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Favourable exchange rate brings timely relief to farmers

With farm incomes under pressure over the past year, news the exchange rate used to calculate basic payments is the most favourable since 2011 and will bring some relief.

Written by Matthew Sawdon

Recent forecasts for net farm income for all farm types for the year to March 2016 are down by 25 per cent, equivalent to an average of £13,000.

The 2016 exchange rate for this year’s Basic Payment Scheme has been set at €1 = £0.85228 – an increase of 16.5 per cent on 2015.

The rate is based upon an average of the European Central Bank exchange rates in September and is adopted to calculate the BPS, as well as other elements of the CAP direct payments regime.

In other developments, land parcels
of two hectares or less next to a watercourse will have to comply with cross compliance from 2017, to protect against pollution and run-off from agricultural sources by maintaining buffer strips. Furthermore, the review of greening requirements is now delayed until 2018.

It is understood proposals to extend the Ecological Focus Areas (EFA) fallow period from six to nine months, and also reduce the proposed extension to the minimum period for catch and cover crops from 10 to eight weeks have been dropped. However, it seems the proposal to ban the use of chemicals on nitrogen- fixing crops remains.

Revised claim statements should be checked carefully, especially revised statements following a top up payment for an incorrect 2015 payment. We
are aware of circumstances where this additional payment is incorrect. The RPA should be contacted without delay.

Following the Chancellor’s August announcement that the government will match the current level of agricultural funding until 2020, clients are reminded to carefully review existing farming arrangements and consider the implications of future funding when entering into new arrangements and tenancies.

Entitlement trading is expected to commence in early 2017.

Early indications say the market is likely to commence at around £200 per unit as it did last year.

In 2016 the market was subdued because of the uncertainty of the Brexit vote, however improvements in the exchange rate may help strengthen prices.

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