The pound slipped further to an all-time low last week (19 March) when the euro reached 78.7p.
If the high value of the euro against the pound is maintained into September, when the rate for payments is set, farmers could see their single payment cheques worth more than 10% extra, says consultant Andersons.
With the Euro worth just over 78p, a E50,000 SFP payment would be worth £39,350 compared with £33,750 a year ago when the euro was worth 67.5p.
Andersons’ research economist Graham Redman said farmers could see the value of their single payment grow by more than 10% this year, if currency rates remained unchanged.
Supporting the dollar
HSBC senior economist Mark Berrisford-Smith said the pound was suffering the fall-out from a weaker US dollar. If the dollar continued to fall, it was possible the world’s central banks may step in to support it, he said.
“With or without a major credit crunch, the days of cheap finance are finished,” he said.
Managing inflation here would probably mean businesses should prepare for average interest rates at 5% and above over the next five years, he said.
The pound’s weakness
Some farmers were seeking opportunities to hedge their payments at current values, said the bank’s agriculture director Martin Coward.
“We’ve certainly had an increase in the number of people asking about this, but no evidence that more people are doing it,” he said. Most were speculating that, as was widely predicted, the pound could weaken further, he added.
But a weaker pound will bring a much-needed boost to UK exports, allowing some sectors to rebuild Continental business still reeling from last summer’s export ban.
Sheepmeat exports to key markets like France will be more competitive, and coupled with better domestic demand in the run up to an early Easter, could help finished lamb values recover more ground.
Deadweight lamb values have strengthened from 225p/kg in early January to over 305p/kg this week.
Richard Phelps, managing director of Southern Counties Fresh Foods, said: “If the pound continues to weaken, this can only be positive and could help us make fresh ground in French markets.”
The shift in currency values should also help maintain stronger values from older cow beef, he added. European markets remained short of cow beef as higher milk prices led to more older dairy cattle being retained longer, Mr Phelps said.