31 March 1995

Uncertain conversion system under attack

ANY revaluation of green rates in Austria, Belgium, Germany or Holland will lead to an automatic increase in aid payments to UK farmers.

This is because, under the new agrimonetary arrangements (in force since Feb 1) any revaluation in one member state, which would cut support prices there, should be accompanied by an across-the-board hike in compensation.

But with these strong currency countries becoming increasingly resistant to any revaluation (see above), delegates at last weeks Agra-Europe Agrimoney 95 conference were fully expecting ministers to bend the rules again.

Such uncertainty was just one of the areas of criticism levelled at the system for converting support payments from ecus into national currencies. "What the food trade wants is low inflation, stability and certainty," said sugar consultant Joan Noble. "But the mechanism we have is inflationary, volatile and uncertain."

The fact that the new system encourages green rate devaluations in weak currency countries rather than revaluations in strong currency countries was costing consumers dear, she said.

The effects of this instability were partially masked by the fact commodity markets had been trading above intervention levels this season, said HGCA head of marketing, Steve Thornhill.

But the potential for trade distortions was enormous, he added, as long as revaluations were delayed. Current grain intervention values in Germany were £120.50/t when converted into sterling, compared with £111.50/t in the UK. The differential – greater than the cost of haulage – could lead to speculative trading. &#42