Farmers could reap profits from a spot of currency speculation

Playing the currency markets is not farmers' usual line of work, but the choice of currency in which they wish to receive their single farm payment (SFP) could have considerable financial implications.

The SFP was introduced in 2005 to replace a raft of former subsidy schemes. The SFP is based on the historical average of support paid to a farming business during the reference years of 2000-2.

There is a progressive reduction through "modulation" with this element increasingly directed towards environmental schemes.

Farmers have now submitted their applications for this year's SFP – which is paid towards the end of the year – and may well already have opted for payment in sterling or euros. They have until 30 June to make or amend their currency choice, a decision that could be very important this year.

The exchange rate for the SPF is fixed on one single day – 30 September – but any farmer arranging a euro-denominated bank account can agree with his or her banker a fixed rate of exchange, in effect taking a bet on which way the currencies will move between now and the autumn.

Currently one euro is worth 80p while 12 months ago the rate of exchange was nearer 68p.

Scott Walker, senior policy director at NFU Scotland, said: "It is worth most farmers discussing the pros and cons with the agricultural advisers of their bank. Many more people have chosen to receive their 2008 payments in euros than was the case last year.