ANALYSIS - Rising production costs in the French agricultural sector have more than countered the improvement in prices and next year the situation is expected to get worse, writes Chris Harris.
The French farming sector is concerned that the price volatility that has affected production costs since 2006 is set to continue and analysts at the French farming union FNSEA are warning that the recent improvements in income should be regarded with extreme caution.
"A sharp reversal of the market is a distinct possibility," the FNSEA say.
The union has warned that the sector could experience a similar dip in fortunes as in 2009 when there was a 30 per cent drop in farm incomes.
There is also concern over the proposed changes to the Common Agricultural Policy, which the FNSEA believes has stopped acting as a regulator and has relinquished its market management instruments.
The French farmers are also worried that where the old intervention process to support market prices has been retained, it is only kept as a safety net.
The FNSEA has called on the French and European governments to reinstate the regulatory tools as a matter of urgency in accordance with the EU's G20 commitments.
The concern is that continuing rise in costs is weakening farms in a scenario of volatile commodity prices.
For the French farmer energy costs have risen by 60 per cent over the last three years, fertilizers have gone up by 35 per cent in two years and feed costs have risen by 25 per cent in two years. Such rises have hit all the agricultural sectors but livestock production most severely.
Despite some rises in prices across the farming sector, except in dairy, such hit input costs are threatening to force further cuts on the French farmer next year.
The French farmers are appealing for all these commodity costs - energy, fertilisers and feed to be passed on to the consumer and not absorbed by the producer.
The concern over rising costs has deepened recently as all the indicators have been in the red since October, including the French pig sector.
Producer groups have been calling for a renegotiation of the prices they receive to make them more realistic, as a study from the Observatoire de la Formation des Prix et des Marges has shown that out of every €100 spent on food by the consumer, just €5.4 is returned in agricultural income.
The FNSEA says that there is room for manoeuvre either through other productivity gains or by improving the distribution of added-value products in the food chain.
The farmers are anxious not to be further burdened by new demands and commitments such as the constraints of the extension of the nitrate vulnerable areas.
The farmers are worried that through the changes in the Common Agricultural Policy moves to fully decoupled assistance is not an appropriate response to price volatility and payments for land management will not compensate market related troubles.
The farmers want to see a more flexible aid structure with instruments for crisis management within the changes to the CAP.