Keep an eye on exchange rate

Farmers seeking to maximise their single farm payment will have to keep an eagle eye on the euro-sterling exchange rate to “lock in” at a favourable rate in the coming year.

Clydesdale Bank economist, Tom Vosa, told an Oxford Farming Conference fringe meeting that the volatility of exchange rates could see the euro rate fall to a low of 82p early this year from its present level of just under 84p as the market continues to speculate about a eurozone break-up, before rallying to 87p by the end of the year.

“I don’t expect the euro-sterling rate to regain the 90p level it touched in 2011 or to test parity as it did in 2009,” said Vosa. “But I remain more optimistic on the euro than the consensus which suggests a steady depreciation to 82p by December, 2013.”

The eurozone crisis was probably worth 5p to the UK and the exchange rate was still significantly ahead of the rate when the euro was introduced ten years ago when it was 70p and averaged 68p from mid-2002 to December, 2007. If Greece with its weak economy left the eurozone it would give a further boost to the euro-sterling exchange rate.

EDDIE GILLANDERS