The Scottish Government has confirmed that the exchange rate to be used to calculate support delivered through the 2014 Single Farm Payment (SFP) Scheme is €1= £0.7773. This represents a decrease of 7.02% on the 2013 rate.
This compares with the exchange rate for the 2013 SFP of €1=£0.83605; 2012 SFP of €1= £0.79805, the 2011 SFP which stood at €1 = £0.86665 and the 2010 rate of €1 = £0.85995.
The 2014 rate represents a seven percent reduction in the value of the Euro compared to last year. This will result in a significant drop in the sterling value of the SFP to Scottish agriculture when compared to the £445 million paid out in 2013. That comes in a year when farmgate prices for many of Scotland’s key agricultural products have taken a severe hit.
Responding to the announcement on the exchange rate to be used for the 2014 Single Farm Payment Scheme, Plaid Cymru’s Shadow Minister for Rural Affairs, Llyr Gruffydd AM said: “This announcement underlines just how damaging the Welsh Government’s decision to transfer 15% away from Pillar 1 is to Welsh farmers.
"Having already faced a 44% drop in farm incomes and a substantial cut from the European Union to the Common Agriculture Policy, this 7% drop on the exchange rate further exposes the folly of taking nearly a quarter of a million pounds away from direct payments in Wales. It has made an already difficult situation even worse.
“Plaid Cymru was right to oppose the 15% pillar transfer and we will continue to put pressure on the Welsh Government to ensure as much resources as possible come back to the industry through the proposed Rural Development Programme.”
Last year also saw the introduction of financial disciple across Europe, which stripped away much of the benefit derived from a favourable exchange rate that year. This year, financial discipline will also be applied but at one percent – approximately a quarter of the rate applied in 2013. That means Scotland will have to further readjust SFP and claims under the Scottish Beef Calf Scheme.
Europe has also entered a new budgetary period. As a result, the overall ceiling for Scotland’s support pot falls from €597 million in 2013 to €580 million in 2014.
NFUS 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. In 2012, financial turmoil in Europe saw significant weakening in the Euro - much of that ground was recovered in 2013 only for the currency to weaken again this year.
“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.
“There is the ability to change that rate setting process for the next CAP regime, starting in 2015, when the currency rate could be based on the average figure achieved throughout the month of September. Numbers would need to be crunched to determine whether such a shift would be a positive or a negative for Scottish agriculture.
“The exchange rate this year also means that the 14 percent of Scottish businesses receiving their SFP in Euros will have to think very carefully about how they manage their funds and when they choose to convert them to sterling.
“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.
“That makes prompt delivery of the 2014 SFP important to farm businesses and we have sought reassurances from Scottish Government that the 2014 payment run will commence at the earliest opportunity in December to help provide valuable stability to businesses.
“Looking ahead, we have also put down a marker with Scottish Government about payment arrangements under the new CAP regime in 2015 and beyond. The shift from SFP being paid on a historic basis to an area rate will bring complexity and challenges to administration and payment systems.
“Throughout 2015, we will be keeping in close contact with Scottish Government to ensure computer programmes and payment systems are in place to deliver future SFP payments early in the payment window, maintaining Scottish Government’s good track record in this area.”
This decrease is a further body blow to Welsh farmers, who before today’s announcement were already facing up to an average reduction in the value of their Single Payment of 14.5%, compared to 2013, as a result of the reduction in the overall CAP budget for 2014 and the decision made by Welsh Government last December to transfer the maximum amount of funds out of Pillar 1 and into Pillar 2 from 2014.
NFU Cymru President Stephen James said, “Market volatility has caused significant damage to the Welsh agricultural industry in 2014 with beef, followed by lamb and now milk prices all cut substantially during the course of the year. These challenging market conditions have highlighted once again the importance of direct payments in providing some level of income stability to allow farmers to continue to produce sufficient levels of food, produced to the highest quality standards, whilst providing some protection against market volatility.
“However a combination of our Government’s unique decision to modulate Welsh farmers to the maximum amount possible, alongside the impact of the exchange rate and CAP budgetary cuts, is going to mean despite the favourable weather conditions seen so far in 2014 there is the potential for a long dark winter ahead for the Welsh agricultural industry, with market prices continuing to be seriously depressed and Welsh farmers facing direct payment cuts estimated to be around 21% less compared to 2013.
“With Welsh farmers facing significant challenges ahead this winter, we urgently need Welsh Government to come forward with clear proposals for how they intend to use the Wales RDP to enhance the viability of Welsh agriculture. With the combination of factors that we currently face we need projects and schemes up and running to deliver RDP support direct to farm level from the start of the next programme in January 2015. Welsh farmers cannot afford to see support lost from direct payments in December 2014 without a clear timetable of when they will have the opportunity to recover this support back to their farming businesses.”
Stephen James concluded, “The Welsh Government has an excellent record in ensuring that payments are delivered to the majority of farmers on or shortly after the opening of the payment window. We hope that this level of delivery will be maintained when the window opens on Monday, 1 December.”
