7 June 2002

Stronger i may bring area aid payments rise

By Robert Harris

ARABLE farmers could receive bigger-than-expected area aid cheques this season if the k continues its recent stronger run against the £.

Several other support prices are also benefiting from the uplift, which has seen the k break out of its seemingly established 60-63p range. It hit a 20-month high against the £ midweek, reaching 64.5p.

The impetus has come from renewed speculation about the UK joining the single currency, better economic data from Germany and concern over US trade figures.

"If it continues at this rate, UK arable growers will gain about £40m on their 2002 payments," said Richard King of farm business consultant Andersons.

Arable area payments are converted from ks into £s using the average exchange rate during June. In the first five days of the month, the k has averaged 64.16p, 5.5% above the overall June 2001 figure.

"These are early days – there are still three weeks of the month to go," said Mr King. "One out-of-place comment from a politician or economist, and the k could quickly slip back again."

But, if the early average value is maintained, 2002 area aid for cereals and set-aside in England would be worth about £226/ha (£91.50/acre) after 3% modulation and an estimated 2% scaleback for exceeding the regional base area. That is almost £9/ha (£3.60/acre) more than last year.

Payments for protein crops would climb to just over £260/ha (£105/acre) after modulation and scalebacks, a gain of over £10/ha (£4/acre) on the year.

The rising k will also help offset falling oilseed and linseed payments, which, due to the Agenda 2000 agreement, will match cereal aid in 2002.

Growers in Scotland, Northern Ireland and Wales will receive a few £s less for all crops due to lower yield bases. For example, cereals and set-aside will attract £211/ha (£85.40/acre) in lowland Scotland and £203/ha (£82/acre) in the Welsh lowlands.

With the k gaining about 3.5% against the £ in the past month alone, other support payments are making ground. The cereal intervention price, worth k107.9/t in June, converted to £69.50/t on Wednesday, up 80p/t on the week and almost £2.40/t higher than a month ago.

Although intervention has closed, people are still delivering much of the 118,000t of barley tendered, said the HGCAs Gerald Mason. "They will receive the price set on the day before their first delivery."

The intervention milk price has also risen (see page 24), as have over 30-month-scheme payments. These were set for June using the exchange rate on the last day of May. Payments have climbed to 51.2p/kg for cows and to 57.6p/kg for other stock.

A stronger k also means cheaper UK exports. This has helped old crop cereal prices to edge up, though the £ will have to weaken a further 4-5% to make new crop competitive with Black Sea origin wheat, says Glencore Grain.

Conversely, imports have become dearer, which could help to maintain the UKs widening pig price premium. The UK adjusted euro-spec average rose 3.2p/kg last week to 104.66p/kg, almost 25p/kg more than in Holland and Denmark. &#42