Strong Euro could boost 2008 Single Payment

Single Payments could be worth about 15% more than last year, thanks to the relatively weak position of sterling against the euro, according to the main banks at this year’s Royal Welsh show (21-24 July).

They predicted that if the exchange rate stayed around the current level (£1=E1.26) until the September cut-off when payments were converted from euros to sterling, the increase would more than offset deductions through modulation.

“We’re reasonably happy that the sterling:euro rate will stay relatively stable for the rest of the year, but one major event could easily change that,” Martin Redfearn of Barclays Bank said. “We’ve had years when we’ve benefitted from the exchange rate and others where we haven’t. It just underlines the point that while its there, the Single Payment should be regarded as something to use wisely and not something to prop up profits.”

HSBC Regional Agricultural Manager for Wales Nigel Davies also thought the euro would stay strong for the rest of 2008 and into 2009.

It would be livestock producers in Wales and Scotland who would stand to gain most, as payments were based on the historic reference period. “It’ll be a welcome boost for beef and sheep producers, as they’ve not really seen the increase in output prices that milk and cereals have.”

But given the pressure that rising feed, fertiliser and fuel prices had put on cash flows, he said producers were unlikely to feel any better off.