15 June 2010

5 minute read

The report, which analyses supply and demand in Poland's changing dairy, grain, rice, sugar and livestock sectors and looks at how production levels and consumption are likely to play out to the end of the forecast period in 2013, shows that about 77 per cent of the agricultural land is arable, two per cent is covered by orchards and about 20 per cent is permanent pasture.

BMI says that Poland is a significant producer of wheat, sugar beet, pork, poultry and milk and in the report BMI forecasts production increases for wheat, barley, corn, sugarbeet, milk, cheese, poultry, pork and beef.

Poland is generally a net exporter of meat and dairy products, however, the situation has become more difficult this year.

According to the Foundation of Assistance Programmes for Agriculture in Poland, as cited by Rzeczpospolita, the monetary value of Polish milk products was expected to drop by 20 per cent in 2009.

Earnings from exports of dairy products (excluding ice cream) saw a 30 per cent year-on-year decline to €336 million during the first five months of 2009, attributed to low prices and lack of demand in global markets.

Agri-food exports have increased considerably in recent years. In 2008 the value of foreign sales reached €11.3 billion, up 12.1 per cent compared to the year before according to the Ministry of Agriculture.

Most of the exports, worth €8.5 billion, went to the EU-27, with Germany being the biggest market.

The value of imported agri-food products in 2008 was €9.8 billion, up 21.7 per cent on 2007.

Since joining the EU Poland's agriculture industry has been, and is still being, forced into significant change in order to be competitive.

In an effort to encourage consolidation of the fragmented farming system, to help bring farms and processing units up to EU production, health and safety standards, and to help give impetus to the food industry, the EU, in conjunction with the national government, has handed over billions of euros in subsidies and other types of financial support. Additional support is provided by the World Bank.

Slowly, BMI says, this seems to be working and despite inevitable fluctuations in market conditions for certain products (the pig industry has suffered in the recent EU pig crisis), farms are generally becoming more productive, farmers are generally becoming richer and the food industry is developing well.

A new law on genetically modified organisms set for consideration by parliament does not place an outright ban on GM crops, but it will make planting them prohibitively difficult and amount to a de facto ban.

The effects of the legislation, as well as other developments in Polish agribusiness over the last quarter, are analysed in depth in BMI's report.

The Genetically Modified Organisms Law calls for 'isolation zones' between GM corn and conventional and organic crops of 500 and 1,000 metres respectively.

In BMI's view the legislation is likely to significantly reduce potential yield gains over our forecast period. The corn borer, which GM varieties are resistant against, is a significant problem for the country's producers.

BMI still forecasts strong growth in corn production, but has reduced its forecasts accordingly and is now forecasting production to rise by 48.9 per cent from 2009 to 2014.

In 2010, BMI expects output to come in at 1.85 million tonnes, up 8.6 per cent year-on-year.

In 2014, BMI expects it to have risen to 2.54 million tonnes.

Although booming corn production and low feed prices have been good news for pig farmers, inefficiency and a strong zloty against the euro continue to conspire against them.

Pork production has been plummeting.

Figures indicate pork production picked up during the final quarter of 2009, as the seasonal increase in pork prices kicked in, although the year as a whole saw a very weak performance.

Eurostat puts 2009 pork production at 1.60 million tonnes, lower than any year for which BMI collects historical data. The figure represents a 14.8 per cent fall year-on-year from the 1.89 million tonnes produced in 2008 and the report authors say they do not expect production to recover over forecast period.

Meanwhile, poultry production, currently Poland's second-largest livestock sector, is set to overtake pork in 2013.

Low feed prices as well as booming exports to the EU are allowing Polish poultry producers to expand. Latest figures from Eurostat put 2009 poultry production at 1.27 million tonnes, up 6.7 per cent year-on-year and 50,000 tonnes higher than we previously estimated. In 2010, we forecast a 2.5 per cent increase in production to 1.30 million tonnes.

All this has helped expand the wider Polish economy, which in recent years has seen a significant improvement in GDP and consumer spending power, although BMI says that the recession is now taking toll and in May 2009 the IMF approved a one year $20.58billion arrangement for Poland under the Flexible Credit Line.

The westernisation of consumer food preferences is providing further opportunities for agricultural producers and processors and the winners will be those who can adapt best.

Poland's encouragement of foreign investment in the food industry is helping to meet shifting consumer demands and drive the industry forward. Denmark's Arla Foods operates two dairies in Goscino and Warsaw which have EU export licences.

French Groupe Danone is the largest supplier of fresh dairy products in Poland, reporting a 32.6 per cent market share in value terms.

To help improve the poor quality of locally sourced raw milk the company also supplies animal feed to producers, the cost of which is deducted from receipts paid to producers for the milk supplied.

Significant opportunities still remain in some sectors such as organic production, which could particularly suit many of Poland's small farms.

Eurostat figures suggest that although the conversion to organic is slow some progress is being made.

Fully converted crop area rose from 37,724 hectares (ha) in 2004 to 178,670ha in 2008. Crop area under conversion rose from 45,006ha in 2004 to 135,274 ha in 2008.

Conversely, a greater acceptance of genetically modified (GM) organisms could help crop and livestock producers.

In response to the EU Renewable Energy Directive which stipulates that by 2020 at least 10 per cent of fuel used in transport will be from biofuel or electric power, there is some excitement about the possible benefits of domestic biofuel production for crop and sugar beet growers.

However, it remains to be seen how this plays out.

According to a Reuters report Poland is the fourth biggest EU producer of bioethanol, though a long way behind France, Germany and Spain.

The current economic downturn has of course threatened the profitability of Poland's agricultural sector, as it has most others around the world.

To obtain the full report go to http://www.fastmr.com/prod/55068_poland_agribusiness_report_q2_2010.aspx.