The social and economic importance of agriculture and rural areas in Poland is much greater than in many other countries. Some 38% of the population lives in rural areas, almost 30% still is involved in farming, and agriculture is the main source of income for more than 11% of the population total.
Polish agriculture consists of farms that vary considerably in organizational structure, type of ownership, size and output volume. Even so, more than half of all farms produce agricultural products nearly exclusively to supply their own family needs, and marketable production accounts for only 57% of total agricultural output.
Despite efforts to collectivize farms after World War II, private ownership has always prevailed in Poland’s agricultural sector. The political and economic transformations launched in 1989 led to even greater reduction of the public sector share in agriculture and to the introduction of new forms of ownership, including cooperatives, corporations and foreign equity enterprises.
The agriculture sector suffers economically from unpredictable weather and fluctuating profitability. Production is not regulated, and the producer bears the entire production risk, with only a few crops marketed on supply contracts with processors.
Grain is grown on 90% of all farms, but most also are involved in livestock production. Larger farms, defined as more than 50 ha, are more specialized, with 38% growing crops only and 17% limited to animal production, but even so, 45% of these larger farms are mixed.
Polish agriculture today faces structural problems that are particularly challenging as the country tries to prepare for E.U.
Production scale is small, resulting in high costs and declining farm income, estimated to be only 44% of urban income levels. These factors impede adoption of new technologies, especially those that would improve crop quality.
Poland also lacks stable domestic markets, and marketing links between producers and food processing plants/wholesalers are inadequate. Competitive pressures from imports, many of which are subsidized, also are on the increase.
Agriculture employs a large percentage of the labor force, and an estimated 900,000 agricultural workers are considered redundant. In addition, Poland faces a lack of alternative sources of additional income for farmers; only about 17% of those involved in farming have income from non-farm employment.
To address these problems, a growing number of programs are being implemented to change agriculture’s structure in terms of farm size, employment and production. For example, developing non-farming business activities in rural areas would enable the outflow of labor from agriculture and would create opportunities to supplement farm income.
Although production is not regulated, the government maintains involvement in the sector. The Agricultural Market Agency of the Ministry of Agriculture is responsible for intervention programs to support farmers’ incomes by managing a procurement program and maintaining minimum prices for food wheat and rye.
Although 2002 program prices have been cut from 2001, they are offset by increased direct subsidies paid to farmers when selling grain under the program.
Grain buyers, who purchase at the minimum price or higher, are eligible for bank financing which is guaranteed by AMA. The banks are further subsidized by direct payments from the government to offer lower interest rates.
It is estimated that only 55,000 out of 2 million farmers in Poland participate in the government procurement program. While this accounts for less than 2.5% of total farms, participating farms tend to be larger scale producers and accounted for 4.2 million tonnes of grain procured by the AMA under the program in 2001.
Poland currently is negotiating with the E.U. to establish grain production quotas, direct payment levels and other policies that will go into effect upon Poland’s accession, which the Polish government hopes to achieve by January 2004. The negotiations have been contentious, as Poland wants higher quotas and direct payment levels than what has been proposed by the E.U.
Poland proposes using 1989-1991 as the base reference period for calculation of production quotas for grains, oilseeds, high protein crops and oil flax. Also, Poland wants to use as base reference yields obtained during the period 1986-87 to 1990-91, the same years used by current E.U. members.
The European Commission uses the period 1994-95 to 1998-99 as base years for its quota and yield calculations for all E.U. candidate countries. Polish officials oppose the E.U. base years because they assert that Poland suffered from economic crises and weather-damaged crops during that period.
In addition to structural and accession problems, Poland currently faces surpluses of grain and other commodities, based on favorable weather and generous subsidy programs that encouraged overproduction. The current situation recently has sparked farm protests and political controversy.
WHEAT AND FLOUR MILLING
Milling wheat consumption remains relatively stable in Poland, competing only with rye used for bread. Of the 5.8 million tonnes of food grain consumed annually, wheat accounts for about 75%.
About 80,000 tonnes of imported durum wheat is used annually for pasta production, which totals about 110,000 tonnes. High quality pasta uses 100% durum, but other Polish pasta production blends durum and common wheat, while the lowest quality pasta is not made from durum at all.
A relatively large amount of wheat, around 4 million tonnes annually or 40% of total consumption, is used in feed.
The number of wheat and rye mills operating in Poland today is still considerable, although the number has dropped from the nearly 2,000 operating in the 1990s. Most of those were small family-owned mills with capacity of 20 to 100 tonnes per day.
Before 1989, flour milling in Poland was a state monopoly organized into a series of regional companies. During the early 1990s, more than 200 private mills were built. Although these mills were small — most had capacities of 30 to 60 tonnes per day — they were aggressive and took over a large segment of the flour market from the slow and inflexible state owned facilities.
In the second half of the 1990s, the privatization of some state mills and growth of the new private milling sector changed the Polish milling industry, and the process of consolidation began. Currently, there are about 40 large mills in Poland with capacities of 200 to 600 tonnes per day. Most, but not all, are privately owned.
The biggest milling company is the Polskie Mlyny Group, whose five large mills have a total annual processing capacity of 800,000 tonnes. All the other major companies operate a single, high-capacity milling plant.
Also playing an important role on the Polish market is a series of smaller but well organized, modern and aggressive mills with a daily processing capacity of 100 to 200 tonnes per day.
As a first step in a plan that will eventually see Poland organized into five to seven regional trading and marketing groups, the Polskie Mlyny Group plans to centralize its marketing activity and trade through a licensed commodity exchange modeled on the Poznan and Warsaw exchanges. The company hopes it will create a fairly stable cereals market and will improve the quality of end products being offered by mills.
Both overcapacity in the Polish milling industry — currently estimated at about 40% — and continuous new investment in the industry is putting pressure on operating margins. Officials at the major Polish grain processing companies predict that the number of bankruptcies among small- and medium-sized operations will continue to increase.
LIVESTOCK AND FEED INDUSTRY
Feed demand in Poland has been growing and is expected to remain strong. Growth in poultry production, the largest feed use sector, is expected to slow to 2% this year, down from 7% in 2001, because of depressed prices. But that slowdown should be countered by a recovery in swine inventories, which were forecast to increase by up to 18 million head by July.
Feed grain use in 2001-02 increased by 6.5% from the previous year to 16.5 million tonnes. Feed grain use in 2002-03 is estimated only slightly higher, at 16.6 million tonnes.
The big increase in 2001-02 feed grain consumption was spurred in part by reduced feed potato use, as the potato harvest declined by 20% from 2000. In Poland, a significant amount of potatoes is still used as hog feed.
Total commercial feed production increased by about 7% in calendar 2001, to 4.58 million tonnes. Of this total, compound feed accounted for 4.01 million tonnes against 3.8 million the previous year, while protein concentrates, mainly used to mix with on-farm grain for pork production, increased to 445,000 tonnes versus 400,000 in 2000. The remaining feed industry products consisted of energy concentrates, 5,000 tonnes; milk replacers for calves, 8,000; mineral mixes and specialty feeds, 9,000; and premixes, 53,000.
Feed production for the poultry sector accounted for 73% of all compound feeds. The feed industry is currently benefiting from low raw material prices.
The Polish feed industry, which is largely private, invested heavily in recent years in modern production technology to improve feed quality. Beside local feed companies, companies financed with overseas capital have a strong presence. Provimi (formerly Central Soya), Rolimpex, Cargill and Land O’Lakes are the major commercial feed producers in Poland.