Green pound revaluation could cost farmers £62m

THE Department of Agriculture is making last ditch efforts to prevent a revaluation of the green pound, which would cut the value of intervention payments to farmers.

The first-ever revaluation for Irish farmers is due to come into effect on Monday, but the Department is in Brussels making a case for a 20-day extension.

The IFA is warning the revaluation could cut payments to Irish farmers over a full-year by as much as £62 million. The Department, however, is far more sanguine.

The Minister for Agriculture, Mr Yates, was in contact with EU Commissioner, Mr Franz Fischler, yesterday. A spokesman said he remained hopeful the revaluation would not be as high as 3.5 per cent.

The IFA and others also hope that if the Department does win the extra days, the currency markets will simply turn around and sterling will fall back.

However, even if that does not happen, extra days of intervention at current prices could make a significant difference, according to Mr Martin Varley at the Irish Co-Operative Organisations Society (ICOS).

The extra 20 days would help cereals as intervention only started at the beginning of this months, while up to 90,000 cattle could be put through the system at current prices, he added.

The Department spokesman insisted the IFA estimate of the cost of revaluation was not taking the value of pre-fixing into account. "The price has been set for up to 40,000 animals and most of the big kills will be over within 10 days," the spokesman said.

But, according to Mr Varley, the "pre-fixing" which the Department referred to was simply a once-off sheltering. "It is small and only lasts a few months; the Department should not try to underestimate the impact this will have," he said.

ICOS and Davy stockbrokers both broadly agree with the IFA view of an approximate £60 million loss to farmers over a full year. According to Mr Oliver Mangan, economist at Davy stockbrokers, all EU transfers would not be affected as there was a derogation with regard to the subsidy part of some compensation packages until 1999.

"The market support measures, like intervention and export refunds, will be cut by around 3 per cent," he said. "Nearly all of that goes to beef farmers."

The value of Irish beef output is £1.5 billion and the floor price is set by EU support, so the revaluation would cut output by £45 million. The revaluation would also affect cereals and sugar, he added. "If you add those together you come close to £60 million," he said.

Mr Mangan also pointed out there would be a knock-on affect on the dairy industry. World prices have been falling and many co-ops have not yet passed on the price cuts to farmers.

Mr Varley said he estimated the effect on the dairy industry could be £30 million in addition to what may be required in any case.

The green pound is being revalued because the actual pound was worth over 5 per cent more than it. The authorities then had five 10-day periods to bring the pound closer to the green level. The Central Bank even sold the pound in an attempt to lower its value - but all efforts failed.

In the end, sterling strength took the bank by surprise and made the job practically impossible. Even if the Department succeeds in getting Brussels to bend the rules, it is unlikely the Central Bank will again intervene on behalf of the farmers.

If the lobbying fails, the green rate will be cut next Monday, the end of the final 10-day period. The amount of the cut will be half of the difference between the current value of the pound and the current value of the green pound. Recently, this has been running at around 6 per cent - so a revaluation around 3 per cent looks most likely.