What is the “floor price”? And why is it up for debate?

Emmanuel Macron announced the establishment of floor prices for agricultural products, but the measure does not convince everyone: farmers fear prices that are too low and manufacturers fear prices that are too high.

What is the “floor price”? And why is it up for debate?

Emmanuel Macron announced the establishment of floor prices for agricultural products, but the measure does not convince everyone: farmers fear prices that are too low and manufacturers fear prices that are too high...

This is the “most engaging measure we have ever made” for an agricultural policy according to Emmanuel Macron: the establishment of a floor price. The project was announced by the Head of State himself during the inauguration of the Agricultural Show on Saturday February 24 and has continued to generate reactions since. On paper and according to the executive, these floor prices “will make it possible to protect agricultural income and not give in to all the most predatory practices”. The question of income is one of the demands of angry farmers, particularly for the Peasant Confederation which wishes to obtain a minimum and fair price, capable of remunerating farmers.

Concretely, the objective is to determine for each sector prices below which agri-food manufacturers will not be able to fall during annual negotiations. These prices should not come out of nowhere, but be thought of according to the production costs incurred to produce, for example, a kilo of meat or a thousand liters of milk, but also the costs which weigh on farmers. Such indicators were created by the Egalim 2 law, but are not always applied and respected. The government therefore wants the existing indicators to be rethought or supplemented and wants to "empower each inter-profession to make their reference indicator the reference for agricultural contracts" as indicated by Minister Delegate Agnès Pannier-Runacher on the set of Public Senate , Monday February 26. Emmanuel Macron, however, specified that the indicators will be "opposable" by food stakeholders, which could once again call into question the obligatory nature.

The logic of the floor price, however, seems difficult to implement while satisfying all food stakeholders. Farmers themselves are skeptical about how to calculate these famous floor prices. "How can we set this floor price? Between a milk producer who farms in the mountains and the other in the plains, the costs are not the same. Which one do we choose?" questions the administrator of the FNSEA, Sébastien Poutreau, in Le Figaro. Depending on the region of production, the size of the farm or even the investments made on the farm, production costs are not at all the same. The risk is that there are as many floor prices as there are types of breeding" anticipates Anne-Catherine Loisier, centrist senator from Côte d'Or, in Le Parisien emphasizing the absence of agreement in the sectors on " the criteria of production costs".

The visibly difficult fixing and standardization of floor prices are not the only fears of the FNSEA. The first agricultural union fears that, once determined, the floor price will be uncorrelated with fluctuations in production costs, particularly in the event of an increase in the latter, and will end up harming farmers. The National Federation of Milk Producers (FNPL), affiliated to the union, fears that the price will become a "ceiling price" which will stagnate producers' remuneration. The measure goes “completely against what we have built up to now” said the president of the FNPL, Thierry Roquefeuil, at a press conference this Tuesday.

The solution to avoid having a floor price that is too low would be to align with the highest standards, but French production would then fall into another pitfall: that of losing its competitiveness at the international level. “If administered prices are too high compared to international prices, we will no longer export. And imports will increase,” warns Senator Anne-Catherine Loisier.

An outcome feared by some agri-food giants such as the general director of Lactalis France, Jean-Marc Bernier, who fears a drop in milk exports, half of whose production is intended for export as reported by Le Point . France could lose this market if floor prices increase costs too much and can no longer compete with international competition. The problem would also arise with cereals of which France is a major exporter.

The level of the floor price is not the only question raised by the measure desired by Emmanuel Macron, there is also that of respect for competition. “When we decide on a price it is normally contrary to competition law,” explained the director of Dairy Cooperation, Carole Humbert, during a press conference at the Agricultural Show on February 26. "Or it means [...] that agriculture goes beyond the laws of commerce, but this authorization today, we do not have it. Agricultural goods and food goods are subject to the same rules as no matter what product is marketed,” she added. Price agreements relating to agricultural products such as ham or vegetables have already been identified by the Competition Authority. Could the measure wanted by Emmanuel Macron change the rules of competition?

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