DAERA has confirmed that the exchange rate for 2016 CAP Payments is the average rate recorded by the European Central Bank for the month of September. The rate used will be announced on 30 September.
Commenting, Ulster Bank’s senior agricultural manager Cormac McKervey said: “While Sterling has strengthened following its plunge due to Brexit it is still weak versus last year. The conversion rate on September 30th 2015 was 73p. It is likely going to be around 10p up at 83p this year.
“Obviously, this still has be confirmed as it’s the average exchange rate over the month of September that will decide figure used.
“But assuming a figure of 83p then the rate would be 14% up on last year and would equate to that last seen in 2013. This will mean more money paid out to farmers. The weaker sterling also helps with exports as it makes our food more competitive in GB versus food from euroland and it encourages GB based importers to buy locally rather than importing.”
He continued: “For the last 25 years, Northern Ireland’s farmers have done better when Sterling is weak. There are downsides in that inputs are more expensive particularly those that are traded in euros or dollars. Grain and proteins have already risen in price which is partly due to exchange rates.”
According to the Ulster Farmers’ Union, the conversion rate from euro to sterling for direct payments has a big impact on farm incomes. A Union spokesperson said: “But it is beyond the control of the farming industry. This year it looks as though things will be to farmers’ advantage, thanks to the post EU referendum weakening of sterling. This however comes after two successive years when the currency rate went against farmers.
“An improvement in the sterling value of direct payments will be a welcome boost at the end of a grim year for farming families – but it will not solve the deep financial problems the industry faces.
“It is also important to remember that currency markets are volatile, and that it will only be possible to forecast the final rate closer to the end of this month when the conversion rate is set.
“A better rate and advance payments during October will be welcome, but the problems remain and it would be wrong of banks to expect farmers to use the gains from these to pay down debts more quickly than planned.”