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Exchange rates cause UK farmers’ subsidies to shrink

Staff Writer |
Farmers who receive EU subsidies stand to lose out if they don’t account for shifts in currency exchange rates.

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Subsidies like the Basic Payment Scheme are paid to farmers from the EU, with the amount each individual receives being based on a number of factors – including how much land a farmer has, the levels of animal and public welfare that they maintain and their ability to operate sustainably.

The amount that farmers receive is set in Euros by the EU. However, farmers have the option to receive their payment in sterling instead.

The EU calculates the amount in sterling that the farmer will receive based on an exchange rate defined by the European Central Bank at the end of September each year.

However, farmers do not receive their final payment until much later, meaning that the amount they receive is based on a historical exchange rate.

The newest round of regulation under the Markets in Financial Instruments Directive (MiFID ii) places new requirements on many financial services companies, requiring them to be more transparent in their reporting in an attempt to create a more open and evenly-balanced marketplace.

However, some smaller providers may be unable to meet these new requirements, ultimately resulting in them discontinuing hedging products that farmers have used in the past.

Larger firms and banks look set to remain active in the marketplace, but the pool of choices available to farmers is likely to shrink.


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