Regoverning Agrifood Markets in CEEC –

Poland’s Pork and Apple Markets

Jerzy Wilkin, Malgorzata Juchniewicz and Dominika Milczarek

2

Introduction

Goal of the research: Links between producers, the processing

sector and distribution networks. Position of small producers, their

possibilities of self-organization and public support.

3

Introduction

Example of two important food products in Poland: pork and apples. The 4th largest producer of pork, One of the largest producers of apples in

the EU, A significant exporter of both products,

especially for UE market.

4

Inheritance of Former System

Private farmers dominated production sector,

Fruit and meat-processing plants belonged to so-called socialized sector,

Distribution networks consisted both of private and socialized sector.

5

Transition Period

Dramatic collapse of cooperatives, A weaker position of farms and an

increased competition between them, Market-oriented producers started to

intensify production and to modernize their farms.

6

Transition Period

Distribution networks: A booming development of local market

places at the beginning of 1990, An increase in the number of alimentary

shops, Fast development of super- and

hypermarket chains.

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Transition Period

Food-processing sector Meat market:

Privatization and modernization of meat-processing industry,

A concentration process in procurement and processing.

Apple market: An emergence of many small processing

plants due to growing home demand for processed fruits and vegetables.

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Current Situation – Meat Market

A growing structural asymmetry on the meat market:

On both ends of food chain - numerous groups of actors, i.e.: 1.1 million of producers and 12 million of households.

In the middle - processing plants and traders characterized by a growing level of concentration. In some regions food processors or

procurement companies have quasi-monopolistic positions.

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Current Situation – Apple Market

Fruit market can be characterized by: a high level of fragmentation and

competition (both between producers, brokers and processing companies),

highly fluctuating supply and prices, a low level of organization, high transaction costs.

10

Current Situation – Apple Market

Production structure: Apple production is concentrated in

small and medium farms (5-15 ha), Only 10% of farmers possessing

orchards specialize in apple production Due to prices and supply fluctuations.

Average size of an orchard - ca 0.86 ha.

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1.2%2.5%3.4%

7.9%

18.8%

13.3%

9.2%

15.6%

27.5%

0.4%0.2%0%

5%

10%

15%

20%

25%

30%

0 - 1 ha 1 - 2 2 - 3 3 - 5 5 - 10 10 - 15 15 - 20 20 – 30 30 – 50 50 -100

over100 ha

Share of farms having an orchard according to farm area

Source: on basis of PSR 2002 data

(in % of total number of farms with an orchard)

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Current Situation – Apple Market

Fruit-processing sector: Utilizes around 60% of fruit crops; There are around 1300 fruit and

vegetable-processing companies, Majority (90%) of them are small, Most of them located in the central

Poland, An increase in production of processed

fruits and a lower dynamics of demand at domestic market lower prices and emergence of a group of effective processing companies.

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Current Situation – Apple Market

1990/1991 1995/1996 1999/2000 2000/2001

World production

480.5 618.5 632.7 677.0

Production in Poland

80.3 82.0 110.0 160.0

Share of Polish

production

16.7% 13.3% 17.3% 23.6%

Share of Polish production of apple extract in the world production (in thousand tones)

Source: Ozimek 2002, p.17

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Current Situation – Apple Market

Distribution network: High level of dispersion of wholesale and

retail trade: Around 3800 companies, Small wholesale companies deliver fruits

mainly to processing companies and to local market places.

Super and hyper-market chains

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Results of Preliminary Survey

The most important problems for producers are: problems with marketing of their products

and fluctuation of prices.

The smaller farmers, not associated in any producers’ group tend to perceive their situation as difficult: because of lack of capital necessary for

investment and a lack of influence on the market.

16

Results of Preliminary Survey

All interviewed persons agreed that small farmers, not associated in any producers’ group or cooperative have no chances to survive and to develop.

Therefore: why such a weak cooperation between farmers?

17

Results of Preliminary Survey

Contracts: Pig producers having multi-year

contracts with meat processor – ca. 10% higher price.

Majority of fruit producers have no written contracts Larger producers and producer groups

sell directly to large retail stores. Usually, they have short-term written

contracts.

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Conclusions Polish agriculture is still dominated by small

producers. Their position is weakening year by year. The largest problems are:

Poor institutionalization, especially in the area of self-organization,

And very limited access to modern knowledge and technology.

Thousands of farms reduce their ties with the market.

There is a lack of well-defined and efficient public support for small producers.

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Further Research Identifying obstacles in forming

producers groups and cooperatives. Analysis of contracting arrangements

between main elements of food economy. Analysis of the impact of EU

enlargement. Who benefits most from European

integration? Better description of the impact of big

retail chains on other parts of food economy.

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Production

2 433 941 t 166 400 ha

(private farmers: 2 379 000 t)

Export (direct and wholesale) 246 000 t

(ca 10% of production)

Processing

1 300 000 t (ca 50% of prod.)

Consumption

ca 780 000 t

Import

21 600 t

Consumption from own production ca 285 000 t

(ca 15% of prod.)

Storage loss and use within farm

ca. 120 000 t (ca 5% of prod.)

Production level = ca 2 434 000 t Wholesale level = ca 1 000 000 t Retail level = ca 500 000 t

Wholesalers and wholesale markets 792 600 t

Modern and traditional retail

store formats

Market places

Super and hyper-markets

chains (ca 20% of consump.)

Source: own calculations and estimates on basis on data from IERiGŻ, GUS and COBRO.

Total fresh sale from domestic production

ca 485 000 t (ca 20% of prod.)

ca 35% of consump.

ca 45% of consump.

Vertical Flow of Apples in Poland in 2001