The gross value of the 2013 single farm payment in the UK will be worth 5% more than last year thanks to a weaker pound.

The European Central Bank’s final September exchange rate used to convert the euro-based SFP into sterling valued €1 at £0.83605 compared with £0.79805 in 2012.

While it is tempting to make approximate calculations for English SFP values based on the flat rate figures set in 2012, for example €323.91 for non-SDA, and 19% modulation, the final figure could be lower, warns Paul White, partner at rural consultants Brown & Co.

“As well as the usual small adjustment relating to the number of entitlements activated nationally, there is a much more significant unknown this year that will affect the final SFP calculation – a potential 4% cut due to financial discipline.”

This mechanism, which applies to all member states receiving the full direct payment value at the beginning of 2013, is designed to prevent expenditure exceeding the budget set by Brussels for Pillar 1 payments. Although established in 2003 this is the first time financial discipline has been triggered, says Mr White.

“Until 2012 there were enough funds to meet these Pillar 1 costs. However, demands have been increasing in recent years, mainly due to the phasing in of direct payments to new member states and a reduction in budget ceilings agreed last February.

“We’ve learned from colleagues at the NFU that the European Commission recently issued an implementing act which would set the necessary rate of financial discipline. This is likely to be around 4% for amounts over €2,000, though the actual figure will be subject to change for the next couple of months. This could negate much of the gain we’ve seen in sterling terms.”

The £:€ conversion rate was significantly better than last year but below the previous two years and well under the 0.91 rate seen in 2009. “We’ve seen a lot of volatility, including a near 10% swing in the exchange rates in the past 12 months,” says Mr White. “As recently as the end of July the euro reached 87.3p.”

Farmers need to keep a close eye on exchange rates – if it looks like sterling is set to strengthen again it may well be worth fixing the conversion rate to avoid any nasty surprises in a year’s time, he advises.

Although the RPA has been sending out SFP cheques much earlier than was the case, with around 90% of last year’s payments processed before Christmas, it is under no obligation to do so, Mr White points out.

“The payment window runs from 1 December through to the end of June 2014. For cash flow purposes it is prudent to budget for March receipts and to be prepared to make alternative arrangements if payments are delayed further.”

“It is also worth noting that the RPA values will assume a business has met its cross-compliance obligations. With inspections on the increase, it’s worth considering Brown & Co’s Farm Compliance Health Check. Our consultants examine the main areas that would be considered by an inspector, helping to ensure farmers receive the maximum payment.”

Past SFP conversion rates

2013 – 0.83605

2012 – 0.79805

2011 – 0.86665

2010 – 0.85995

2009 – 0.90930