High dollar hurts exporters

PENNY WARDLE AND KAT PICKFORD
Last updated 11:30 19/02/2013

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Export industries in Marlborough are struggling to hold products at affordable prices as the value of the New Zealand dollar soars against major currencies.

The kiwi went beyond US85c on Friday, and remained just below an all-time high yesterday, against a basket of trading partner currencies at 77.2.

New Zealand King Salmon food service and sales general manager Graeme Tregidga said customers in the United States and Japan already paid 30 to 50 per cent above the commodity price, but this might have to move to 50 to 80 per cent.

There was a risk customers might start saying: "We like your product and service and are prepared to pay a premium, but this has got to a point where we say enough," he said.

The company exports half its salmon mostly to North America, Japan and Australia, trading in US dollars to avoid frequent fluctuations and keep prices consistent, compared with competing products, Mr Tregidga said.

The Australian market was relatively stable because the relationship between the two currencies was fairly consistent, he said.

To protect itself from currency swings, King Salmon bought forward cover based on predicting exchange rates, Mr Tregidga said.

Sanford manager Eric Barratt said the export price of New Zealand greenshell mussels had steadily increased for two years but not by enough to offset the NZ dollar's rise to 84, 85 and 86 cents. The Auckland-based fisheries company processes mussels harvested in the Marlborough Sounds at its Havelock factory.

The price paid to growers had been stable "but we can't predict what will happen due to the combination of market prices and exchange rates", he said.

Sanford exported about 90 per cent of its mussels so was very exposed to exchange rate effects, Mr Barratt said. Programmes to hedge exposure to foreign exchange shifts generally worked well for the company.

Alliance Group marketing general manger Murray Brown said farmers would be earning $45 a head more for their lambs at 2009-10 exchange rates.

"Instead of a $120 lamb, they are getting a $75 lamb," he said.

Market correction from high prices paid for New Zealand lamb since 2009-10 also had an impact.

"We'll have to see more consumption before we see price improvements," he said.

Beef + Lamb Economic Service executive director Rob Davison said about 425,300 sheep were farmed in Marlborough in 2011, down about 27 per cent since the last official count in 2007.

Mr Brown estimated roughly half these sheep were killed at the Alliance Nelson plant.

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Marlborough Forest Industry Association president Michael Cambridge said strong demand for timber was buffering negative effects of the strong New Zealand dollar.

However, it was difficult for exporters to add value to timber sold overseas, he said.

"It certainly doesn't make sense to send processed timber to China and India. It is very, very hard to compete with the sawn timber there."

About half of New Zealand logs were exported unprocessed, which meant fewer New Zealand jobs.

Fortunately the domestic market and Australian market were still "ticking away quite nicely".

Mr Cambridge would like to see the Reserve Bank follow Australia's lead of requiring buyers to pay bigger deposits on houses to cool the housing market and lower the dollar. But there was little chance of Government intervention here because politicians preferred a high-dollar economy, he said.

"People may enjoy the good deals they get when the dollar is high, but it is not good for New Zealand in the long term."

- The Marlborough Express

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