Pound weighs heavily on UKfarmers
NFU leader Sir David Naish has requested an urgent meeting with Eddie George, Governor of the Bank of England, to discuss the harm the strong £ is doing to UK agriculture.
In a letter to Mr George, Sir David said that farming was being hit on two fronts – the lower prices received for exports, and the downturn in farmgate prices caused by green £ revaluations.
"This has meant that prices of all agricultural products had fallen in June 1997, in excess of 15%, measured year on year, and look likely to fall further. "Farming income will be acutely lower in 1997 and, as a consequence, investment is also likely to fall sharply."
Sir David explained that several of the main agricultural sectors, including cereals, lamb, pork, butter and cheese, exported up to 40% of production. But the strength of sterling was undermining that business.
The beef sector was hit both by the continuing export ban and the strong £ which was sucking in increasingly competitive products from abroad.
The rise in sterling also had an impact on the green £, with reductions in support prices, caused by revaluations, feeding through almost immediately to UK farmgate prices. The UKs green £ was revalued by about 14% in the 12 months from June 1996. And, with another revaluation likely on Aug 20, Sir David has asked for a meeting with the Governor to discuss the situation in full.
The next revaluation is forecast to knock 4.8% off support prices. That would take November grain intervention down £4.50 to about £82/t, and would lower Milk Marques base selling price by another 1p to about 18.8p/litre.
OTMS rates will also fall again, by about 3p to under 55p/kg lw for cows and 62p/kg lw for other cattle from Sept 1. Calves entered into the calf processing scheme are likely to get £4-£5 a head less from Oct 1.
Arable area aids will not be affected as these were fixed on July 1. But suckler cow and beef special premium for 1998, and sheep annual premium for 1997, will be hit, as these all take the green rate applying on Jan 1, 1998.
With further rises in sterling expected, as the Bank of England raises interest rates, more revaluations are likely.
As such, the NFU is pressing government to apply for compensation, available from Brussels for all farmers who have suffered from green currency movements.
But, despite months of lobbying, the only response the NFU has had is that government is still "considering the matter".n