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26/09/2016

Falling cereal value hits French farmers’ income

Agriculture & Food

Falling cereal value hits French farmers’ income

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France’s agricultural income per farmer dropped by 16.4% in 2013, largely due to the country's dependence on revenue from cereals, according to the European Commission.

A large proportion of French farming revenue this year came from cereals, whose real price dropped by 23.5% following a small harvest, down 1% compared to 2012.

The sector declined by 8.3% across Europe, according to figures published by the EU statistics office, Eurostat, on Friday (13 December).

The French figure pales in comparison with other large European agricultural economies, such as Spain and Italy, which saw a large increase in income per worker, 10% and 8.9% respectively.

Only Estonia, which has a small farming sector by European standards, saw a larger decline (-17.2%).

“The main reason for these changes is the product orientation of these countries. France has a large cereals and oilseed crop which experienced a strong price decline in the summer,” said Roger Waite, European Commission spokesperson for agriculture.

Cold, wet summer hits cereal production in north

Spain, however, saw production value increases across a number of sectors, including potatoes (43.2%), industrial crops (32.5%) and cereals (12.7%). Furthermore, the volume of cereal the Iberian country produced increased by 42.5%.

The Iberian Peninsula was not as affected by bad weather as the north of Europe, whose production of crops such as cereals flagged due to the cold, wet summer.

But yields in southern countries such as Spain and Italy, with diverse agricultural sectors, were not enough to offset the poor results elsewhere, as the entire EU saw a 2.1% decline in the value of the agricultural sector.

An agricultural barometer by Copa-Cogeca, the European farmers association, from the third quarter of 2013 showed that farmers were "particularly worried about developments in farm prices and adverse weather conditions".

The Commission blamed low yields (-1.1%) for the value decline, which also translated into a EU-wide 1.3% decrease in agricultural income per worker.

The falling value of cereals after a poor season may have been a large factor but Copa-Cogeca also singled out the increase in input costs (up 0.8%) compared to value.

Pekka Pesonen, the secretary general of the farmers association, said: "The figures on agricultural incomes per worker confirm that farmers are continuing to face a cost-price squeeze with input costs rising at a much faster level than the value of agricultural output. The income situation is fragile".

High energy prices may help explain the fall in the added value of the agricultural sector, with Copa-Cogeca saying in a statement that "although there was some improvement in input costs, especially feed, many farmers still found high input costs like fuel costs particularly onerous".

Labour input for the sector fell by 0.9%, contributing to the fall in income per worker.

France shifts focus from cereals under new farm policy

For French cereal producers, market prices need to reflect the production costs.

“The drop is simply because, today, with the charges for cereals and oilseeds it is necessary to have higher prices to have a revenue higher than the one that has been published”, said Pascal Hurbault, of Orama, a union of French wheat, corn and oilseed producer associations.

Hurbault added that between the production site and market “a number of companies come in”, so much of the income stemming from the sector does not make its way back to farmers.

Under the reform of the Common Agricultural Policy, EU member states have greater flexibility to devise their own farming support schemes and use of payments.

France has decided to shift part of its focus to the livestock sector, leading to a decline in subsidies for arable crops, such as cereals.

Background

The Common Agricultural Policy (CAP) is the European Union's system of direct payments for farmers and subsidies, which costs each EU citizen around 30 euro cents a day, according to the European Commission.

The CAP has a budget of €53 billion a year, making it the European Union’s most expensive programme. The CAP accounts for 37.8% of the EU's 2014 to 2020 budget, compared to nearly 71% in 1984.

The majority (over 70%) of CAP spending goes to direct payments for farmers, while some 20% of the CAP budget is spent on rural development measures. The rest is handed out as export subsidies to food companies.

The Commission's reformed CAP places a greater emphasis on environmental measures, with up to 30% of the funding granted to farmers who diversify production, rotate their land or maintain permanent pastures.

Timeline

  • 2015: Implementation of the new Common Agricultural Policy

Further Reading

Industry

European Commission