Volatile pound will affect amount UK Farmers receive from European subsidy; Moneycorp offers free service to maximise payments

With the 17th May application deadline fast approaching, Moneycorp is warning all British farmers to act now and take control of their Single Farm Payment or risk losing out. Farmers should opt to be paid in euros so that they can take control of their payment and plan ahead. By electing to take their payment in euros, farmers will be in a better position than if they were to leave things to chance and take the payment in sterling. Last year, UK farmers that applied for the Single Farm Payment in euros could have received 7% more than if they chose to receive their payment in sterling[1].  

The Single Farm Payment is calculated in euros and if a farm chooses to be paid in sterling, the amount will be converted according to the European Central Bank exchange rate set on 30th September 2010. There is no guarantee that the value of sterling against the euro will be favourable at that time and farmers are therefore left at risk of a weak euro, or strong sterling, resulting in a lower value payment. Electing for euros will mean farmers have a variety of choices as to how and when they wish to manage their payment and with the help of a currency specialist like Moneycorp, ensure they achieve the best possible exchange rate.

To help UK farmers plan for movements in the currency markets and make the most of their Single Farm Payment, Moneycorp offers a flexible solution. Farmers can elect to take out a free, forward contract which allows them to fix an exchange rate for a future date. Alternatively they can select a foreign exchange option which allows them to guarantee themselves a minimum exchange rate whilst benefitting from any improvements. Knowing exactly how far the Single Farm Payment will stretch should also make planning and budgeting for the farming year more manageable.

As Chris Redfern, a dealer at Moneycorp explains:

“Given the current unpredictability of the currency markets, it is crucial that farmers understand how to ride the currency wave and prepare themselves for its various peaks and troughs.

“A currency specialist like Moneycorp can offer a variety of choices as to how to manage their payment such as ‘forward contracts’ or ‘options’, which allow farmers to secure a exchange rate in advance of the payment date. And in today’s economic climate, this could be very favourable. We have helped several farmers to trade their payment at 0.90p per Euro.”

[1] If farmers had chosen to receive euros and fixed the exchange rate in January 09 @ €0.9799 they would have received £18,645.72. Based on the average payment of €19,028.19 this is £1,343.39 or 7% more than if they had chosen to be paid in sterling (based on ECB rate of 0.9093 set on Sep 30th 2009). Therefore, the 107,500 farmers choosing to receive their payment in sterling lost out at on an average of £1,343.39, a total of almost £144 million.