PAYMENTS MADE to farmers under the 2017 Basic Payment Scheme look set to be about 4% higher than in 2016 because of a more beneficial currency exchange rate.

Under the rules of the Common Agricultural Policy, support payments for farmers across the UK are set in euros and then converted to Sterling using the average European Central Bank exchange rate recorded across the month of September.

From September 1st to 25th inclusive, the average rate has been £0.89866 pence per euro, fluctuating from a high of £0.92075 at the start of the month to a low of £ 0.87938 on Sept 25.

If this is extrapolated to the end of the month, it suggests a final 2017 exchange rate conversion in the region of £0.89p/€, several pence up on the final conversion rate for the 2016 BPS scheme, which was €1 = £0.85228.

NFU Scotland director of policy, Jonnie Hall, said: “While the exchange rate to be used to calculate support delivered through Scotland’s Basic Payment Scheme has yet to be finalised, it is going to reflect further weakening in Sterling against other currencies – a process that started after the decision to leave Europe was taken in June 2016.

“For 2017, the rate will be based on the average exchange rate across the whole month of September, the third year this has happened, and the final figure is likely to represent a further increase on top of the 17% increase in the value of the Euro seen in 2016.

“Although the weakening of sterling is good news for support payments and strengthens the competitiveness of UK exports, farmers and crofters are likely to need it all in what remains a very difficult year for all sectors," added Mr Hall. "Given the desperate situation many farmers and crofters in Scotland are facing with low prices, increased output costs and challenging weather, this will be a welcome boost at this time of year.”

The head of the Scottish farming department of land agents Strutt and Parker, Mary Munro, agreed: “Any increase in the value of payments will be a welcome boost to farmers.

“While farm profitability has improved over the past 12 months, with a weaker pound leading to commodity price rises, farm incomes for many businesses are still way down on 2011/12 levels and levels of farm borrowing are also at an all-time high.

“At the start of the month it did look as if the confirmed exchange rate would be the highest we have ever seen by some margin," she noted. "However, September has proven to be a changeable month in terms of currency, with hints of interest rises from the Bank of England causing sterling to strengthen against both the euro and the dollar.

“As it stands, farmers are potentially looking at payments being as much as £10/ha higher on Region 1 land than last year, although this varies for each business depending on the direction of convergence.”