Agriculture experts say they don’t expect the withdrawal of Great Britain from the European Union to have significant short-term impacts on Iowa exports, but questions remain about the long-term ramifications.
“In the first place, we don’t sell a lot into either Great Britain or Europe, and what we do sell is mostly soybean meal,” said Dave Miller, Iowa Farm Bureau Federation’s director of research and commodity services.
Ron Birkenholz, a spokesman for Iowa Pork Producers, agreed, saying Britain imports very little U.S. pork — 295 metric tons in the first four months of 2016, compared to 169,000 metric tons imported by Mexico during the same time.
The concern, Miller said, is whether Britain’s withdrawal heralds similar actions by other European Union members.
“Does it portent broader scale problems for international trade? Will it usher in a round of protectionism? Does it portend the breakup of the European Union?” Miller asked.
How those questions are answered in the months and years ahead could impact U.S. agricultural exports, he said.
Because both the pound and the euro lost value in relation to the dollar following Thursday’s “Brexit” vote, U.S. products will cost comparatively more, but that difference should fade as the currencies stabilize, Miller said.
Grant Kimberley, director of market development for the Iowa Soybean Association, agrees, saying he sees little continuing impact “unless the dollar stays strong against the euro.”
“Weather during the U.S. growing season and the size of the crop” will have much greater impact on the price of soybeans, he added.
Kimberley said he predicts the European Union remains intact and Britain’s withdrawal “will not have a long-term major impact.”
If anything, Iowa Agriculture Secretary Bill Northey said Thursday’s vote could mean added acceptance of GMO crops. He said Britain is likely to be friendlier than the European Union as a whole when it comes to biotechnology innovations.
Both Miller and Northey said the decision to leave the EU signals widespread dissatisfaction with the economic and political status quo.
Art Durnev, associate professor of finance with the University of Iowa’s Tippie College of Business and an expert on the European Union, says he expects the European economy to bounce back relatively quickly.
In the hours that followed Britain’s vote to leave the European Union, global financial markets plummeted. The pound dropped more than 10 percent against the dollar, the biggest one-day drop in history.
“I think the reaction was a little bit overblown,” said Durnev. “I don’t think it’s going to be as big of a backlash. The stock markets always bounce back, they always say this is the end of the world, but they always bounce back.
“I would say it’s back in a couple of days.”
Durnev said Britain’s financial sector is feeling the biggest and most immediate effects right now.
Billions of dollars were wiped off European banks’ market value, with Britain’s Royal Bank of Scotland, Barclays and Lloyds Banking Group among the biggest fallers.
Like those in the agriculture industry, Durnev said the biggest factor now is not the United Kingdom, but other nearby countries. Major stock market shifts could be seen if other nations follow suit and vote to leave the European Union.
“The only danger is what it might potentially trigger from other countries, but by itself, the impact is small,” Durnev said.
Reuters contributed to this report.