Foreign exchange rates could see farmers lose out on thousands of pounds when they receive EU subsidies, while new regulation means that farmers will have less choice when they look for a foreign exchange broker.

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

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 delay between the BPS exchange rate being set and payments actually being made is an issue for farmers and could end up costing them thousands of pounds,” said Brian Harris, chief product officer at Currencies Direct, a foreign exchange and currency management service.

“However, the fact that farmers can elect to be paid in Euros is a great opportunity for them to mitigate this risk. Doing so means that farmers ultimately have more flexibility. A good currency management service can help them secure the best possible EUR to GBP exchange rate to ensure they don’t lose out."

Richard Batty of Reuben Wilson and Son, a farm in West Yorkshire, said: “I do think there’s a lack of awareness among the farming community about the fact that BPS payments are available in Euros. Not many people know about it, or they don’t know the benefits it can have.

“We’ve always chosen to receive our payment in pounds because we thought it was easier – we never really looked into drawing it in Euros. Now that I know of the benefits it could bring I’d definitely think about taking the payment in Euros and using an FX provider to transfer it back into pounds.”

New regulation that came into force at the start of 2018 may see some FX providers leaving the marketplace and reduce the number of counterparties available to farmers when they look for a foreign exchange provider.