Battle Against Currency Fluctuations: The Profitability Formula for Canned Food Exports

Battle Against Currency Fluctuations: The Profitability Formula for Canned Food Exports

Geranaz Group, with years of expertise in food exportation, has established a strong presence in international markets. By prioritizing top quality and adhering to global standards, it has earned the trust of international clients. The key strengths of Geranaz lie in precise selection, professional processing, and efficient packaging—ensuring that each product meets the expectations of target markets.

The Hidden Battle Every Exporter Faces

Let’s be honest—food exportation is not just about taste, branding, or logistics. It is a daily fight against currency fluctuations. If you are involved in canned food trade, especially in the Middle East or Iran, you already know what I mean. One day, your profit appears stable.
The next day, the Riel depreciates, and your profit vanishes into thin air. The good news is that overcoming currency fluctuations is not impossible. With the right strategies, you can not only survive in the market but also grow—even when exchange rates soar.

Read more : Next Generation Exporting: The Future of the Food Industry in the Shadow of Emerging Technologies

What Causes Currency Fluctuations?

According to Euro news, the value of a currency fluctuates due to various factors, including inflation rates, interest rates, political stability, and economic performance. For example, high inflation can erode a currency’s purchasing power, leading to depreciation. Conversely, higher interest rates can attract foreign investment, strengthening the currency.
Political instability or economic uncertainty can also diminish investor confidence, resulting in currency weakening.

For exporters, currency volatility can significantly impact profitability. When the domestic currency weakens, exports become cheaper for foreign buyers, potentially increasing demand. Conversely, if the domestic currency appreciates, exports become more expensive, possibly reducing competitiveness in international markets. Additionally, unpredictable exchange rates complicate pricing strategies and financial planning for exporters.

In Iran, the Riel experiences considerable fluctuations due to factors such as high inflation, economic sanctions, and geopolitical tensions. For instance, escalating Middle Eastern tensions have led to a sharp decline in the Rail’s value against major currencies. This volatility presents challenges for Iranian exporters, making it difficult to set stable prices and manage expenses effectively.

The Challenge of Exporting: Navigating Currency Fluctuations in Iran

Iranian exporters face significant hurdles due to Rial volatility, exacerbated by sanctions, inflation, and geopolitical tensions. This instability complicates financial planning, as unpredictable exchange rates can erode profit margins and disrupt pricing strategies. For example, a sudden devaluation of the Rial can make exports more competitive internationally but simultaneously increase the cost of imported raw materials, squeezing margins from both ends.

Moreover, limited access to international banking systems forces many exporters to rely on alternative methods such as barter transactions or intermediaries, adding layers of complexity and cost to trade operations.

Iran’s Central Bank policies have also contributed to this problem. By prioritizing gold imports over dollar reserves, the Central Bank has restricted foreign currency inflows, further destabilizing the Rial. In addition, inconsistent foreign exchange regulations enacted by the government create an unpredictable business environment.

These factors, combined with the Rail’s rapid depreciation—from around 32,000 IRR per USD in 2015 to over 100,000 IRR recently—highlight the urgent need for exporters to adopt robust risk management strategies to safeguard their operations.

Strategic Formula for Profitability Amid Iran’s Infinite Crises

• Step 1: Diversify Currency Holdings
  Avoid holding all revenues solely in a weak currency like the Rial. Convert part of your income into stronger, more stable currencies such as the Euro or the UAE Dirham. Multi-currency accounts in Turkey, the UAE, or Georgia offer flexibility and reduce the risk of currency losses. This approach protects you against sudden devaluations and helps maintain more stable profits.
• Step 2: Select Suitable Markets
  Avoid relying solely on one region or economy for exports. Combine high-margin but riskier markets (e.g., some African countries or CIS nations) with more stable markets like the Gulf or Europe. This risk diversification spreads exposure while still pursuing profitable deals. Free Trade Agreements (FTAs) and regional blocs like ECO can also stabilize trade. Choosing reliable buyers makes your cash flow more predictable.
• Step 3: Hedge Against Currency Fluctuations
  Currency hedging tools lock in current exchange rates for future payments, acting as a form of insurance against currency declines or inflation. Even small businesses can utilize simple hedging options through brokers or advisors. It’s no longer just for large corporations; accessible and essential for all exporters.
• Step 4: Localize Part of Your Production
  Transporting products from Iran increases costs and currency risks. Consider relocating some packaging or manufacturing closer to your end customers. This reduces dependency on foreign currency and speeds up delivery times. Partnering with local entities can strengthen your market presence. It’s a smart method to reduce risk while enhancing competitiveness.
• Step 5: Smart Pricing
  Implement flexible pricing strategies that can adapt to currency fluctuations. Use contracts that allow price adjustments in case of significant exchange rate swings. Regularly review and update your prices—every few months—to stay aligned with market conditions. This approach protects your margins without scaring off customers. Dynamic pricing acts as a buffer for your profit line.

Why Do Canned Foods Have Export Potential?

In 2023, Iran’s food exports reached approximately $5 billion, reflecting a 15-20% increase over the previous year. This growth highlights the potential of the sector, especially processed and canned foods, which are favored in international markets for their shelf life and convenience. Nonetheless, challenges such as currency fluctuations and international sanctions continue to impact the industry’s full potential.

Despite overall growth, specific segments like canned fish experienced significant declines. In 2023, canned fish exports dropped by 59% in volume and 55% in value compared to the previous year. This downturn is attributed to rising production costs, declining global demand, and logistical challenges. Addressing these issues is crucial for revitalizing and sustaining growth in this segment.

To capitalize on increasing demand for canned foods, Iranian exporters should focus on diversifying markets, improving product quality, and adopting innovative marketing strategies. Targeting regions with high demand and ensuring compliance with international standards can boost competitiveness. Investing in technology and infrastructure will also be vital for increasing production efficiency and meeting global demand.

Iran’s Multi-layered Exchange Rate Policies

Iran has implemented a multi-tiered exchange rate system, resulting in eight different rates for the US dollar. This complex structure creates significant challenges, including opportunities for corruption and economic inefficiencies.

One common issue is the misuse of subsidized foreign exchange, where goods purchased at lower rates are sold at higher market rates, undermining intended economic benefits. Furthermore, the Central Bank’s preference for importing gold over maintaining dollar reserves has further depreciated the Rial, especially during periods of political and regional instability.

To address these challenges, Iran must consider unifying its exchange rates to eliminate arbitrage opportunities and enhance transparency. Strengthening foreign reserves, particularly in dollars, can provide a buffer against external shocks and help stabilize the Riel. Additionally, implementing strict monitoring mechanisms to prevent misuse of subsidized currency allocations ensures that economic support reaches its intended purpose. These policy adjustments are essential for creating a more stable economic environment and restoring investor and public confidence.

Conclusion

In the world of canned food export—especially in regions like Iran—you are not just selling products. You are navigating through political storms, economic minefields, and currency chaos.

However, those who adapt, plan ahead, and adopt strategic approaches rather than relying solely on instincts will succeed. Following a proven formula, food exports can become incredibly profitable—even during turbulent times.