Scottish farmers yesterday had confirmation that their support cash this year will fall by about £38 million as a result of fluctuations in the rate of exchange between the euro and sterling. And the cut could have been much worse if the euro had not rallied in the past week or so following emergency budget measures in Spain and Greece.
Commenting on the multi-million drop in income this year following record high pay-outs in 2011, 2010 and 2009, Jonnie, Hall, the head of policy with NFU Scotland, said: “Producers will be mulling over the adage that exchange rates can go up as well as down. This year has been testament to that.”
The exchange rate at midday yesterday was €1 to £0.79805 and this ratio is used to determine the value of the 2012 single farm payment (SFP). This compares with the exchange rate for the 2011 SFP of €1 to £0.86665, the 2010 SFP which stood at €1 to £0.85995 and the 2009 rate of €1 to £0.90930. The 2012 rate, therefore, represents a significant weakening in the value of the Euro compared to the historic highs of the previous three years.
While the total funding pot that Scotland receives in euros remains fixed at close to €550 million (£440m), the exchange rate has seen the value to Scottish agriculture in sterling drop by almost £38m this year, compared to the £478m paid out in 2011.
Hall added: “Today’s exchange rate is a huge factor in determining the value of support delivered to all eligible farm businesses in Scotland. Everyone is aware of the problems experienced by the European economy and the euro in the past year. That volatility in has been a worry for many businesses, especially when the rate setting process comes down to a single day.
“The outcome of exchange rate fluctuations is that for those businesses receiving their support solely in sterling, SFP receipts are likely to be down on those received in 2009, 2010 and 2011 but higher than those received in the first few years of the scheme.
A fair percentage of Scottish farmers have opted over recent years to receive their SFP in euros but Hall said they would have to think very carefully about how they managed their funds when they converted to sterling.
Scottish Government rural affairs secretary Richard Lochhead said the fall in the sterling-euro exchange rate was not unexpected given the continuing difficulties in financial markets.
He promised early payment of the cash: “I know that support payments are vital for many of our farmers and they will be eagerly anticipating the start of payments in December.
“We are working hard to ensure that farmers receive their payments as early as possible and farmers can help with this by responding promptly to any queries they may receive from Scottish Government officials.”
Tom Barclay, of CLA Foreign Exchange Services, said that budget action by the Spanish Government had helped raise the value of the euro in recent days.
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