Neither grain from Ukraine nor the European Green Deal are the cause of low grain purchase prices in Poland. So neither the embargo nor the abandonment of pro-ecological measures will solve the problems. Better access to information about trends on global exchanges, support for the consolidation of small farms, and the expansion of land and sea transport networks enabling exports outside Europe would help more.
An expert report on the causes of the current difficult situation in the market for agricultural products and an analysis of the impact of EU membership on the agricultural industry in Poland were presented on March 18, 2024.
In 2023, Poland will import 1 million tons of grain from Ukraine, which, with domestic production at 35.2 million tons, may not be a significant factor in the price decline.
A report by the Institute of Public Finance:
Authors: Ph.D. Slawomir Kalinowski, Ph.D. Wawrzyniec Czubak, Ph.D. Benedykt Peplinski.
The situation of the agricultural sector as a whole has been extremely good in recent years, during a period of elevated food prices. The agricultural sector has been a beneficiary of rising food prices. This is a fact visible in the aggregate EUROSTAT data. According to EUROSTAT data, in only 2 years (2022-2023), the gross value added of the agricultural sector in Poland increased by 71%. This was the second-highest growth in the entire EU. Only Hungary recorded a higher increase, 86%, while in the EU as a whole, the increase in agricultural value added was 22% during this period.
Analysis of the Institute of Public Finance
“20 Years in the EU of Polish Agriculture; Macroeconomic Perspective. Selected facts“. Author: PhD Slawomir Dudek
Market globalization drives prices down
Wheat, rapeseed, and corn futures prices on the MATIF exchange in Paris are falling. Therefore, this is not exclusively specific to Poland. Moreover, the prices also fell during the period when Poland had an embargo on agricultural products from Ukraine, the study shows. The authors add that the European Union tries to support its producers, but it is not possible to completely protect them from market mechanisms in the reality of global trade.
Right now the reason for the drop in prices, the authors of the study explain, is the high level of production in Australia and Argentina, where the harvest is currently underway. Previously, prices may have been depressed by grain supply from Russia, which had a surplus of 63 million tons of wheat and 14.9 million tons of feed grain in the 2022/23 season.
Overall, worldwide production exceeds consumption. The global grain surplus in 2022 was about one billion tons, according to the Food and Agriculture Organization of the United Nations. “The latest Grain Market Report data, dated February 15, 2024, estimates world cereal production for the 2022/23 season at 2.87 billion tons and consumption at 2.3 billion tons,” the report shows.
The world’s largest grain producers are China (569.4 million tons in 2022), the US (408.5 million tons), India (293.7 million tons), the European Union (269.0 million tons) and Russia (146.4 million tons).
In this situation, the introduction of an embargo on products from Ukraine will not improve the situation in Poland’s agricultural markets and may lead to retaliation and the closing of Ukraine’s borders to goods from Poland, which we export there more than we import from there.
European Union
Agriculture is the sector of the economy that has benefited most from Poland’s accession to the European Union. Under the Common Agricultural Policy, €67.1 billion (about PLN 300 billion) has gone to Polish agriculture since accession. The subsidies, combined with access to the huge EU market and opportunities for cooperation with Community partners, have resulted in the accelerated development of agriculture in Poland.
“In 2004. Poland’s agricultural sector was achieving an added value of about 7 billion euros. This was one-third of that in Germany and two-thirds of that in the Netherlands. In two decades, the added value of agriculture has grown to more than 22 billion euros, an increase of more than three times. In 2004, we were eighth among European Union countries, and now we have jumped into the top five. We have overtaken the Netherlands by 41%. And we are only a quarter short of Germany,” writes PhD Slawomir Dudek in his analysis summarizing 20 years of Polish agriculture in the EU.
Nor are farmers’ difficulties in making production profitable due to the EU’s pro-environment policy, so stopping the European Green Deal would change little. Most Polish farms already meet their requirements. Besides, the so-called eco-schemes are not mandatory. Helping farmers could be a simplification of the bureaucracy involved in joining the program of increased subsidies for farms operating under eco-schemes.
What can be done about low prices?
The main weakness of Polish farms is their relatively small size. According to data from the Central Statistical Office, more than half of them have less than 5 hectares, and almost three-quarters do not exceed 10 hectares. The average area of a farm in Poland is 11.42 hectares, according to the Ministry of Agriculture and Rural Development. By comparison, the acreage of the average farm in the EU is 17.4 hectares, with Denmark exceeding 75 hectares, France and Germany 60 hectares, and the Czech Republic 120 hectares (Eurostat).
“Small farms do not take advantage of the economies of scale of production, they have no negotiating capacity, and this is accompanied by poor technical equipment and low efficiency. (…) From a social point of view, this implies two main consequences: it generates social problems (due to low income) and incomplete use of the land resource, which is in the hands of these farms.” – the report’s authors explain.
The role of the state in this situation would be to support the integration of agricultural entrepreneurs, promote cooperation, and facilitate the passage of procedures and formalities.
