Farm support blow for Scots producers as exchange rate plunges by 7%

Payment scheme: European bank decision affects 16,000 SFP recipients

The exchange rate to be used for the 2014 Single Farm Payment Scheme has fallen.

The rate has been set at one euro being equal to £0.7773 by the European Central Bank, a fall of almost 7% compared to last year. The decision affects about 16,000 Scottishfarmers who choose to receive their Single Farm Payments (SFP) in sterling.

In addition, the European Commission is proposing to apply a budgetary control mechanism called financial discipline for a second year, which would mean a further 1% reduction on all direct payments over 2,000 euros. This will be confirmed later in the year.

2014 is the first year of the new Common Agricultural Policy (Cap) period which sees a reduction in Scotland’s farm funding budget. However, only 9.5% of direct farm funding will be transferred to the rural development programme in the new Cap period compared to 14.5% last year.

Rural Affairs Secretary Richard Lochhead said: “Thesterling/euroexchange rate has fluctuated in recent years and so this reduction is not entirely unexpected. Nor is the reduction in Scotland’s Cap budget which was imposed upon us – despite the best efforts of the Scottish Governmenttosecureafairdeal for Scotland’s farmers.

“The scale of the financial challengewe are facing in this Cap budget period will now be clear. However, this is the final year of Single Farm Payments – 2015

“The scale of the financial challenge will now be clear”

will see the start of Scotland’s new Cap package whichwill target support at genuinely active farmers – including newentrants – as well as specific measures to support Scottish livestock producers and the environment. It is the best possible deal under the difficult circumstances we find ourselves in.”

Mr Lochhead said the Scottish Government has a strong track record in making early Single Farm Payments, with typically 90% of farmers receiving funds by the end of December.

“We are striving to achieve a similar timescale for payments this year, but need early clarity from Europe on the level of any further mandatory reduction we will have to apply.”

NFUScotland director of policy Jonnie Hall said: “Today’s exchange rate setting is a huge factor in determining the value of support delivered to all eligible farm businesses in Scotland. With 16,000 Scottish SFP recipients receiving payments in sterling, volatility in currency remains a constant worry for many businesses, especially when the rate-setting process comes down to a single day.

“This year, the exchange rate has worked against many businesses, budgets were already reduced and financial discipline will still impact on the vast majority of SFP recipients. That comes in a year when virtually every single sector in Scottish agriculture has struggled with farmgate prices.”

Jonnie Hall