The French government has set aside an extra €10m to aid consolidation and restructuring in the country's dairy industry so far in 2006, continuing its interventionist strategy for the sector.
Dominique Bussereau, French agriculture minister, announced he had cleared the extra state aid to "support the restructuring of the dairy industry to make it more competitive".
The funding shows how France has continued to take a more interventionist stance in promoting dairy sector consolidation.
The French government launched a strategic plan to modernise the national dairy industry back in 2004, and has so far paid €28m out of the state purse to compensate producers who have closed their businesses.
Consolidation in France's dairy sector has accelerated in the last couple of years, according to recently published report from the government's dairy executive agency, ONILAIT.
It said six per cent of businesses disappeared last year, and average milk production per business rose to 232,000 litres. Market share of milk production held by independent producers has fallen from around 60 per cent to 38 per cent in the last decade.
The trend is another example of how commodity price cuts, as part of the European Union's (EU) Common Agricultural Policy reform, as well as greater cost pressures are changing the shape of Europe's dairy industry.
France has not been immune to the pressure, despite being the largest beneficiary of European agricultural subsidies and housing Danone and Lactalis, two of Europe's largest dairy firms.
Lactalis, which recently formed a joint venture with Nestlé and owns the well-known President and Société brands, called last year for France's industry to agree fixed prices for dairy products in order to cope with unstable markets and insulate against cuts to EU export subsidies.
"We want to have all companies charging the same," said Lactalis spokesperson Luc Morelon, indicating that some French dairy companies were acting irresponsibly by cutting the price they paid to producers too much.
French producers staged numerous protests outside Lactalis factories last year after the firm told them it would have to drop farmgate milk prices.
France had the second-highest average farmgate milk price in the EU in 2004, at almost €28 per 100kg, according to European statistics office Eurostat.
EU prices, however, have fallen over the last couple years, reflecting commodity price cuts, growing retailer power and a shortage of added value products.