This study aims at investigating the impact of agricultural policies on structural change in farming. As not all farms may behave alike, a mixed Markov chain modelling approach is applied to capture for unobserved heterogeneity transition process of farms. A multinomial logit specification is used for transition probabilities and the parameters are estimated by maximum likelihood method and the expectation maximization (EM) algorithm. An empirical application to an unbalanced panel from 2000 to 2013 shows that the French farms mainly consists of a mixture two farm types characterized by specific transition processes. The main result of this paper is that the impact of farm subsidies from both the two pillars of the Common Agricultural policy (CAP) highly depends on the type membership of farms. From this result it is argued that more attention should be paid to both observed and unobserved farm heterogeneity in assessing agricultural policy impact on structural change in farming.