Farmers earnt more with euro Single Farm Payment
Farmers who have elected to receive their Single Farm Payment in euros and secured forward contracts to convert it to sterling are up to 6.7% better off than those who didn’t.
Some farmers have secured a rate of 1.09, and if they had instead elected to receive their payment in sterling, they would be worse off.
Bryan Wood, of Cow Pasture Farm in Milton Keynes, commented: "I have been delighted with the outcome of this year's Single Farm Payment, which has given me more pounds than I would have got had I elected to receive it in sterling.
"Being able to fix the rate has given me peace of mind and has allowed me to budget for the next two years, knowing exactly how much I will be receiving."
Tom Streeter of Harps Farm near Bishop's Stortford secured an exchange rate of 1.14 for his 2010 Single Farm Payment (SFP), that he will receive in January 2011. He said: "Being able to fix the exchange rate with a forward contract has the additional benefit of being able to budget more precisely a year in advance.
"Other decisions in farming have to be made well in advance of the SFP, such as spray and fertiliser choices. Being able to 'fix' one more variable gives a clearer picture and therefore aids these decisions.
"Things do not happen quickly in farming so having this much time is important. Waiting to find out how much the SFP will be until 30 September can compromise this, especially in the last two years where we have seen such volatility."
Elisabeth Dobson, head of private clients at foreign exchange broker World First, said: "Farming clients of ours secured a rate of around 1.09 back in March for their 2010 SFP. The extra money this has given them, compared with their counterparts who didn’t fix a rate, is invaluable.
"In addition, securing the exchange rate in advance and knowing exactly how many pounds their SFP will give them has enabled our farming clients to budget well in advance. In fact, we can fix exchange rates for farmers up to two years in advance."
Farmers receive an SP5 form on which they indicate whether they wish to receive their Single Farm Payment in euros or sterling. They had to remit this form for their 2010 payment by 17 May 2010.
By opting to receive the payment in euros, farmers can decide when they convert their euros in to sterling.