Emmanuel Macron’s promise launched during a more than eventful inauguration of the International Agricultural Show last February, the establishment of floor prices has not made much progress since. Although a bill to this effect was passed in the National Assembly, the dissolution of the parliamentary chamber and the governmental instability which followed did not advance the debates.
The bad memory of the “mountains of butter”
If the idea has been more or less well received by the agricultural world, two researchers have just published a study on the subject within the Institute of Public Policies (IPP). The floor prices, which were introduced in 1968 for milk powder and bulk butter, before being ineffective at the beginning of the 2000s, leave a mixed memory, they describe, symbolized by the “mountains of butter”.
Due to an imbalance between supply and demand, the European Economic Community intervened by purchasing surpluses before storing them or exporting them at a loss. This is the danger when floor prices exceed world prices, observe the authors.
Monopsony hunting
They nevertheless show in their study that floor prices would still be effective in certain market situations for the remuneration of farmers. This would be the case when “farmers face buyers with monopsony power”, that is to say when a small number of buyers are able to impose a price lower than the competitive price. Livestock products (milk, meat) and market gardening are concerned, unlike cereals.
Continuing with the example of raw milk, the authors observe that between 2003 and 2018, French dairy manufacturers purchased raw milk (not labeled organic farming or AOP) “on average at a price 16% lower than its marginal contribution to their profits. “This figure hides certain disparities, in particular greater monopsony power in departments characterized by a more concentrated industrial scale,” they qualify.
In response to this situation, “a floor price indexed to international prices and taking into account the manufacturing costs of manufacturers, would lead to better remuneration for farmers and a reduction in margins for manufacturers”.
Conditioned efficiency
The other side of the coin is that “the establishment of an effective floor price could nevertheless destabilize a sector in the short term and reinforce the concentration of its industrial level in the long term, making its effect on the prices paid by the companies uncertain. consumers,” the researchers qualify.
The effectiveness of the floor price would be limited if it is not supplemented by other measures to support agricultural production. The authors discuss the need for subsidies, trade policy and insurance schemes to limit the negative effects of climatic hazards or fluctuations in international markets.
