The exchange rate used to convert euros to sterling for the 2014 Single Farm Payment (SFP) will be €1 = £0.77730. It is the lowest rate since 2007 and 7% lower than the rate used in 2013 (€1 = £0.83605).

This year is the final time that the rate will be based on the market rate according to the European Central Bank on 30 September. From next year, the exchange rate will be calculated using the average market rate during the month of September. If that system had been in use this year, it would probably have resulted in a rate close to €1 = £0.79.

Calculating what the new rate might mean for an individual farmer’s SFP in 2014 is complicated slightly by changes in how modulation is applied. In 2013, compulsory modulation of 10% was removed from payments over €5,000 but, in 2014, the current best estimate is that 9.25% will come off all entitlements (to account for modulation and to stay within EU budget limits).

It means that a farmer with entitlements worth an initial €10,000, received a SFP in 2013 of £7,779, but this will be down to around £7,054 in 2014. A farmer with initial entitlements of €20,000 will see their SFP fall from £15,098 to around £14,108 this year, while someone with €50,000 entitlements will drop from £37,056 to £35,270.

It is a significant hit to incomes at a time when margins in many sectors are already under pressure. However, the key issue is that as many farmers are paid in December 2014 as possible. As bad as the drop is in the value of the 2014 SFP, it is much more stressful when it does not arrive in the month expected. The current DARD target is to get 93% of claims paid this December.