Recently in Exchange rates Category

Yesterday (Thursday) I had the pleasure of attending one of the Andersons spring seminars at Salisbury racecourse on Opportunities in a Changing Agriculture.

Surprisingly it was the first of these annual events I'd been to - and sadly one of the last that well-known agricultural consultant and analyst Francis Mordaunt would be giving before his impending retirement.

Explaining complicated issues in simple and engaging terms is a gift, and one that Francis has in abundance.

In just 30 minutes he gave a crash course on the current state of British agriculture, encompassing most of the external factors affecting it, giving an assessment of the health of the industry and providing some useful pointers as to where we might be heading.

The key points were as follows:

* UK farming has weathered the recession better than most sectors. Total Income From Farming (TIFF) in 2008 and 2009 came to over £4bn each year - well up on the £2-3bn seen in the previous eight years.

* At this level, TIFF was finally in excess of direct payments, showing that farming is making a small profit even without subsidy...

Everyone knows that a weak pound is good news for British agriculture.

Primarily because of the weakness of sterling, farm incomes in England last year were limited to just a 6% fall, despite the slump in global commodity prices, while farm incomes in Wales enjoyed a 60% increase.

So yesterday's jitters for sterling on the foreign exchanges, amid fears of a hung parliament this summer, will have been viewed with some satisfaction by many in the farming industry. (The pound reached a ten month low against the dollar and a three month low against the euro.)

The effect of the weak pound can be clearly seen in latest figures from UK Trade and Investment - the government department responsible for international business development.

These show that meat exports rose by 9% to £1.27bn in 2009, while fruit and veg exports were up 10% to £763m and cereal and animal feed exports were up 3% to £2.35bn...

Farmers Weekly's publisher Trevor Parker approached me at the start of the week and asked me to come up with a current "state of the industry" assessment for a presentation he is giving.

It was a good opportunity to take stock and have a think about where we have come from in the past 18 months and where we might be going. The following is what I told him:

UK agriculture was the best performer in the European league table of farm incomes in 2009. EU farm income figures from Brussels show that the UK is just one of four member states to have seen an increase in farm income in 2009 - thanks in large part to the weakness of sterling. Provisional figures put us up 14%, compared with a 35% decline for Hungary, 25% decline for Italy and 20% declines for France and Germany. DEFRA predicts an 8% fall in UK farm income in 2010, but it will still top £4bn - the second best result in a decade...

There can be little doubt that the bears are winning the day in the grain markets this month.

Prices have been under pressure since the turn of the year, with March futures dropping from £111/t in week one, to £107/t in week two, to just £101 this week - down 10% in a fortnight.

The reason for the fall comes down to two basic factors - supply and currency.

Last week's data from the US department of agriculture came as a series of body blows. Global wheat production was revised upwards by 2m tonnes, and end stocks by 5m tonnes at 196m tonnes - up 61% in just two seasons.

US wheat stocks were also increased by 2m tonnes to 26.6m tonnes - the highest for 20 years - while US maize production was raised by 6m tonnes, and stocks by 2.3m tonnes...

With the festive season fast approaching, I thought I'd get my crystal ball out and predict some prices for six month's hence.

It's never an easy task. Just one look at the price graphs at the back of Farmers Weekly is enough to demonstrate the rollercoaster trip that agricultural markets have been on over the past couple of years.

Furthermore, as one leading banker recently told me, "if there's one thing you can guarantee about forecasts, it's that they'll be wrong".

So, spurred on by this vote of confidence, I can now reveal that, at the end of June 2010, the following values will prevail:

Feed wheat (FW ex-farm price) £107/t
Nitram (GrowHow price)           £205/t
Finished lambs (R3L carcases) 440p/kg
Red diesel (FW IPM price)      49p/litre
Bank of England base rate        0.75%
Euro:Sterling exchange rate       86p

But what are your predictions? Why not jot them down in the comment section below, or e-mail them to me at philip.clarke@rbi.co.uk, and I'll come up with a small prize for the closest prediction in six months time. What have you got to lose, apart from your pride and dignity?

2009 has been a year of ups and downs in the world of agri-business. Prices have reached record highs for some commodities, and dismal lows for others.

Some businesses have gone to the wall, while others have flourished.

But how much do you remember from the past 12 months? Are you a "Business Numpty" or a "Business Genius".

To test your knowledge, I have devised the following quiz:

Bankers' bonuses have been in the spotlight in recent days, as politicians and the media question the morality of multi-million pound payouts to City highflyers.

But it's not just bankers who get bonuses. Here at Farmers Weekly we too get the occasional perk, and I was especially delighted to receive my 2010 Simba calendar today with some lovely pictures of drills and cultivators.

Better still, yesterday three of us were invited to a pre-Christmas lunch with our well-resourced friends at Barclays.

As might be expected, there was a degree of opulence on display. The view from the 31st floor of Barclays' Canary Wharf HQ over docklands and the O2 Arena was spectacular. The food was straight out of Master Chef. And yes, that was an original Lowry on the wall of the private dining room.

The conversation flowed as easily as the wine, covering a wide range of subjects - from the state of the dairy sector, to succession planning (or lack of), to the future of agricultural shows...

Faster than a speeding bullet, DEFRA has put out a press release revealing the exchange rate at which this year's single farm payments will be converted from euros to sterling.

Confirming what the rest of the agricultural industry was talking about two weeks ago, farming minister Jim Fitzpatrick has declared that the conversion will be made at 90.93p/euro, securing farmers a 15% increase in their SFPs for 2009.

Important as this figure may be, perhaps a more newsworthy piece of information to come my way this week is the figure from the Rural Payments Agency confirming that as many as 1900 SFP claimants in England have elected to receive their subsidies in euros this year, rather than sterling.

That's three times as many as did so in 2008, suggesting there has been a reasonable uptake of the various schemes being touted by financiers in February and March to persuade farmers to pre-book their euros at the exchange rate prevailing earlier this year.

The figure still only amounts to less than 2% of the total number of SFP claimants in England, and is well short of the 7% who told an earlier survey they were going to pre-book their euros. But it shows a growing number of farmers are at least looking at ways of controlling their exposure to risk....

By Paul Spackman

It's official! The 2009 single farm payment is going to be worth 15% more than last year, at least for those who opted to receive it in sterling.

As Mr Clarke explained in his blog posting last week, the EU Commission fixes the rate at which the SFP is converted from euros into national currencies using the European Central Bank's closing rate on 30 September.

Today that rate finished the day at €1 = £0.90930. Compare that with the rate of €1 = 79p last year and around 68-69p in the years before that, there's a clear bonus for farmers this autumn.

But while some in the national media have quickly jumped on headlines such as "windfall for farmers", others closer to the industry have been understandably more reserved...

It's that time of year again when many in the farming industry take an even closer interest in the value of sterling and what is going on in the international currency markets.

Of course such things are always important and the weakness of sterling has already served the farming industry pretty well over the past 12 months.

For example, where it not for the 15% drop year-on-year, dairy farmers would be getting a milk price nearer to 18p/litre than the current 22p/litre, and arable producers would be getting just £70/t for their wheat.

But the value of sterling is even more important now as in just over a week, at close of play on 30 September, the EU commission will fix the rate at which this year's single farm payments will be converted from euros into national currencies.

The use of this seemingly arbitrary date has often been criticised in the past for making the whole process something of a lottery. But, if that is the case, then at least UK farmers seem to have hit the jackpot for a second year in a row......