Productivity is relatively low, with a large number of small private farms averaging about 6 hectares accounting for at least 75% of production. Privatization of state-owned farms also has created disruptions that diminished productivity.
Agricultural policy. Government involvement in agriculture today is relatively minimal. The state does provide various subsidy, credit and guarantee programs for land privatization, farm inputs, grain storage and procurement for the state milling sector.
Government marketing activities focus on influencing grain prices through stocks management. The state Agency for Agricultural Markets (A.R.R.) is responsible for grain procurement and sale to the market, with tariffs also used to control total grain supplies.
Since 1992, minimum procurement prices, which serve as price floors for open-market grains, have been in effect for wheat and rye. The A.R.R. is authorized to raise actual procurement prices by 20% above the minimum. The A.R.R.'s procurement program is directed at food grains, consisting of 70% wheat and 30% rye, but a large amount of A.R.R. stocks ends up in feed channels.
The agency sets procurement targets and it attempts to meet them by offering various inducements to producers. But farmers are free to sell on the open market.
The system has made the A.R.R. the dominant player in Polish grain markets with an estimated 50% market share. But other private grain companies and intermediate marketing organizations are developing, and their activities gradually are increasing.
In addition, more and more grain is marketed through various commodity "exchanges," with the most important in Poznan, Szczecin, Lodz, Katowice and Olsztyn. In 1995, a central commodity exchange was opened in Warsaw in cooperation with the Chicago Board of Trade; the Warsaw exchange deals mainly with spot transactions, but exchange authorities hope to develop viable forward cash and futures contracts.
In 1996, Poland's Foundation for the Development of Agricultural Market Infrastructure began a pilot project using grain warehouse receipts with 20 elevators. These activities are expected to increase the efficiency of the domestic market and provide for closer links to the world grain market.
Total storage capacity of the major grain purchasing organizations exceeds 6 million tonnes. The state milling industry holds 4 million tonnes of capacity, A.R.R. holds 500,000, cooperatives hold 800,000, and various smaller groups hold 600,000.
Grain storage capacity at Poland's ports is extremely limited. Szczecin is the largest with about 50,000 to 60,000 tonnes of storage, followed by Gdynia with 10,000 and Gdansk with 8,000.
These capacities have not changed significantly in recent years, although many have been privatized, resulting in greater efficiency of usage. More grain is stored on farms as farmers begin to take advantage of delayed sales under the open market system.
Flour milling. This sector suffered relatively poor financial conditions related to the transition and continues in the process of privatization. The former central organization for the milling industry, Polskie Zaklady Zbozowe (P.Z.Z.), has been transformed into a limited liability company, and its various mills, although still state-owned, operate independently.
At the end of 1995, the government liquidated part of the debts accumulated by P.Z.Z. Debts were liquidated for 20 large P.Z.Z. companies, and interest on debts was liquidated or rescheduled for 23 more.
The debts were accumulated by P.Z.Z. during the transition period, when inflation and interest rates were skyrocketing, and they posed a significant barrier to privatization and development for P.Z.Z. companies. With the debt burdens eased, the government is working to privatize as many state-owned P.Z.Z. firms as possible.
P.Z.Z. remains the most significant entity in Poland's milling sector. But some smaller, privately owned flour mills also have begun operations, and their activities are gradually increasing.
The milling sector suffers from overcapacity, but privatization and the liquidation of industry debts has resulted in improvements in the industry's financial status. This in turn is expected to result in increased efficiency and a greater focus on quality.
A move in that direction already is occurring, as some privately owned mills have been built with new state-of-the-art equipment. Although relatively small, with daily capacities of 75 to 100 tonnes, the new mills are efficient and can offer more variety and improved flour quality.
As the nation's economy has improved, consumers increasingly are switching to wheat flour bread from rye bread. Pasta consumption prospects also are promising.
Livestock and feed. Poland's livestock sector basically has recovered from the worst effects of the economic transition, and general economic growth has helped consumption. Like grain producers, domestic pork and poultry producers are protected by A.R.R. programs and import tariff regimes.
The industry's primary difficulties most recently have stemmed from soaring feed costs. Strict phytosanitary requirements and tariff regimes to protect domestic producers have restricted access to cheap coarse grains, forcing the expanding meat and poultry industries to turn to wheat as an alternative.
Trade. Poland participates in the World Trade Organization, has preferential trade agreements with the European Union and is a member of the Central European Free Trade Area. Poland relies on import tariffs as a major component of its domestic grain stocks management and price stabilization policy.
Tariffs are imposed or suspended depending on government analysis of domestic supply conditions and price levels. At one time or another in the past three years, tariffs for non-durum and durum wheat, maize, rye and other commodities alternately have been suspended altogether or reinstated at reduced levels, based on supply and price levels of specific grains.
For example, the 20% tariff on non-durum wheat was suspended from the end of 1995 through June 1996, when the suspension was extended until June 1997. But in February 1997, the government reversed course, imposing a 10% tariff; that action was attributed to political pressures form agrarian party interests. By lat April, officials continued to debate whether to reinstate the 20% tariff, retain the 10% tariff or, as some observers speculated, suspend the tariff entirely.
Poland imports most of its wheat from the European Union and neighboring countries and is very much a price market.