An increasing number of farmers are reported to be taking advantage of the weak pound to hedge their single farm payments.
The recent exchange rate volatility has prompted a rise in the numbers of enquiries from producers looking to fix their entitlement rates, according to Clydesdale Bank.
Last week’s opinion poll results predicting general election results cast uncertainty into the currency markets with the result that the value of sterling fell markedly against the euro. This presented an opportunity for single payment claimants wanting to secure their entitlements at favourable rates.
“Many are hedging their 2010 SFP euros at an exchange rate of 90p and some are sticking with that for 2011 as well,” said Clydesdale’s David Douglas.
“The present volatility of the currency markets is creating short-term opportunities for producers.”
According to the bank’s economic specialists, this exchange rate uncertainty is likely to continue up until the election and farmers should consider taking advantage of hedging opportunities between now and May.
The alternative is to take payment in sterling with the government carrying out the currency exchange according to market rates at the end of September.
Clydesdale’s economists suggest that once the new government is in place, sterling will regain strength, with the euro possibly dropping to below 80p by the end of 2010.