Policies like 'set aside' (under which land was compensated for being set aside, or taken out of production) was funded by the EU. Clearly agri-business was interested in production and not in that policy, while small farmers were being paid for doing nothing. Here in Britain the Ministry of Agriculture, Farming and Fisheries has pays out millions of pounds each year to help farmers - small farmers - to convert to organic farming (though plainly it is not sustainable on economic grounds alone).
Of course you are right that bigger farmers are increasing the economic pressure on small farmers, or to put it more plainly, the small farmers are not efficient enough to compete.
I would argue that the relationship with small and big farmers and the EU subsidies is this: for most of the post-war period, farming was heavily subsidised, and that tended to prevent centralisation of capital (consolidation of larger firms) because it gave an artificial extension to small farmers. This was largely for political reasons. Rural communities voted with the right. In Britain constituency sizes were weighted to give the countryside more influence and keep the Tory party in the game. Even as far afield as Japan, small farmers were subsidised as a counterweight to urban voters.
It is only recently that the decline of the left has allowed governments to reduce the protective measures from small farmers. For a long time now advances in technique have been calling the small farms into question. Now that some of the subsidies are being rolled back, small farmers are exposed as less efficient, and a lot of them are going to the wall. Prices are being held down by their more effective rivals and governments are less willing to bail them out than before (though the support for small farmers is still extensive).
It is pointed that the effect of the BSE crisis here was that the culling hit big herds harder, in proportion to the size of their herds, and therefore their investment. But the net effect was to increase the size of herds overall, as financial ruin helped those businesses with more capital to consolidate. The abattoirs were also reduced in number, as many smaller family firms could not survive the crisis (a good thing, if you ask me, having grown up around some foul abattoirs). -- Jim heartfield