ANALYSIS-French farmers looking beyond EU cash battle
* France facing farm aid cut in Feb. 7-8 EU budget talks
* French farmers are top beneficiaries of EU subsidies
* Farmers say competition as important as aid
* Red tape over green issues a fear
PARIS, Feb 4 (Reuters) - France's President Francois Hollande faces the awkward prospect of walking away from this week's European Union summit having accepted a cut in the bloc's agricultural spending for the next seven years.
That would once have created uproar among French farmers who have enjoyed generous EU subsidies for decades. But most are resigned to less overall aid and are pushing instead for a wider shake-up of the sector to ensure they can compete for a bigger share of the rising global demand for food.
"We're in a fierce competition on a world market," said Pascal Clement, a 46-year-old dairy and cereal farmer in the village of Saint-Corneille, near the northwestern town of Le Mans, famous for its 24-hour car race.
"We just need to be given the means to be competitive. We have a lot of doors to push open," he told Reuters on his farm.
Such attitudes reveal a revolution in mindset since the EU's Common Agricultural Policy (CAP) was created under the impetus of President Charles de Gaulle in 1962, subsidising farmers to ensure adequate food supplies in the then six-nation bloc.
Its production-led model was discredited by excesses such as the surplus food mountains that prompted public disgust in the 1980s. And the CAP has also come under criticism for distorting global trade and disadvantaging farmers in developing countries.
A pact between the French and German farm ministries to hold EU farm spending for 2014-2020 at its nominal 2013 level fell victim to budget austerity when German Chancellor Angela Merkel insisted in November that cuts would have to be made after all.
Hollande will keep fighting hard to defend CAP spending when he meets his counterparts in Brussels on Thursday and Friday to discuss the EU's next long-term budget, his entourage says, but Agriculture Minister Stephane Le Foll in December acknowledged that EU farm aid would be cut.
France's ageing farmers now account for less than two percent of national output, against 80 percent for the services sector. Agriculture's share of the national workforce is a one-sixth of what it was when the CAP was created.
Yet the French have a special attachment to the land and no president can be seen to ignore their interests. The Socialist's conservative predecessors, Jacques Chirac and Nicolas Sarkozy, championed French farmers' interests in Europe.
The CAP accounts for 39 percent of total EU spending of 150 billion euros. In 2011, France alone took nearly 17 percent of the farm budget and nearly 20 percent of the direct payments to farmers which it most wants to safeguard.
EU subsidies still make up a large part of French farm income. But they are unevenly spread, with livestock farmers much more dependent than growers whose incomes are buoyed by high grain prices.
French farmers took over 9 billion euros from the CAP budget in 2011. Crop growers got about a third of the aid but represent only a quarter of farmers. Livestock farmers won about half the aid, equivalent to their share in the farm population.
Subsidies can be double the income of livestock farmers, who face rising costs for grain-based animal feed, and prevent them making a loss. Cattle farmers earned on average 15,000 euros last year, including subsidies, the farm ministry says, just above the 13,300 euros of a worker on France's minimum wage.
These disparities are one reason why Hollande may be able to cope politically with an overall cut in the CAP pot of money.
His farm minister wants to shift aid - perhaps several hundred million euros - to worse-off livestock farmers as part of the CAP reform, a plan that has angered crop growers.
"This is the explosive CAP issue at the French level," said Patrick Theet, a grain and sugar beet grower near Paris.
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The U.N. food body FAO says food output must rise by 70 percent by 2050 to feed a larger, richer world population.
For many farmers, that means the pressing issue is not subsidies but how French and EU policy positions them against international rivals - starting with their peers in Germany.
German farm income rose by about 29 percent between 2005 and 2011 - twice the rate in France, helped by lower German labour costs, less stringent application of EU environment rules and investments in on-farm renewable energies.
"Behind the CAP lie issues like competitiveness, modernising agriculture and environmental standards," Xavier Beulin, head of France's main farmers' union the FNSEA, said.
"These are subjects that are just as important as, if not more important than the basic level of direct aid per hectare."
Farmers favour a more flexible subsidy scheme, as exists in the United States, that would give them more aid in bad years and less in good times. Research also needs to be better funded, notably to boost stagnant grain yields and compensate for France's refusal to adopt genetically modified crops, they say.
Environmental constraints are among French farmers' top grievances and they fear a proposed "greening" of the CAP will bring more red tape.
"When we get up in the morning it's to do our job, not to check we've filled in the right form or are within the rules," said Michel Dauton, a cattle farmer south of Le Mans.
Moreover, with much of the EU economy set to remain stagnant through 2013, policymakers should ensure they do nothing to harm one sector whose growth prospects are shining, they argue.
"In the midst of an economic crisis, we have a sector with growing markets," said Dauton. "What company boss could wish for anything better than markets that await him?"
(Additional reporting by Valerie Parent and Elizabeth Pineau in Paris, Charlie Dunmore in Brussels and Charles Abbott in Washington; editing by Mark John and Keiron Henderson)