By Philip Clarke

THE Euro was alunched this week in 11 of the EUs 15 member states – and although the UK is staying outside Euroland, the new currency will still affect UK agriculture.

“Euros will be used almost immediately in the agricultural supply chain,” predicts NFU chief economist Sion Roberts. “Many of the multinational companies farmers trade with will be selling to mainland Europe and getting paid in Euros. They will be keen to deal in Euros with their UK business partners too, to avoid currency risk.”

They will also want to adopt the new currency for strategic reasons. “As the single European market becomes more efficient, the pressure for businesses to rationalise will increase,” says Mr Roberts. “The extent to which Euros are used could have a bearing on where the parent company chooses to site its next investment.”

For farmers, the Euro will make Continental markets more transparent. It will be easier for them to make international comparisons on input prices. “Once British farmers start reading about the cost of chemicals in Denmark or machinery in Spain, they will want a supply of Euros,” says Mr Roberts.

Interest rate differences should also provide a strong incentive for farmers to set up Euro-loans. Despite last months cut in UK base rates by the Bank of Englands monetary policy committee to 6.25%, that is still more than double the level in the Euro zone.

But prospects for Euro payments have suffered a set-back with farm minister, Nick Browns, recent announcement that farmers will not receive direct income aid in Euros during 1999, even though the new agrimoney rules allow it. Traders will also have to wait until autumn 2000 before they can receive export refunds and intervention payments in Euros.

“MAFF has indicated that there would be a cost involved in offering the Euro option to farmers,” says Mr Roberts.” It has also raised doubts about the level of interest among farmers and said it wants more information before committing resources to provide Euro payments.”

As such, the NFU plans to monitor the use of Euros in the farming industry during 1999, assessing how many farmers open Euro bank accounts and how many look into getting Euro loans.

It is also launching a new report, “The practical and strategic implications of EMU for the UK agri-food industry”, later this month at a special London conference. “The debate about the pros and cons of EMU will continue for some time,” says NFU deputy president, Tim Bennett. “But businesses have to learn to deal with it now. Our role is to inform farmers about the practical implications from the start of EMU.”