No more serviced agronomy, no more rebates: French law set to help farmers and consumers

Since entering office in mid 2017, France’s government under President Macron have set in motion critical changes in legislation which give us plenty of food for thought as we consider our post-Brexit future.

Following wide consultation, a Bill has been put forward for incorporation to French law in the coming year, which is intended to address key commercial challenges in agriculture in support of farmers and consumers. The proposed measures cover a range of topics such as crop pricing, contract law, and prevention of food waste.

The measures also include developments related to agrochemical use and sales in the French market. These stem from the government’s assessment of the following factors:

• There is a highly fragmented customer base (farms) with poor information and negotiating power compared to a highly consolidated supply base (distributors). (We revealed some symptoms of this power imbalance in our blog on ag chem pricing in the UK)

• The Industry’s commercial drive for ever greater ag chem sales - which runs against France’s long term environmental plan of reducing pesticide intensity.

• The distributor (cooperative) is the primary point of influence to French farmers for dissemination of ‘best practice’.

In response, French law is set to incorporate the following:

1. The forced division of sales and consultative activities on farm

Agronomists will be banned from bundling their fees with the price of their products. The respective activities will have to be explicitly priced and managed through different legal entities to ensure full separation. This will give clearer information back into the hands of farmers, placing greater accountability on distribution for price and product recommendations.

This move follows many industries which have legally enforced the separation of expert technical advice, and the associated product sale: in the UK, ‘complex monopolies of supply’ were targeted in the veterinary world through improved product price transparency, and independent financial advisors (IFAs) were banned from commission sales in 2012.

In the UK there is already an accelerating trend of farms moving to this form of relationship with their ag chem supplier, as a bundled price removes a farmer’s ability to benchmark effectively. One farm business consultant has highlighted to us that in his top 25% most profitable farming customers, none has tied agronomy.

Tools such as our Ag Chem Price Check further allow farms to compare like-for-like their product choices and prices against the rest of the market, ensuring they can unlock significant savings for their businesses.

2. The banning of rebates and rebate-like mechanisms across the agricultural supply chain

Rebates are a commercial pricing mechanism intended to maintain a high market price point, while incentivising increased volume through an end of season discount. Such an explicit mechanism targeted at volume sales runs against the government’s environmental ambition.

Furthermore, rebates prevent effective benchmarking for farms by obscuring comparable prices. End of season rebate discussions are often informal and lack rigorous calculation or credibility from suppliers, while the farmer has insufficient information to negotiate across dozens of products.

Through market data from Ag Chem Price Check, we can cut through this obscurity and have helped customers achieve well into the tens of thousands of pounds in extra rebates.

3. Further formalisation of a Certificate Scheme to reduce pesticide intensity

An interesting development sees distributors responsible for disseminating techniques to reduce agrochemical use (for example through biocontrols). This encourages distributors to focus their advisory activity on encouraging more efficient use of agrochemicals, rather than higher sales at all cost. The mechanism works by giving distributors certificates for ag chem reduction initiatives they have put in place, and facing fines for poor performance.

Something for the UK?

One French minister has accused these proposals of merely “tinkering with the plumbing” of the industry. However, anyone familiar with the deep commercial arrangements which hold today’s distribution status quo, will understand the potential of these reforms to dramatically adjust the relationships and power balance in the French agricultural sector. The UK has its particular dynamics and market structure, but similar ideas are regularly floated and discussed by farmers here too, as they look for a fairer, more transparent distribution industry.

Plenty of food for thought for Mr Gove from the other side of the channel.