By Emmanuel Jarry
LA ROCHEFOUCAULD, France (Reuters) - France will spend between 500 million and 1 billion euros ($730 million-$1.5 billion) to help farmers affected by a spring drought that has parched fields and shrunk the supply of animal fodder, the government said on Thursday. The support would include exemptions from land tax worth about 300 million euros and 200 million euros in compensation from an agriculture disaster fund, President Nicolas Sarkozy said during a visit to a drought-hit part of western France.
The authorities would also offer farmers a one-year postponement on the repayment of loans contracted during a previous government aid plan, he said, adding the cost of this measure had yet to be calculated.
Prime Minister Francois Fillon, speaking to parliament later on Thursday, estimated the total cost of the support for farmers at "close to 1 billion euros."
The March-May period was the driest in France in 50 years and the hottest since 1900, and cattle breeders already struggling with low meat prices have seen supplies of grass and other fodder dwindle, leading some to reduce their herds by selling more livestock to abattoirs.
"The thrust of what we're going to do is to give you some room for maneuver in terms of liquidity and to put back loan repayments by one year," Sarkozy said during a visit to a farm.
Rain has returned to dry farm belts in western and northern France since last week but the spring drought is already expected to have slashed yields of crops in the European Union's top grain producer and exporter.
FRENCH WATER PLAN
Drought has also struck other major grain areas in western Europe, including northern Germany and southern England, although rain has been plentiful in Spain, which typically has a much drier climate.
In a gesture to drought-hit breeders, the EU has agreed to bring forward to mid-October the payment of certain subsidies for cattle farmers at the request of countries like France.
Agriculture Minister Bruno Le Maire had said last week that the government would spend several hundred million euros in compensating farmers hit by the drought.
A member of parliament on Wednesday had quoted Sarkozy as putting the cost of the government's drought support at 700 million euros, but officials later said this was a reference to low-interest loans from French bank Credit Agricole, unveiled last week by Le Maire.
Sarkozy confirmed the government would call on the national rail network and the army to support efforts to transport fodder to the worst-affected farms.
He also announced a five-year plan to improve water management in France, including measures to expand storage and help farmers use the resource more efficiently.
More than half of France's administrative departments are currently subject to restrictions on water use, with this year's drought exacerbating declining water-table levels in some areas.
(Writing by Gus Trompiz; Editing by Geert De Clercq and Anthony Barker)