Green £change looks certain
A REVALUATION of the green £ on Jan 21 is looking a virtual certainty, leading to cuts in support prices for many agricultural commodities.
Sterling has continued to strengthen over the holiday period, in anticipation of a new year interest rate hike, opening up a gap over the agricultural exchange rate of about 8%.
If this is still the case by Jan 21 (the end of the 50-day monitoring period), then green rates will have to be adjusted to halve this gap – in other words, a 4% revaluation, taking the ecu rate down from 81p to about 78p.
The main disadvantage of this is that support prices and export subsidies would fall accordingly. This would take about £4/t off cereal intervention, with equivalent falls for butter, skimmed milk powder and beef.
But at least if the revaluation goes ahead, it will be deemed an "appreciable" one by Brussels. As such, government can request that green rates for area aid and headage payments are frozen at current applicable levels until Jan 1, 1999.
This would keep arable payments, which take the green rate on July 1, at 1996 levels. But the change will be too late to help this years livestock payments, which take the rate applying on Jan 1, 1997. At about 81p/ecu, this is more than 5% less than that used to convert suckler cow and beef special premiums in 1996.