The strength of the pound against the euro is adding to the pressure on British farmgate prices.

One euro was worth just more than 79p on Wednesday (30 July), compared with about 87p a year ago, following better economic news and predictions of an early UK interest rate rise.

The International Monetary Fund warned this week that sterling was overvalued by 5-10%, which was hurting British businesses’ efforts to trade abroad.

Nearly all farm commodity prices have slid in the past few months, with high world milk production, a short-term surge in the beef supply and strong estimates for this year’s harvest.

Farmers Weekly Academy: Protect your single farm payment from fluctuations

NFU economist Anand Dossa said the fluctuating exchange rate hurt the international competitiveness of the agricultural sector.

“It makes exports more expensive and imports cheaper,” he said.

“The EU continues to be critical to UK export success, as European markets accounted for 75% of [farming] exports in 2013.

“And it is twofold: this strengthening comes at a time when we see weak commodity prices.”

In the first five months of 2014, beef exports were down 7.4% on the year by volume, while sheepmeat exports were 1% lower.

But pork exports were 9.5% higher and dairy exports were up 16%.

Mr Dossa also said the strength of sterling would affect the value of direct payments to British farmers when the single farm payment is converted from euros to pounds according to the European bank rate on 30 September.

“If the pound continues to strengthen between now and September, this will translate into a lower SFP,” he added.