THE exchange rate to be used for direct farm payments in 2017 has increased by around 5% compared with last year.

The 2017 exchange rate will be €1 = £0.89470. This is based on the average of the European Central Bank rates set over the month of September. The decision affects around 16,400 farmers who have chosen to receive their 2017 Basic Payment Scheme support in Sterling.

Scottish rural economy secretary Fergus Ewing said: “I can confirm that farmers who choose to receive their Basic Payment Scheme (BPS) support in Sterling will see an increase of nearly 5% when compared to the 2016 rate, after taking account of Financial Discipline arrangements.

“In addition, and as detailed in the recent CAP Stabilisation Plan, farmers and crofters will shortly receive a letter outlining how to apply for this year’s national BPS and Greening loan scheme. Those eligible will receive 90% of their entitlement in the first two weeks of November to a maximum of €150,000.

“I hope that confirmation of the exchange rate will provide farmers and crofters with some degree of certainty that will enable them to plan for the year ahead and continue to drive forward the rural economy."

All payments for direct farm payment schemes are originally set in Euros, with the conditions on how to convert these amounts into the national currencies of Member States that do not use the Euro are set in European Commission regulations. These allow the European Commission to set in advance the date on which the exchange rate is calculated.

NFU Scotland director of policy, Jonnie Hall, said: “The 5% lift in the exchange rate used to calculate support delivered through Scotland’s Basic Payment Scheme reflects further weakening in Sterling against other currencies – a process that started after the decision to leave Europe was taken in June 2016.

“The 2017 rate is based on the average exchange rate across the whole month of September, the third year this has happened, and the 5% figure represents a further increase on top of the 17% increase in the value of the Euro seen in 2016," explained Mr Hall.

“Although the weakening of sterling is good news for support payments and strengthens the competitiveness of UK exports, the downside can be higher priced imported inputs such as animal feed and machinery. As recent lending figures showed, farmers and crofters are likely to need every pound and euro in what remains a very difficult year for all sectors. Given the challenging situation they are facing with low prices, increased input costs and challenging weather, this – along with the announcement that loan scheme letters are being issued – will be a welcome boost at this time of year.”