Exchange rate for Direct Payment is announced

John Henning, Danske Bank
John Henning, Danske Bank

Agriculture and Rural Development Minister Michelle O’Neill has confirmed that the Sterling equivalent for the 2015 Direct Payment will be made using the exchange rate of €1 = £0.73129.

On the basis of the new rate, it is estimated that the total net value of 2015 Direct Payment to local farmers would be in the region of £236.04million compared to £250.89million had the 2014 exchange rate applied.

Direct Payments are set in Euro and converted to sterling each year using the exchange rate calculated in accordance with the EU regulations. In 2015, the rate is the average market rate for the month of September according to the European Central Bank.

Noting the exchange rate, the minister said: “This exchange rate is a reduction on last year’s rate and will be unwelcome news for local farm businesses as it will reduce the amount of Direct Payment received in what has been a difficult year for our farmers. The Direct Payment, like its predecessor the Single Farm Payment, remains an important element of farm incomes and although it has been a challenging year of change for my Department, I remain committed to ensuring that payments are issued to local farmers as early as possible.”

Commenting on these developments Danske Bank Head of Agricultural Relations John Henning said that the £0.73129 figure was based on the average European Central Bank exchange rate during the month of September.

“This compares to the rate calculated on 30th September only in previous years,” he added.

“This is down 6% on the 2014 exchange rate of £0.77730 and nearly 20% less than the most favourable exchange rate of £0.90930 which was used in 2009.

Mr Henning confirmed that, during 2014/15, the ECB exchange rate has ranged from £0.7989 (November) to £0.6963 (July/August).

“However, the modest improvement in recent weeks must be considered as welcome news for the industry,” he said.

“However this is still the lowest exchange rate for eight years with the further reduction, compared to the 2014 exchange rate, impacting negatively on farm incomes in 2015 and cash flow later this year.

“In light of ongoing industry difficulties in many sectors, particularly dairy, this reduced income will be keenly felt particularly on those farms where BPS payments may already be reduced following reform of the CAP and the introduction of area-based payments.

“Timely payment to farmers by DARD in December will therefore be particularly important to assist cash flow where farm incomes have already reduced due to lower commodity prices during the year.

“At Danske Bank we continue to work with our farming customers recognising that agriculture is a long term industry subject to global factors beyond the farm gate, volatile commodity price movements and the vagaries of the weather.”

MEP Diane Dodds said the rate would make a difficult climate even tougher for farmers.

“Although disappointing, it is more positive than the exchange rate back in early August, which was €1 = £0.70.

“However, it is important to note that the value of this payment has decreased by £40m in the past two years,” she said.