The past six years have tested food and drink businesses in ways few could have predicted. A pandemic disrupted supply chains overnight. An energy crisis drove up processing, refrigeration and distribution costs. A trade war repriced imported ingredients across continents. And now, sustained conflict in the Middle East is reshaping oil markets, inflation expectations and currency dynamics simultaneously.

Each event was called unprecedented at the time. Taken together, they point to a harder truth: disruption is no longer the exception to plan around. It is the operating condition.

For finance decision-makers in food and drink, the question is no longer whether the next shock will arrive. It is whether your business is structured to absorb it.

The hidden cost of reactive decision-making

Most businesses still anchor their FX approach in a world that no longer exists — one where market signals arrived slowly enough to act on. But when geopolitical risk escalates, currency markets move fast. In April alone, sterling strengthened roughly 3% against the dollar as ceasefire conditions held; the euro gained around 1.5%. For UK importers buying dollar-denominated grains, flavourings or specialist additives, that was a meaningful reduction in input costs. For exporters, the same move cut US competitiveness.

The problem with reactive currency management is structural. By the time signals align, the rate has already moved. Businesses then face an uncomfortable choice: transact at a rate that no longer reflects the economics they were working to, or wait — extending exposure and compounding risk. Neither is a strategy.

Today’s outlook

Currency volatility is unlikely to ease. Sterling remains vulnerable to risk sentiment shifts, with the Bank of England holding rates at 3.75% in April. The euro faces parallel pressure as eurozone inflation rose to 3% in April from 2.6%, with energy dependence amplifying any renewed escalation. The dollar could regain safe-haven momentum, though the expected appointment of Kevin Warsh as Fed chair — seen as more dovish — may favour earlier rate cuts.

For food and drink, the interaction between FX, fuel and inflation is especially direct. Energy costs feed into processing, cold chain and distribution. Currency moves feed into cocoa, coffee, packaging and specialist ingredients. These pressures don’t arrive sequentially. They compound.

From reactive to systematic

The businesses that have navigated successive disruptions most effectively were not those with the most accurate forecasts. They were those that had already built systematic hedging frameworks — cover levels established, decisions anchored in fundamentals rather than market noise.

Consider a business with $4 million in annual dollar exposure. The finance director structures hedging into predetermined quarterly tranches, covering 20% of forward exposure each time. When a short-term spike follows a headline, there is no reactive decision to make. The next tranche is already scheduled.

The strategic imperative

For businesses sourcing globally or selling into export markets, FX volatility is not a treasury problem. It is a margin problem — and increasingly, a competitive one. In an environment where the next disruption is a matter of when rather than if, that distinction matters more than ever.

Lumon Corporate helps food and drink businesses manage currency exposure with flexible hedging products tailored to their trade and supply chain profile. To find out how active FX management could support your margins, speak to one of our specialists.