At the end of last year, the Ministry of Agriculture published the provisional figures for the mean farming income in 2012. According to these figures, the mean farming income for 2012 was € 36,500 for a farmer in activity, after three consecutive years of progression. As mentioned previously1
, this increase in the mean farming income over the last few years must not mask two fundamental facts: on the one hand, the farming income for non salaried farmers widely depends on the type of production and is particularly low for certain types of production, on the other hand, the mean farming income per farmer for the entire sector has been subject to considerable fluctuations over the last few years. Didier Caraes, from the Agricultural Economy and Policy Cluster of the Permanent Assemblies of Chambers of Agriculture (APCA) confirms this trend in his Economic Letter of January 20132
, in which he states that farmers have experienced ‘major fluctuations in income’ since the beginning of the 90s when the 1992 CAP reform was introduced. We recommend reading this article which underlines another important element by comparing the situation of French farmers with that of American farmers, and pointing to the fact that if in France figures are based on the mean income per farm and/or per farmer in activity, in the United States, these figures are based on the global farming income, which is to say the income generated by the entire agricultural sector, regardless of the number of farms and farmers in activity. This distinction is fundamental as it shows that although the economic climate may affect the income of farmers, the context in the United States is entirely different. After a slump in the 70s, the total income for the agricultural sector entered a long term growth phase, while at the same time this income has been divided by half in France over the same period, 1970 to 2012. Considering the diverging policies of the European Union and the United States, this evolution is hardly surprising, and the last two decades confirm this trend. If the Farm Bill, just like the CAP, has undergone a number of changes since the 90s, it goes on reflecting the political will to protect a highly strategic sector, by making every effort to provide effective tools for sustaining farming income at a remunerative level in the face of market turmoil. At a time when the new PAC is about to be introduced, looking to the United States provides an interesting insight.
momagri Editorial Board
According to the INSEE, the mean farming income increased 6.2% in 2012 in France. It must be mentioned that in France the increase in mean farming income is essentially due to the decline in the number of farmers in activity. If it were not for this demographic evolution, the mean farming income would have dropped. This is the major difference when compared with the situation in the United States, where the global farming income is on the increase regardless of the effect of demographic restructuring.
According to the INSEE the net farming income (Production – IC + Subsidies – Taxes - Wage Taxes – Rent - Interest rate) for the year 2012 increased 6.2% for non salaried farmers. In a context of market volatility which has been affecting French agriculture over the last ten years, the economic climate has proved favourable. With the exception of viticulture, prices for fruit and vegetable crops have increased. Prices for livestock produce are also on the rise, with the exception of milk and veal. In terms of input, the cost of animal feed and energy has gone up, but this has not affected added-value which has gone on increasing.
The higher farming income for non salaried farmers over the 2011-2012 period, must not mask the deterioration of the French agricultural economy which started in the 90s, and the significant disparities in income. One striking observation is that farming income has become even more unstable since the introduction of the 1992 CAP reform. This evolution was predictable as the objective of this reform was to integrate agriculture in the dynamics of the agricultural market. Unfortunately in the current context of globalisation, agricultural markets have become more and more unstable. Climatic conditions affecting production in top producing countries (United States, Brazil…) and unanticipated decline in demand from emerging countries (China, North Africa…) have lead to brutal reversals in global market trends.
This happened in 2012, when the drought in the United States and the pick-up in imported goods from China boosted exports for French agriculture. Over this period, the parallel between figures for agrifood sales and farming income speaks for itself3
. 2008 and 2009 saw a decline in the global demand for agrifood products due to the economic and financial crisis. Foreign demand for French agrifood products fell sharply and as a consequence, French agrifood exports slumped, and the mean farming income literally collapsed. On the contrary, when there was a strong demand in the global market for French agrifood products over the first eight months of 2012, export figures rose and the mean farming income increased. The recent evolution in agrifood exports and farming income clearly show that French agriculture is now a globalized sector of activity.
In France, figures taken into consideration are based on the mean income per farmer in activity. In the United States, on the other hand, these figures are based on the global farming income, which is to say the income generated by the entire agricultural sector, regardless of the number of farms and farmers in activity. This distinction changes the way in which farming income is perceived. In France, the global income for the agricultural sector has declined over the long term: from 1970 to 2012 this income was divided by half. The increase in mean farming income is therefore the consequence of the declining number of farmers in activity, which has decreased at a faster rate than the mean farming income. The context in the United States is entirely different. After a slump in the 70s, the total income for the agricultural sector entered a long term growth phase, which carries on albeit some unexpected downturns as in 2012.
For the year 2012, the drop in the US farming income was essentially due to the higher cost of inputs, mainly energy and animal feed. The drought also had a negative impact on income. In strict terms of production, the economic climate was favourable. In the market for combinable crops, prices shot up for raw material used as energy. In the market for livestock produce, prices dropped for milk and pork, but this loss was compensated by the increase in added-value for beef cattle and ovine livestock. Beyond these transitory downturns, one can only acknowledge the disparity in the evolution of the global farming income, which is on the increase in the United States and on the decline in France.
1 You can read especially this article « For French farmers, incomes can vary by over one third from one year to the next ! », http://www.momagri.org/UK/agriculture-s-key-figures/For-French-farmers-incomes-can-vary-by-over-one-third-from-one-year-to-the-next-_1065.html
3 If you wish to view available graphs and charts, please check the original version of this article on the APCA website: http://www.chambres-agriculture.fr/grands-contextes/cles-de-lagriculture/economie/actualites/toutes-les-publications-economiques/article/lettre-economique-n-325-jan/