Poland is one of the biggest countries in the European Union (E.U.) and also one of its newest members. The change from its past as part of the Eastern Bloc to become a modern market economy with its focus on relations with the rest of Europe has meant huge changes and challenges. The grains sector has been no exception.
Poland is one of the E.U.’s most important grain producing countries. According to Poland’s Ministry of Agriculture, it is second only to France in terms of planted area, while it is third, behind France and Germany, in terms of production. "After many years of Poland being a net cereals importer, which was noted despite the domination of cereals in crops, for the last two years export of cereals cultivated in Poland has considerably exceeded import," the ministry noted in its 2007 yearbook.
The International Grains Council’s (IGC) latest forecast for total grain production in Poland in 2008 is 26.5 million tonnes, down from 27.6 in 2007. It now predicts a 2008 wheat crop of 8.5 million tonnes, compared with 8.3 in 2007. The barley crop is projected at 3.5 million tonnes, down from 4 million a year ago, with oats at 1.3 million (1.5 in 2007) and rye at 3.8 million (3.3 last year).
Grain production is concentrated on relatively few farms, Izabela Dabrowska, Agricultural Market Analyst at Bank Gospodarki Zywnosciowej S.A. (BGZ), told World Grain. "In the biggest group, zero to five hectares, there was something around 1 million farms, but they produce no more than 9% of the grain," she said. "About 3.5% of the farms produced almost half the grain." Those 58,000 farmers are responsible for 49% of production. Their influence on the grain market goes even beyond their high share in production. "The biggest farms have elevators," she said. "They buy grain from the smallest farms and they sell it at the best prices."
The under-3.5-hectare group of farms represents 57% of the total number of producers.
"A small number of farmers have in their hands more than half of total Polish grain production," she said. "They can influence prices because they decide when to sell."
That can help keep prices up. "For example, last year we had a very good harvest, but it was not good in the rest of the E.U.," she said. "At this moment, prices in Poland are one of the highest in the E.U. In the case of wheat, that is the highest."
One problem for Polish grain farmers is low yield. "The yield on wheat this year (2007-08) was 3.94 tonnes a hectare," she said. "The average for the E.U.-27 is 5.11. The yield in Poland is much lower than in France, Germany or Britain."
One problem is that soil conditions are generally not as good as in some of the other European countries, but there is also an issue with the structure of Polish agriculture. "We still have many small farms where they are not so efficient and working on a lower scale," she said. "The use of fertilizers is less, and it is less well chosen."
Another problem is the small percentage of bought-in, as opposed to farm-saved seed. She put the percentage of bought-in seed at 7% in 2007. "I think that’s the lowest in all of the E.U," she said. "For example, in Latvia it’s 30% and in Spain 34%."
This year, very dry weather has limited yields. "We expect a harvest of about 25.7 million tonnes; last year it was a 27.1," she said. She put the wheat crop at 8.4 million tonnes, compared with the Polish farm ministry’s figure of 8.3 million for last year, with rye at 3.1 million compared with 3.1 million last year, barley at 3.5 million compared with 4 million, maize unchanged at 1.7 million, and oats at 1.3 million tonnes compared with 1.5 million.
"We expect that in comparison with last year, the biggest change will be for barley, because it is a spring grain," she said. "We don’t expect a big change in the case of maize. Wheat is lower, but not by so much. There is a bigger area sown, so the harvest will be on a similar level."
Despite a smaller harvest, Poland will continue to be adequately supplied with grain. "We had a good harvest last year and quite a high surplus, and now we have quite high ending stocks," she said. "Even if this year we have a lower harvest, we will keep the similar supplies to last year. We don’t expect problems with domestic supply."
She expected wheat consumption to remain stable but noted the growing use of wheat for non-food uses, mostly ethanol. It will, however, be offset by changes in the feed sector. "We expect, because of changes in pig production, use for feed will decline with about 8% less use for feed than last year," she said.
Polish farmers have also faced a rapid rise in input costs since the start of this year. "In the case of some fertilizers in Poland, it’s even up by 90%," she said.
Poland is also a major producer of oilseed rape. Izabela Dabrowska put production in 2007 at 2.13 million tonnes, an increase of 29% year on year and 12.2% of the total E.U. crop. However, with prices for rape becoming less favorable in comparison with wheat, she expected a fall in 2008.
Poland has a large processing sector which faces major structural change. According to the European Flour Milling Association (GAM), the total quantity of wheat milled in Poland was 4.1 million tonnes in 2005, along with 900,000 tonnes of rye. Of that, 32% went to small bakeries, 23% to industrial bakers, 12% to bakeries in supermarkets, 18% to biscuit and rusk manufacturers and confectioners, and 10% to households. The remaining 5% went to "other" users.
"In the last two decades, we (have observed) strong concentration," said Dabrowska. "Small companies have collapsed. Big companies have invested, for example, from Germany. We have a lot of companies which are producing flour. They compete on price. The truth is that small companies have no chance."
The Polish milling sector is struggling with high prices, said Jadwiga Rothkaehl, president of the Polish Millers Association (SMRP). "Like in the whole of Europe, there are very high prices for wheat and rye," she said. "Farmers were waiting for better prices and didn’t sell the grain."
She also focused on the problem of overcapacity. "We have few groups of flour millers of any size. The big companies won in competition with the small mills. A lot of small, often family, mills have disappeared during the last two years."
Millers have also found it hard to buy grain. "There is a shortage of grain, not because we had bad crops but because the farmers didn’t sell."
Dabrowska described the trend in the bakery sector as similar to the rest of the E.U. "We have a lot of small companies," she said. "People are starting to appreciate more good-quality bread for which they are ready to pay more.
"Consumption of bread overall is getting lower and lower. That is also a similar trend to the rest of the E.U. It’s not so good for processors. In the long-term, maybe this process will help the structural changes."
Chris Lyddon is World Grain’s European editor. He may be contacted at: