For food company executives with warehouses full of export produce to shift, the exchange rate boards make grim reading.

Sterling may have strengthened against the euro yesterday, but this latest rally is only a baby step in the right direction. The euro is still more than 75 pence sterling - far above the stable 65-69 pence rate of recent years.

Food exports to the UK dropped 14 per cent in December compared to the same month in 2006, external trade figures published yesterday by the Central Statistics Office (CSO) reveal.

According to Paul Kelly, director of Food and Drink Industry Ireland, this is "a clear indication" that sterling's weakness is damaging the competitiveness of exporters - a pressure highlighted by Bord Bia last month in its annual export report.

He warns that jobs will be shed at home and business will be lost in the UK - still the destination for 42 per cent of food and drink exports.

Last week, Greencore, which manufactures prepared foods for UK supermarkets, warned that exchange rates would eat about €8 million from its profits.

Next week, consumer foods and dairy ingredients company Kerry Group, which has double- whammy exposure to both the weak sterling and weak dollar, reports its full-year results for 2007. Currency movements seem just as likely to feature in its 2008 outlook as commodity price ones.

A new research report by NCB Stockbrokers appears to have little time for companies that blame their performance on the deterioration of sterling or the dollar. A strong euro is "no excuse" for disappointing profits, it says.

Nevertheless, NCB has reduced its earnings estimates for several food groups, including Greencore, Kerry, Cuisine de France owner IAWS and fruit distributer Total Produce.

Among the quoted food stocks, Greencore generates the highest proportion of profits in sterling, at 80 per cent. Its exposure is likely to be offset by a better performance in malt and the progress it has made in passing on higher input costs to retailers, according to NCB. But this did not stop analysts from cutting its 2009 estimates by 4 per cent.

Kerry generates 65 per cent of its profits in dollar and sterling, giving it a foreign exchange currency headwind of about 3 per cent before offsets such as price increases and acquisitions.

As a result, NCB has lowered its earnings forecast from 6 per cent to 5 per cent for both 2008 to 2009.

Among the other food stocks, cider-maker C&C is potentially the most exposed. A 10 per cent euro-sterling swing will lower its earnings by 5 to 7 per cent, NCB says.

Bord Bia is optimistic that Irish exporters can diversify away from the UK. Other EU markets now account for over 30 per cent of total food and drink exports.