The euro exchange rate used to calculate support delivered via the 2014 Single Farm Payment Scheme has plunged 7% to one euro = £0.7773.
The depressing news, a result of the strength of the pound, will affect all 16,000 Scottish farmers who currently elect to take receipt of their SFP in sterling.
In a further blow, the European Commission is proposing to apply a budgetary control mechanism called financial discipline for a second year, which would mean a further 1% reduction on all direct payments above 2,000 euros.
This will be confirmed later in the year.
With the rate set by the European Central Bank subject to fluctuations over recent years, the dip was “not entirely unexpected”, according to the Rural Affairs Secretary Richard Lochhead.
It compares to a 2013 SFP valued at one euro = £0.83605; a 2012 SFP rate of £0.79805, a 2011 SFP rate of £0.86665 and a 2010 rate of £0.85995.
This year is also the first of the new CAP period which sees a reduction in Scotland’s farm funding budget.
However, only 9.5% of direct farm funding will be transferred to the rural development programme in the new CAP period compared to 14.5% last year.
Commenting on both the dip in the exchange rate and the reduction in Scotland’s CAP budget, Mr Lochhead said the scale of financial challenge Scotland’s farmers are facing with the CAP budget period is now becoming clear.
However, he added: “This is the final year of Single Farm Payments; 2015 will see the start of Scotland’s new CAP package, which will target support at genuinely active farmers including new entrants as well as specific measures to support Scottish livestock producers and the environment.”