A small but significant number of farmers appear to have received their single payment from the government in the wrong currency, several banks have said.

While relatively few farmers opted for euro payments on their 2005 claims form, several of those that did have been sent cheques in sterling, or had electronic sterling payments refused by their bank.

And several of the euro claimants are among the 3300 top priority farmers still awaiting payment altogether.

Euryn Jones of Barclays said it was causing cash flow problems for some customers and lumbering them with the extra costs of converting the cheques back to euros to repay euro loans.

But most Barclays’ clients who took the SFP in euros last year were pleased with their decision, Mr Jones said.

And despite a rise in eurozone interest rates to 2.5% last month, it still made sense for some farmers to consider it again in 2006.

“The reason for doing this was always to achieve lower interest rates, not to speculate on exchange rates.

The benefits are still there, although they are smaller than before.”

Farmers and landowners still have until 30 June to opt to receive their 2006 single payment money in euros rather than sterling, but they must write to tell their national payment agency by that deadline.

However, John Barker at HSBC said it was not a decision to be taken lightly and farmers should fully understand the potential risks before signing up to a euro loan.

Because the SFP only runs until 2013, the loan is repayable in just seven years, negating some of the benefits of the lower borrowing rates, he said.

Exchange rate movements could also reduce the benefit of borrowing in euros.

“When farmers convert their existing debt into euros, they effectively lock in the exchange rate at that time.

If sterling then weakens, they can’t take advantage of it because the value of their SFP relative to the debt is fixed.”

And not everyone could afford to tie up their SFP income in euros, he added.

“Some farmers will need the money to reinvest in buildings or plant or to pay for diversification schemes.”

Single Farm Payment Scheme special report from FWi

sam.fortescue@rbi.co.uk