Distribution of agricultural productivity gains in France since 1959: producers have been the main losers
02/08/2024
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The current crisis in the agricultural sector and the recent inflation weighing on household purchasing power, particularly for food products, need to be placed in a long-term historical perspective to better understand a more complex reality: the way in which productivity gains in agriculture are distributed among the various stakeholders.
Annual gains in overall productivity occur when the total volume of production increases faster than the total volume of costs. They represent additional value creation. Through price movements, this value is distributed between producers, suppliers, the State, landowners and the customers who buy agricultural products (agri-food industry, supermarkets, and the end consumers).
Our recent study uses data from the Institut national de la statistique et des études économiques (INSEE) on French agriculture from 1959 to 2022 to reveal very significant underlying trends in the distribution of these gains, which overall remain unfavorable to farmers.
Unevenly distributed value creation
The average annual growth in productivity gains in French agriculture has been 1.26% for the period studied. This trend accelerated markedly between 1959 and 2009 (1.45%), before slowing significantly (0.22%) in recent years.
We have seen distinct stages in this trend: firstly, a more rapid increase in production in relation to costs (1959-1979), then a steady rise in production associated with a fall in costs, and finally, since 2004, a stabilization in production.
Over the past sixty years, productivity gains have accounted for 70% of the sector’s value creation. To this, we can add the contributions of partners who have suffered from unfavorable price trends, such as suppliers of intermediate consumption (15%), the State through taxes and subsidies (11%) and landowners (4%).
However, the value created has not been evenly distributed between stakeholders. Customers/clients have been the main beneficiaries, capturing 51% of the value created, followed by farmers (39%). Employees and equipment suppliers have reaped a smaller share, at 8% and 2% respectively.
This distribution of value creation in the French agricultural sector has been strongly influenced by a sustained decline in real producer prices. From 1959 to 2009, this decline reached an impressive average annual rate of -3.3%. To put this into perspective, this means that agricultural prices have halved every 20 years!
However, this reduction has only partially passed on to consumers. Over the same period, prices of agricultural and food products sold to end consumers fell at an average annual rate of just -0.4%.
Specific dynamics
Since 2009, however, we have observed a reversal of this trend for agricultural producer prices, with an average annual increase of 1.1%. This trend has even accelerated over the last two years (in 2021 and 2022) with a remarkable rise of 11%. This has enabled farmers to return to price levels similar to those of the early 1990s, but these are still a long way from those witnessed in 1959.
Of course, there are specific dynamics between the different branches of agricultural production, such as cereals, dairy farming, meat producers, viticulture, fruit and vegetables. However, looking at French agriculture as a whole, a notable imbalance emerges: despite significant advances in productivity, farmers are not reaping the full benefits of their labor.
Acute cyclical fluctuations
Against this backdrop, it is essential to understand how the real income of French farmers compares with that of the country’s wage earners as a whole. Over the long term, the trends are remarkably similar, with average annual growth of 1.55% for farmers working on family farms, compared with 1.54% for all French wage earners.
Nevertheless, farmers are subject to acute cyclical fluctuations due, for example, to factor such as climatic conditions and market instabilities. These variations lead to highly irregular income trends. As a result, over short to medium-term periods, farmers face considerable uncertainty and difficulties in terms of purchasing power.
Comparing the real income of family farmers with that of French wage earners as a whole does not adequately reflect the differences in the labor productivity dynamics of these two groups. Since 1960, labor productivity in the agricultural sector has grown at an impressive exponential rate of 4.15% per year, clearly outstripping the 1.8% growth recorded for the French economy as a whole.
The responsibility of consumers
These growth rates imply that value added per farm family worker has more than doubled in less than 18 years, while for the national average, such a doubling of labor productivity has taken around 38 years. This distinction underlines the rapid increase in efficiency in the agricultural sector compared to the economy as a whole.
It is therefore imperative to rethink the structure of the sector to ensure a fairer distribution of productivity gains, particularly between farmers and their main customers, namely the agri-food industry and supermarkets, who have not significantly passed on these benefits in the form of lower prices to consumers.
At the same time, it is important to emphasize the responsibility of consumers, who must be prepared to pay a fair price for quality, environmentally-friendly food products. This observation calls for a significant transformation of negotiation dynamics within the agri-food sector, to ensure a fairer, more sustainable future for farmers, who are at the heart of our food system.
Such a reform is not only vital for farmers, but also beneficial for the entire food value chain, by ensuring greater fairness and transparency.
Jean-Philippe Boussemart, Professor Emeritus at the University of Lille, Member of LEM (Lille Économie Management, UMR CNRS 9221), Corresponding Member of the French Academy of Agriculture, Professor of Economics, IÉSEG School of Management
This is a translated version of the article originally published on the Conversation France.
The original article in French can be viewed here.
