Stronger pound means 2010 SFP will be 5% to 7% lower

Farmers will receive a lower single farm payment rate than last year following a strengthening of sterling over the past 12 months.

The rate, which was set on 29 September, will be 5-7% down on 2009 despite a weakening of the pound in the past fortnight and a four-month low on Tuesday.

But it will still be the second best since the introduction of the SFP in 2005.

The exchange rate for converting SFP from euros was to be set yesterday (30 September) and the euro was worth between 85p and 86p as Farmers Weekly went to press on Wednesday, 29 September.

The modulation rate will stay at 19% in England but will take a further 1.6% from Welsh claimants, where the rate rises from 9.2 to 10.8% this year. In Scotland, modulation rises from 13.5 to 14%.

English claimants will also see a further minor reduction as the share accounted for by flat rate payments rises slightly. Final calculations on this will be made by the Rural Payments Agency around the end of October.

Those with larger and more intensive units and high historic payments, in particular beef and dairy producers, would see more of an effect from this shift, said Tom Hind, NFU head of economics and international affairs.

Calculations by consultant Andersons show that assuming a 2010 conversion rate of 85.5p, an English lowland arable farmer will get a payment of around £227.80/ha (£92.19/acre) this year compared to £242/ha (£97.93/acre) in 2009.

“This assumes Arable Area Payments were claimed over the land during the entire reference period,” said the firm’s head of business research, Richard King.

“A typical English dairy farmer with 150 cows plus followers on 100ha (247acres) would see payments drop from around £262.50/ha (106.23/acre) last year to £240.60/ha (£97.40/acre) this year.”

The single payment continued to underpin farming profitability, said George Chichester of Strutt & Parker. “Last year, according to the government’s analysis, the net profit delivered to the UK economy by farming was £4.07bn, but this was after £3.65bn of income from subsidy supports – so the majority of farms would have lost money without this underlying support.

“With the historic element of single payment now making up only 25% of the payment in England this year, all payments are slowly converging towards a common rate, with the main variation now being only between the three main regions of lowland, SDA and SDA moorland.”

With the final claim of the current regime due to be made in 2012, farmers needed to think about the future shape of their businesses at lower support levels, warned Mr King.

The highest proportion of those opting to take their SFP payment in euros is in Scotland, at around 20% of claimants and accounting for about 45% of SFP paid. The vast majority of these have in turn taken some form of exchange rate protection.