NZ manufacturers should be selling product in NZ dollars

[peat]

I always thought this problem would represent a good opportunity for NZ forex dealers to provide hedging services to exporters

[BIRMANBOY]

You dont need forex dealers for currency hedging you just go to your local bank..you've missed the point. The point being that it would appear that too many exporters quote their products and sell in USD. If the exchange has moved in a negative manner from the time of the quote and the final payment then you previously known profit margin has been eroded by currency moving against you. This is of course why most experienced exporters take currency contracts to lock in exchange. My original point was this could all be avoided by pricing, quoting and receiving payment all in NZD. Let the buyer take the risk and do all the currency movements. This only works of course if your products are in demand. The relative strength/weakness of buyer/seller will dictate who controls the sale.

I always thought this problem would represent a good opportunity for NZ forex dealers to provide hedging services to exporters

[peat]

I know I missed the point - my perspective is that of a forex trader on a forex trading forum.

Your original post might be more relevant in an exporters forum if such a thing exists?

[BIRMANBOY]

That forum would be even thinner post wise than this...relevance or lack of, is a personal opinion and if you think its not I accept that. However there are other posts that reference copper, gold, silver on this thread....so I dont believe its necessarily irrelevant (but my opinion). If more overseas importers purchased NZD to pay for NZ goods it would presumably at some level affect forex rates and that would be something that would be relevant if I was trading USD/NZ for example.

I know I missed the point - my perspective is that of a forex trader on a forex trading forum.

Your original post might be more relevant in an exporters forum if such a thing exists?

[zon]

Unless you're a kiwi who appear to really value those items.. I'm an importer and over 25 odd years have always been asked to pay in USD so I have seen my costs go up and down from 0.48 to 0.83 which is a huge difference in my landed costs. I just find it strange that apparently mfrs and exporters have allowed their buyers to pay in USD ..regardless of what that did to their margins. I know many do hedge their sales by currency contracts but I'm curious to find out if actually there are some who do ask for NZD and what happens in those instances.

We would all love to sell in NZD, but...
Kiwi exporters (unlike importers) are competing in markets around the world and therefore have competition from around the world.
When I sell into USA I am competing against local manufacturers in USD and sellers from other countries that all sell in USD. If I charged in NZD and insist they take the risk, they would just buy a competing product instead - this is always misunderstood by media. Yes we hedge, but all that does is eat into margins by purchasing the hedge and it only really delays the rise a little bit, it is not a miracle cure against the rising $.
An alternative is selling 'niche' products, but by definition, a niche is a small business with a limited market.

[BIRMANBOY]

Agree its very difficult selling into a market where there is a ton of competition for the products. I was thinking more of the products that have a noticeable point of difference and sell on their own merits as opposed to being priced to the market.. Also of course The Fonterra's etc. The brand has to be sold....You almost have to be arrogant and market it as such. Drive the marketing so that customers are waiting in line to be lucky enough to buy your product. Most companies however probably cant afford either financially or time wise to develop this type of branding positioning. If you are just one of 20 options all pretty much the same then its always going to be marginal.

[macduffy]

Nice theory, but Zon's spot on!

Two major problems. Foreign importers aren't normally interested in taking the forex risk on the NZD - and most NZ exports are competing in markets for commodities/goods which are internationally priced in USD or in currencies which have either a formal or an informal link to the USD. Good luck if you can "position" yourself against that!

[BIRMANBOY]

Sorry thats just wrong. We export occasionally and we price in NZD and are selling into an international market usually quoted in USD. We still sell our products...why do you think that is? If importers want your product they will fit in with your terms and conditions. If they want it is the key. We dont have to sell ..thats our bargaining position. As they say.."if you dont ask, you dont get"

Nice theory, but Zon's spot on!

Two major problems. Foreign importers aren't normally interested in taking the forex risk on the NZD - and most NZ exports are competing in markets for commodities/goods which are internationally priced in USD or in currencies which have either a formal or an informal link to the USD. Good luck if you can "position" yourself against that!

[zon]

Sorry thats just wrong. We export occasionally and we price in NZD and are selling into an international market usually quoted in USD. We still sell our products...why do you think that is? If importers want your product they will fit in with your terms and conditions. If they want it is the key. We dont have to sell ..thats our bargaining position. As they say.."if you dont ask, you dont get"

Selling now and again and when your business does not rely on it is not the same as running a company that depends on export sales. Would you open a cafe and only sell coffee at $10 because they are your preferred conditions?
To answer another point - no we don't sell commodities and we do have points of difference over others - we would be out of business if we didn't. But, ultimately it comes down to what the customer wants - they will only spend what they want on the product that gives the benefits they want, despite whatever marketing classes anyone has been to.

One thing I find disappointing (not just on here) is that commentators in media talk about exporting businessmen as if they are stupid and ask questions like - market better, sell niche, be more productive...and so on, as if we hadn't thought through that years ago and were a long way down that track already.

[BIRMANBOY]

Flogging.....dead.....horse....... If I owned a business that was reliant on someone else dictating the conditions of business I would change the business in some way/shape or fashion that repositioned it in a better space. Just boxing on without any movement forward is a waste of time (in my opinion). However, I do appreciate its easier said than done and I have the advantage of being a small, agile company. The bigger the size the more difficult it is to change direction. Does not mean it cannot be done however. Most business owners suffer from the problems associated with working in a business as opposed to working ON a business. What started out as a good idea and a good product with good sales can gradually change into a non-productive marginal waste of space. Sometimes it becomes clearer when a fresh pair of eyes is looking at the problem. I cannot speak about any other business than my own with any certainty but I do know what it started out as is hugely different than what is now... and that change was driven by HAVING to do something different or getting trampled by my competitors. I do symphasize with someone where exporting is necessary part of the business. If you are in that position I have had good results , feedback and advice from my accountant..if yours hasnt helped you I would look for another.

Selling now and again and when your business does not rely on it is not the same as running a company that depends on export sales. Would you open a cafe and only sell coffee at $10 because they are your preferred conditions?
To answer another point - no we don't sell commodities and we do have points of difference over others - we would be out of business if we didn't. But, ultimately it comes down to what the customer wants - they will only spend what they want on the product that gives the benefits they want, despite whatever marketing classes anyone has been to.

One thing I find disappointing (not just on here) is that commentators in media talk about exporting businessmen as if they are stupid and ask questions like - market better, sell niche, be more productive...and so on, as if we hadn't thought through that years ago and were a long way down that track already.