How much is the SFP worth?

Most farmers should soon know exactly how much their SFP will be worth for 2005, but what is the outlook for the rest of the scheme, which is expected to last until 2012?


“For the first few years everybody’s payments will be different as they will be based on their historic subsidy claims,” says George Chichester of Strutt & Parker.


“But as the regional payment grows (see table) payments will gradually start to align.”

Predicted SFP payments (£/ha)



































































Year Historic
payment
Regional
payment
% deductions
(est)
Total Net present
value
2006  212.50  30.20  15.00  206.30  187.70
2007  175.00  60.30  17.50  194.10  161.10
2008  137.50  90.40  20.00  182.30  138.50
2009  100.00  120.60  22.50  171.00  119.70
2010  62.50  150.80  25.00  160.00  100.80
2011  25.00  180.90  27.50  149.30  86.60
2012  0  201.00  30.00  140.70  74.60
Total        1203.70  869.00



Mr Chichester’s figures include estimates of future cutbacks like modulation and financial discipline and deductions to fund the national reserve, but one of the biggest variables will be the exchange rate used to convert the euro payment into sterling (€1 equalled 68.2p for 2005 payments), he says.


“This is likely to be based on the rate on 30 September in the year of payment.”


Once the likely income stream from the SFP has been worked out, it is possible to calculate a net present value to the recipient of the payment.


Although a pure investment appraisal alone might suggest a value of £869/ha (£352/acre), the many uncertainties of future exchange rates, deductions and the structure of the scheme, make it unlikely anybody would want to buy entitlements for that much.


“The likelihood is that capital values will settle in the region of £500-£550/ha for entitlements with a full history , although eventually supply might start to exceed demand and if that happens price will reduce further.”



  • Because every business will have different payments Farmers Weekly has teamed up with Strutt & Parker to produce an online SFP calculator. Simply go to fwi.co.uk/business to work out how much your SFP could be worth during its lifetime.

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