains in the first semester in the São Francisco Valley affected the productivity and quality of the fruits produced, causing a reduction in exported volumes and a drop in prices paid in the market. external.

Last year, Brazil broke the barrier of US$ 1 billion in fruit exports, a record pursued by the sector for more than ten years. Even with the 11% decline in the first half, Abrafrutas' management considers that it is still possible to repeat this number in 2022.

Source: Globo Rural, Abrafrutas