Scotland’s livestock and dairy farmers could be forced to overhaul their cost structures if current exchange rates are the new norm, experts have warned.
The strength of sterling against the euro had played a big part in the collapse of farmgate prices across all sectors over the past year, with the pound gaining 20% on the euro since 2013.
This had hit lamb producers particularly hard, with about half of the year-on-year drop in sheep farmers’ returns being caused by the currency changes.
AHDB beef and lamb sector director Nick Allen said international demand for British produce would not drop away, but producers would have to accept lower prices for what they exported.
“It could stay like this for a long time, so the industry needs to readjust and take stock,” he told visitors at the Livestock Event.
“It could be the reality and people need to do their sums.”
Rob Hitch, of accountants Dodd & Co, said the change in interest rates had made things increasingly difficult for dairy producers too.
The current average EU milk price of 30 cents/litre would have been equivalent to 27p/litre last year, but it was about 21p/litre at today’s rates, he said.
This was a problem for more than 80% of milk produced in the UK that was not covered by a cost-of-production contract.
Dairy farmers outside retailer producer pools were fully exposed to European prices, where the exchange rate was playing a major role, Mr Hitch said.
“The past five years have been quite good because of the exchange rate, but it probably lulled people into a false sense of security,” he added.