KEY POINTS:
A recent holiday in France confirmed what I already knew - despite the superb food, wine and countryside, French farming is still firmly entrenched in the Middle Ages, at least from the perspective of land parcels and economic scale.
The changes to the Common Agricultural Policy (CAP) are slowly making themselves felt with payments linked to qualifying hectares farmed, not directly coupled to volume of production.
Farmers grumble about the impact on their incomes, but more particularly about the bureaucratic delays and compliance costs, which drove one correspondent to the weekly La France Agricole to ask Agriculture Minister Dominique Bussereau to let them know when he expected them to go bankrupt, so they could leave their farms with heads held high.
Less emotive, but more telling, was a profile in the same magazine of a young dairy farming couple 150km from Paris. They gave up their jobs and bought a farm in 2001 for €450,000, with 80ha split between maize and pasture with a milk quota of 280,000 litres. This quite simply wasn't economic. Estimating they needed more than 500,000 litres to be profitable, they have managed to gain another 155,000 litres of quota, but meanwhile have invested €350,000 to double the herd size to 58 and build a new milking shed with room for 70 cows.
All this has been done on a milk price of €0.29c per litre with a debt ratio of 95:5. Their total income last year from dairying, including subsidy, was €186,000, with a net profit of €72,000 and debt repayments of €48,000. They must be either dedicated or mad to take on this amount of risk for so little reward.
This is a good indication of the economic problem which faces French agriculture. Most properties are far too small to achieve economies of scale. There is also an enormous amount of mixed farming - cereals, maize, horticulture, viticulture, beef, dairy, sheep and sunflowers to name a few land uses - with relatively little specialisation which exacerbates the scale problems.
There are still some good beef herds in the Limousin and further south, but the landscape has changed substantially in the past 10 years, with large tracts of land now covered in sunflowers used for oil and increasingly for biofuels. In marginal areas many hectares of vines have been replaced by cereals.
While in the Massif Central I met a dairy farmer, Philippe Chalchat, who is a rarity in his district with only three other dairy farmers, one of whom has three cows and barters his milk in return for meals and food from his friends. Philippe has 100ha of land, mostly in cereals, and 20 friesians.
He is a member of two co-operatives, Candia for his milk and another for his cereals. These co-ops are getting larger with global interests as the smaller ones go broke. There are still 3500 co-operatives in France, generating €77 million of turnover, nearly half of it from payments to supplier members for raw material. Twenty-one per cent of meat and 20 per cent of milk sales come from co-operatives. However, none of these is large by global standards, when compared with Fonterra, Arla and others.
The question from New Zealand is always whether and when the EU will reduce subsidies to compete on equal terms. The answer is complicated, because it involves more than 1000 years of a rural way of life with masses of small farming properties producing wonderful food. It's not just a question of equity and efficiency, but the preservation of the way of life and quality of produce while improving methods of production and farming economics at the same time.
* Allan Barber is a freelance writer, business consultant and former chief operating officer at Affco.
