Carter Jonas
Carter Jonas

Low Euro conversion rate compounds woes

The Euro / Sterling exchange rate for European support payments for farmers has now been fixed for the 2015 year.

Unlike in previous years, when this conversion rate was fixed on the exchange rate on 30th September only, this year the rate is fixed on the average exchange rate throughout the month of September.

The reason behind this change was to reduce the volatility and unfairness that could be created by using just one date to fix the conversion rate for the whole year but despite this sensible move the value of the Euro has remained subdued. As a result the conversion rate has been fixed at the rate of 1Euro = 73.14p, the lowest rate farmers have received for eight years and 6% down on last year’s rate.

However, because of the introduction of the new Basic Payment Scheme this year, we are still a long way short of understanding how this will actually translate in terms of cash in a farmer’s pocket. This is because the Rural Payments Agency (RPA) still has to calculate the actual value of “a Basic Payment Entitlement” before the conversion rate can be applied.

In this context there are still a number of unknown factors which need to be sorted before the value of an entitlement can be calculated. These unknowns include:

- The effect of rebalancing entitlement payments between the Lowland, Severely Disadvantaged and Moorland areas

- The change in the number of entitlements claimed compared to the previous Single Payment Scheme due to the introduction of a minimum claim size and other new rules

- The deductions which will be made to fund the National Reserve and the Young Farmer Payment

- The annual change to the Basic Payment Scheme National Ceiling (budget)

- The rate of “Financial Discipline” (basically budget cuts) which may be imposed by Europe

Then there is the question as to when the new payments will be made. Under the old scheme, in recent years most payments were made shortly after the payment window opened in December, and the RPA continues to sound confident about “making the majority of payments in December and the vast majority before the end of January”.

However, many commentators are pessimistic that the RPA will achieve these timescales and are suggesting farmers should not budget to receive payments until February or March next year. This will obviously put many, already cash-strapped farmers, under even more unwanted financial pressure in 2016.

James Stephen

James Stephen

Partner

James is a partner who heads up Carter Jonas’ South West rural operation, managing the teams in the four offices of Marlborough, Bath, Taunton and Truro.  He primarily works out of the Taun...

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