Bankers are cool on the advantages
BANKERS are cooling their enthusiasm towards the benefits the single currency will bring farmers.
It follows predictions earlier this year that the new arrangements beginning on Jan 1 could bring a much-needed boost to incomes.
Barclays Bank, for example, said as recently as May that profits on a 400ha (1000-acre) arable farm could be raised 74% by dealing in euros and using relatively-cheap Continental loan rates.
But that requires an income stream in euros, which, for many farmers, depends on being able to take subsidies in euros. And the chances of this happening next year are looking less likely.
"I am confident that the option will be there, but we just do not know when," says Barclays John Page.
There are, however, other benefits to be had. "A farmer could use the internet to find suppliers – particularly of machinery – where there could be an advantage to buying on the near-Continent. The savings could be quite considerable."
In this climate, interest in opening euro accounts before E-day on Jan 1 is "continuing and growing" says Mr Page. And nearly a third of Barclays corporate customers already have such accounts, though caution remains among others.
"Do not rush in," is the advice of Ian Stockley at LloydsTSB. "Wait and see what happens."
With few farmers likely to have a sufficiently big euro income in the early stages, cheaper loans will not be an option for most. "The other advantages are very secondary," says Mr Stockley.
Midlands Steve Ellwood also thinks it unlikely MAFF will pay next years subsidies in euros. "So the only likelihood of a euro income is if you are dealing with a multinational or selling your produce abroad."
The money markets have been forecasting that interest rates would converge between the UK and the Continent and that sterling would weaken, which has happened over recent weeks, says Mr Ellwood. "This makes the advantages of euro loans smaller.
"The reality is, if you have locked yourself in to a fixed exchange rate, it stops you getting any benefit from devaluing £."
of the £."
Ian Kenny at the Royal Bank of Scotland points out that ever more farmers will be selling abroad as the £ weakens, ewe carcass exports increase and Farmers Ferry gears up. "Fingers crossed, the beef ban may be lifted in the not-too-distant future, too." These developments should all generate an extra inflow of euros.