Green £ revaluation looks certainty
A GREEN £ revaluation seemed almost unavoidable as FW went to press this week (Wed).
Although the recent weakening of sterling had raised hopes that a revaluation might be avoided, the £ entered the final confirmation period on Apr 23 at about 3DM, slightly above the crucial 5% gap between sterlings market value and the green £ rate which triggers a revaluation.
Had the £ slipped below 2.99DM for a sustained period, it could have cut the rolling daily average to below 5%. But it remained at or near that figure through to Wednesday, the second last day of the confirmation period.
At Wednesdays rates, the revaluation would have been 2.57% (half the value of the gap to reduce the difference below 5%). This would cut the May intervention price (£87.79/t) by £2.31/t, says the HGCAs Gerald Mason.
But area aid payments are hit twice – they are also affected by last Augusts revaluation of 3.6%, which came too late to change current values. As a result, compared to last harvest, English cereal area payments would fall by £15.51/ha, oilseeds by £27.42/ha, assuming no reductions in aid due to area overshoot and high oilseed prices, which Mr Mason reckons is unlikely.
Compensation payments under various BSE-related schemes will also be hit, notes the MLC, with OTMS payments down about 1.5p/kg, and calf processing payments down about £2 a head.
Assuming there are no further green rate changes, the intervention milk price equivalent will fall by about 0.5p, which could pull down milk values after the next selling round, says consultant Mike Bessey. *