Pressure from Inflation and The Currency Exchange Rate on Seafood Exports in The Final Months of the Year (18-10-2022)

Inflation and the exchange rate are two major issues that seafood exporters are concerned about in the final months of the year, especially around Christmas and New Year's Eve. While "inflation" may reduce consumer demand as a result of tight spending, "exchange rate" raises costs associated with importing raw materials for processing.
Pressure from Inflation and The Currency Exchange Rate on Seafood Exports in The Final Months of the Year

The military conflict between Russia and Ukraine is still intensifying and shows no signs of coming to an end. As a result, there is a severe shortage of gas energy supplies in Europe and other regions, which leads to an abrupt increase in gas prices and has a negative effect on gas prices. This causes a significant "inflation" wave as well as causing supply chain disruptions around the world. Because gasoline and oil are the most significant input costs that make up the largest share of the cost structure of goods production costs, inflation is now referred to as "cost-push inflation." Therefore, a small change in oil and gas prices over a short period of time will have a significant impact on all stages of the value chain, affect production costs, and cause a significant shock to the economy. Some nations have employed monetary policy to combat rising inflation; one of the instruments used by nations today is raising interest rates to increase the value of the domestic currency. A change in the exchange rate will result from that.

It can be said that the terms "inflation" and "exchange rate" are the two hottest and most pressing issues in the world right now. Not only policymakers and macroeconomic operators of the nation pay close attention to these issues, but so businesses, entrepreneurs, and individuals in general. Because "inflation" and "exchange rate" have historically had a significant impact on people's lives and economies all over the world, the short-term forecast will continue to have an impact on the world economy.

Two-way effects of “Inflation” and “Exchange rate”

Regardless of the size of the effect, Vietnam's economy is still caught in the current instability spiral. The impact on the current business environment has been particularly noticeable for Vietnam's import and export enterprises in general and seafood import and export processing enterprises in particular. For businesses that export and import seafood, "inflation" and "exchange rate" fluctuations will have an impact in two different ways.

When it comes to exports, higher inflation means that consumers in other nations will cut back on their spending, which will affect their capacity to market goods. As a result, Vietnamese seafood exporters will see a drop in orders and inventories. However, when inflation is high, countries use monetary policy to control it by raising interest rates. This raises the value of the VND and the USD exchange rates, which raises the cost of export goods. Vietnam is less expensive, encouraging exports since the export value will then be higher in VND.

Enterprises import raw materials for processing in the opposite direction, and when inflation is high, countries raise interest rates, which affects the exchange rate between foreign currencies (USD) against (VND). Businesses will suffer as a result of having to pay more for raw materials, which will raise production costs.

Some businesses must import raw materials for export processing, but domestic raw materials make up the majority of Vietnam's exports of seafood. As a result, when inflation rises, consumers cut back on their spending, which will have an impact on their ability to buy goods. The increase in the USD/VND exchange rate will, however, benefit Vietnam's exports of seafood in the opposite direction. When the exchange rate rises, it will be harmful to businesses that must import raw materials for processing.

The consumption of seafood is suffering due to inflation and a rising dollar, particularly in developed markets like the US, EU, China, and UK. Vietnam's exports of seafood appear to have started to suffer from inflation. Each item that European consumers choose will cost more, and a trend toward reduced consumption is unavoidable.

This is demonstrated by the fact that, starting in July 2022, Vietnam's seafood exports have somewhat decreased after a record growth of 40% in the first half of the year. The difficulty in obtaining raw materials and the inflationary environment are the causes of the decline in consumption demand, particularly in major markets like the US, EU, China, and UK. Major nations with high inflation have increased consumption of necessities, especially affordable goods. Exports of Tra fish from Vietnam have historically maintained a good price, making them favorable in recent years.

In Danger Lies Opportunity

From a positive perspective, because Russian Alaska pollock exported to China is now on the list of goods prohibited from export to the US and Europe. The sharp increase in gasoline prices has driven up the operating costs of tuna fishing and transporting vessels, which has driven up the price of tuna on the European market as well. Since the beginning of 2022, prices for shrimp and salmon have been rising as a result of the market's recovery while the supply is constrained. Exporters also have the chance to grow their market share and export value if they can take the initiative to source raw materials from within the nation.

If previously the average price of Tra fish exported to Europe was only 2.7 USD/kg, then in the first six months of this year, the export price to this region averaged 3.45 USD/kg. This is a great opportunity for Tra fish products in particular to increase market share and earn higher value. In contrast to the past, when Tra fish exports to the US typically only reached 2.9–3.1 USD/kg, the price of Tra fish to the US increased even more sharply, reaching 4.5 USD/kg, the highest ever.

Even if it is to be reduced, it will be challenging for food products like agricultural goods and seafood in general because this is an essential component. As a result, consumers will have plenty of opportunities to consume seafood products that are introduced to the European market now through the end of 2022.

Along with difficulties in raw materials, exchange rates, and inflation, Vietnam's seafood exports in the second half of the year will be unable to maintain the high growth seen in the first half of the year. Businesses are still optimistic about a seafood export figure of more than $10 billion USD in 2022.

Le Mai (theo

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