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French government announces support package in face of rising feedstock costs

04 January 2013

The French government has announced an action plan to assist in insulating the French livestock and food industry from the rising costs of agricultural inputs. According to online reports, the plan has three dimensions:

  • International level: action will be promoted through the G20 to ‘ensure proper coordination of the policies of major players in agriculture’, freeze biofuel initiatives that compete with food production, ‘create initiatives to produce more’, and ensure ‘better storage for agricultural products to help deal with emergencies’.
  • European level: the French government proposes to promote measures to strengthen regulation of financial markets, strengthen CAP mechanisms to manage price volatility and, as at the international level, freeze biofuel production that competes with food production.
  • National level: the French government proposes to ‘increase silo storage capacity’, stop first-generation biofuel development, extend financial assistance to producers facing ‘rising costs of production’, review ‘agricultural taxes to improve incomes for farmers’, and establish ‘a roundtable discussion group…to improve contractual and commercial relationships in the livestock sector’.

In mid September, the French government also announced the establishment of a €100 million ‘solidarity fund’ to assist livestock producers in dealing with high feed prices and improving competitiveness through increased on-farm investments.

According to analysis from Bord Bia, the Irish Food Board, throughput in French abattoirs from January to August 2012 was down 4% compared to 2011, with the decline in throughput gaining momentum through the year. In the face of reduced supplies, average prices increased between 16 and 19% in August, with consumption having declined 1.5% over the course of 2012 compared to the corresponding period in 2011. According to analysts at Rabobank and reported on Thebeefsite.com, the near-record prices for beef experienced during 2012 are expected to continue ‘until at least 2013’.

In terms of policy developments at the EU level, it has been reported on the EU news and policy website EurActiv.com that French ministers have objected to bracketed text included in the Cyprus Presidency working document on the EU budget, which states that ‘The average amount of EU direct payments per hectare will be reduced by [X% to Y%] per year from fiscal 2015 to fiscal 2020.’ The article notes that the French government is firmly against a reduction in CAP spending, and in mid October secured a joint declaration with the German government to work together to maintain the CAP budget at its present level (around €53 billion per annum).

This is consistent with the EC proposal for a total CAP budget of €371.72 billion for the 2014–2020 budgetary period. Of this sum, €281.8 billion would be earmarked for direct payments and market support measures (Pillar 1) and €89.9 billion would be allocated to rural development programmes (Pillar 2). The joint statement, reported on EurActiv.com, came against the background of calls from the UK, Poland and others for a cut in CAP expenditures, particularly under Pillar 1.

However, the joint statement also held out the prospect of gradual convergence of payment levels to farmers across the EU. According to press reports, this could ultimately lead to a decline of up to 7% in payments to French farmers, given the way the current payment system works.

Significantly, the joint statement also called on the EC to protect EU agricultural interests in the face of the globalisation of commercial relations. 

Editorial comment

The pan-European application of CAP measures is only one of the vehicles through which member states can assist national agricultural producers in dealing with global price volatility. National financial assistance programmes and tax measures can also be deployed. While these schemes have to operate within commonly agreed EU rules, in order to avoid any distortion of competition within the EU, there is considerable diversity between EU member states in the extent to which they make use of national support tools.

The French government tends to be in the forefront of national initiatives to support agricultural producers in times of market crisis. Thus it can be seen that in 2009/10, out of the €1,080 million committed to temporary programmes of assistance to farmers across the EU in response to the dairy crisis (consisting of grants of up to €15,000 per farmer), fully 65% was deployed by the French government (with 30% deployed by the Italian government and only 5% by 7 other member state governments).

These national support measures can be of considerable economic benefit to farmers, and can help sustain national agricultural production through the financial difficulties created as a result of global price volatility. This can serve to shift the burden of adjustment to global price volatility to non-EU producers, including those in the ACP.

In addition, the French government is seeking to promote dialogue around strengthening the functioning of supply chains beyond the dairy sector, to encompass all livestock producers (beef, pork and poultry producers). This wider application of the new EU policy initiatives to strengthen the functioning of supply chains to make them more resilient in the face of global price volatility could potentially hold lessons for the ACP.


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