Traders exporting to the UAE and other GCC countries have started quoting prices in euros rather than dollars following the decline of the US currency.
The move by major agro commodity exporters in India, Brazil and Sri Lanka is intended to ensure price stability. Many have suffered heavily due to the weakness of the dollar.
“Most of our Indian customers who used to quote in dollars have started quoting in euros,” said Munir Sait, Managing Director of Mabrook Trading, a commodity dealing and sourcing firm based in Dubai.
“And many of our clients in Africa and the former Soviet republics prefer to quote prices in euro because of price stability. For spot trading involving direct cash payment there is not much risk, but for importers exchange rates are a cause of concern.”
Khail Fraig, Export Manager at Café Canecao, a coffee manufacturing firm in Brazil, said: “We have stopped quoting export prices in dollars. Most of the Brazilian coffee producers and agro commodity exporters are now quoting in euros because the dollar does not ensure price stability. Most of the Brazilian firms that suffered losses due to the weak dollar have switched over to the euro and even our coffee exports to the United States are quoted in euros.
“Brazilian companies have been gradually switching to the euro because the dollar is at an all-time low. There are around 2,000 companies in Brazil engaged in coffee plantation, manufacturing and other related agro economic sectors.
“Most coffee manufacturers and multinational companies from around the world buy coffee from Brazil. Because of the dollar’s weakness almost all coffee exporters have stopped quoting in the US currency.”
Brazil is a world leader in coffee, producing 42 million tonnes per year. Arab countries form the fourth largest market for Brazilian agro products after the European Union, the United States
Shibu Mohammed, marketing manager at Dubai-based importer Emke General Trading, said: “Switching over to euro prices will be good because the dollar has been highly volatile, while the euro has remained stable for some time. Most of our containers are quoted in euros. Exporters from India normally cancel shipments if there are large exchange rate fluctuations.”
But Mohammed said some exporters to the country were still quoting in dollars because of the dirham-dollar peg. The coffee industry in Kenya has also been hit by the dollar’s decline – but prices there are still being quoted in dollars.
“The slide affected the earnings of many small farmers and exporters,” said Angela Ngoki, marketing manager at Kenyan firm Dormas Coffee. “Growing coffee is a major economic activity here – it employs a million Kenyans. There are 27,000 small-acreage farmers and big estates account for only 20 per cent of the total coffee production in the country.”
S. Dave, Director of India’s Agricultural and Processed Food Products Export Development Authority, said export earnings had fallen significantly because of the dollar’s decline.
“We were expecting a 25 per cent increase in agro exports to the Middle East in 2007. In fact, exports came down by 10 to 15 per cent mainly due to the greenback’s fall.”
Exporters to GCC begin quoting prices in euros