The NFU has warned farmers to welcome an increase in single payment rates with caution.
The European Commission set the rate for 2009-2010 payments on Wednesday (30 September), resulting in a 15% payment hike for farmers thanks to the weakness of the sterling.
Despite the increase, NFU single payment adviser warned it was not all good news for farmers.
“Through to 2012, English SPS applicants are undergoing a transition to flat rate payments which means that any gains from currency shifts will vary depending on their individual circumstances,” he said.
“In addition, it must be remembered that for SPS 2009 the level of modulation increases once more in England and Wales.”
Philip Bicknell, NFU senior economic adviser, said: “While undoubtedly a timely boost for the British agricultural economy, this comes at a time when some farmers are seeing substantial falls in the prices paid for their products, most notably in the dairy and cereal sectors.
“Given that the Single Payment Scheme forms a small proportion of total agricultural revenues, it is these shifts in market prices that will have a much greater impact on the bottom line for UK agriculture.
“Commodity price shifts will only be partially offset by favourable exchange rates.”
Exchange rate movements had helped farmers in the short-term, but the future of UK agriculture needed to be based on viable businesses rather than volatility in international currency markets, he added.