The prediction of a more favourable exchange rate for converting the single farm payment from euros into sterling should be a welcome boost to the farming industry, according to Jimmy McLean, head of agricultural services at the Royal Bank of Scotland.

Speaking ahead of next week’s Royal Highland Show, Mr McLean said payments would be converted based on the exchange rate on 30 September this year.

Current forecasting was that one euro would be worth 71p at the end of September – about 4% higher than the same time last year, he said.

“So while we have been expecting a 2% cut in payment value as a result of modulation, with currency strengthening, we are looking at payments that are 2% higher than last year, which is good news for the industry.”

On the arable side, Mr McLean said the expectation of strengthening global demand for cereals was generating some confidence.

The dairy sector was causing the greatest concern, with flat milk prices and rising costs, he said.

He also highlighted the knock-on effect of rising fuel costs as an issue, because not all the price increases had yet fed through.

More generally, he said borrowing remained stable in Scotland at £1.2bn-£1.3bn – up 2% on the year.

Land values north of the border were robust, added Mr McLean.

“We are expecting the amount of land coming on to the market this year to increase, but there is strong demand from both farmers and non-farmers.”