Weather offsets weak Pounds benefits
By Andrew Shirley
ARABLE producers are unlikely to benefit significantly from the Pounds current weakness against the Dollar, and livestock farmers could be faced with higher feed bills.
Sterling is languishing at a 15-year low against the Dollar, worth just $1.389 on Wednesday (13 June).
This would usually make UK commodities more competitive on the world market, but low plantings and the extremely wet weather this year means there will be very little crop available for export.
“It looks like the UK cereal harvest will be approximately equal to the domestic market,” predicts the HGCAs Rupert Somerscales.
“A strong Dollar usually benefits our export market, so although prices should start to firm slightly, if we had been in this situation last year there would have been much more of an influence.”
But livestock and dairy farmers are likely to suffer, according to ABN Feeds Chris Rackham.
“Many straights, such as maize gluten and soya bean meal, are dollar denominated and the fall in sterling has already added 3/t to the cost of gluten.
“Coupled with higher-than-usual demand, this will inevitably lead to higher feed prices as we go into July.”
However, when it comes to arable area payments the Pound-Euro rate is all-important. These are calculated using Junes average exchange rate.
During the last week of May, the Euro averaged 60.45p.
Following Labours election victory it rallied to a peak of 61.5p and has so far averaged 60.61p during June.
Going on these figures, NFU economist Peter King says farmers would be in line for a 40 million agrimoney pay-out.
At the present exchange rate Mr King calculates area payments for cereals and set-aside will stand at 219/ha after modulation, but if the Euro continues to hold its position, this could increase to just over 221/ha before scale-back deductions, thought to be about 3% in England.
1=61.14p; 1=$1.389 on 14 June|
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