Euros or Sterling for Single Farm Payments?

The results from a survey of 5144 farmers, conducted by the National Farm Research Unit (NFRU), reveals that 7% of all farmers interviewed had elected to receive their 2009 Single Farm Payment in Euros, with 69% keeping to the default option of being paid in Sterling. The remaining 23% of farmers interviewed did not know which currency they were to be paid in.

The National Farm Research Unit asked over five thousand farmers which currency they were asking to receive their Single Farm payment in this year. "The option to elect for payment in Euros had to be exercised by the 15th May when the SFP claim was submitted, with payments expected to start around the 1st December. We have been asking our farmers about this over the last two months and it appears that the majority have chosen to go with the default currency which is Sterling," says Jim Williams of the NFRU.

Jim Williams points out that there were very few differences between enterprise types, with 8% of arable farms and 7% of livestock enterprises wanting to be paid in Sterling. "However there were some interesting regional variations, with 19% of farmers in Scotland electing to be paid in Euros, much higher than in any other region. Farmers in the East and in Yorkshire and Humberside Regions were the least likely to be paid in Euros (just 4% of farms), with just 5% of farms in the East Midlands, West Midlands, the North West and Wales choosing Euros."

Farm consultant and commentator David Bolton of David Bolton Partners is unsurprised at the results of this poll. "Only a few farmers appear to have elected to go against the default system. There is a slight indication that the more sophisticated enterprises are looking at the Euro option harder, but doing so would require a sound knowledge and appreciation of exchange rates, which not even the financial experts can claim. You only have to look at the way the Euro: Sterling rates have fluctuated. In September 2005 one Euro was worth 0.68. In September 2008 this was 0.79 and by December 2008 0.98. It is difficult to predict what it will be in September 2009."

David also points out that electing to go for payment in Euros would mean venturing into complex areas and one that many farmers may not be fully conversant or comfortable with. "Farmers are experts in farming and not necessarily experts in finance or currency exchange. Opting to be paid in Euros and so being able to predict future currency fluctuations maybe that step too far for most. This is particularly so at a time when the currency markets have been so volatile."

He adds that many farmers don’t want the complexity or the additional cost of electing to change from traditional sterling payments. "Many may think that if they get as good a rate as they did in the last four years and maybe even more than last years payment, this is what they will budget to get. After all many farmers don’t sell their grain forward, so it is perfectly logical that they won’t want to trade their currency forward either!"

For further information or comment, please contact Jim Williams, Marketing and Communications Director of Precision Prospecting on 01728 622500 or David Bolton, David Bolton Partners on 01953 714030 or on his mobile 07860 742440.