With UK farmers set to discover the value of their Single Farm Payment on Monday (September 30) the prospect for Euro/Sterling exchange rates looks relatively settled going forward into  2014, although a little below current rates.


"While currency markets remain volatile, possibly pushing Euro  values down towards  82p before the end of this year, the currency's value against Sterling in 2014 is  currently forecast to be around 83p," said Clydesdale Bank chief economist, Tom Vosa.


"The fading of political risk within the Eurozone has  been helped by the conclusion of the German election and the general easing of immediate concerns over the Greek crisis. This still leaves the euro a little weaker against the pound from its current value, however, as the ECB continues to add liquidity into the eurozone banking system"


For farmers who are depending on the official Euro/Sterling exchange calculation made for SFP on Monday, the use of a single day rate to set the value of such an important payment inevitably exposes their business to a degree of income risk. During the last 12 months, for example, the Euro has ranged in its Sterling exchange value from 79.5p to 87.47p, injecting close to a 10% gain/lose factor into the annual payment.


Many producers control their own SFP exchange rate process, of course, a choice supported by David Hannon, Head of Agriculture, Clydesdale Bank.


"While those who take control of the currency exchange process themselves can never be guaranteed a Euro/Sterling benefit in relation to the September 30 rate, their hands-on approach removes the risk of suffering from a currency collapse on the critical conversion day.


"Locking into an acceptable forward Euro/Sterling position, or holding SFP in euros until an acceptable currency position is reached, places financial control with the producer concerned, not the marketplace. Such  income certainty in relation to SFP can play an important part in freeing the business concerned to achieve planning and development efficiencies without having to include an unknown figure in the annual budget."