The development of the Polish dairy market over four-year periods before and after Poland’s accession to the European Union

Размещено на http: //www. allbest. ru/

University of Warmia and Mazury in Olsztyn, Olsztyn, Poland

The development of the Polish dairy market over four-year periods before and after Poland's accession to the European Union

Jan Miciсski, Grzegorz Zwierzchowski, Mariusz Czyїewski

Abstract

polish dairy price european

This study provides an overview of the development of the Polish dairy market after Poland's accession to the European Union. It analyzes the condition of the Polish dairy industry prior to the EU accession, and it discusses changes in economic dependencies on that market in the course of successive years. The results of the analysis demonstrate that before Poland joined the European Union, milk and dairy products had been the most heavily subsidized group of food commodities marked by low prices relative to incomes and high consumption. The onset of a market economy witnessed a rapid increase in food prices which limited the consumption of milk and dairy products. A decrease in the cattle population (including cows) directly contributed to a drop in Poland's milk production (from around 16 billion liters before the EU accession to around 11.5 billion liters after accession). The EU accession opened new markets for Poland's milk and dairy industry, and it boosted exports. Nevertheless, a higher milk quota would contribute to a further improvement in the volume of dairy exports. The high quality of Polish dairy products can be attributed to the natural grazing of dairy cattle in grasslands unpolluted by industrial activity.

Introduction

The transformations in Poland's food processing industry reflect the profound changes taking place on a globalizing market. Vast changes are observed in the exchange of goods and services, technology, information, capital and international business. Poland's accession to the European Union has undoubtedly contributed to the growth of the Polish food processing industry (Grzegorzewski 2004). It increased the volume of food exports, it improved the foreign trade balance, financial performance and volume of investment (Њwietlik 2003).

The participation in the globalization process has generated a number of benefits for Poland owing to various adaptive and protective measures. A variety of management, marketing, technological and organizational standards and procedures have been adopted (Szot 2003, Daniluk 2007). Those solutions fostered Poland's trade relations not only with the EU Member States, but they also contributed to the effectiveness of cooperation on the global arena (Baran and Koіyska 2008). The financial assistance granted by the EU aided the modernization of industrial plants, it supported the education of decision-makers, and maximized the competitive advantage of small and medium-sized enterprises. The European Union supports milk production as part of its Common Agricultural Policy (Grochowska 2003). Intervention prices came into force in 1968, and milk quotas were introduced twenty years later to prevent surplus production and price drops (Szot 2003, Bobeі 2007). The aim of regulatory schemes is to protect the dairy market against imports from non-EU countries (Nosowicz 2000). Other support measures include subsidies for private storage facilities, mainly of skimmed milk (Szot 2003).

Custom duties include specific and composite duties. High quality products receive support from export subsidies which account for the difference between EU market prices and the average global prices. Market experts have recently suggested that the milk quota system should be abandoned to increase the competitive edge of the EU's dairy products on the global market. This move would deprive the EU dairy market of any protection, implying that only production and processing plants with the lowest production costs would be able to survive.

Poland's accession to the EU led to changes in the qualitative requirements imposed on both raw milk and the production process (Daniluk 2007). The smallest dairy farms keeping only a handful of milk cows were unable to meet stringent phytosanitary requirements and were, therefore, forced to abandon milk sales. The changes improved the profitability of the milk production process in large and medium-sized farms which contributed to rational investment policies in this market sector. Processing plants were modernized, and Poland's dairy industry was brought closer to EU standards. The change process had begun already before Poland joined the EU (Domaсska 2000), and it continues today. Dairy plants had introduced more restrictive qualitative requirements for raw milk already before the EU accession. Today, they purchase only premium class milk with somatic cell counts of up to 400,000/ml and total bacterial counts of up to 100,000/ml.

This paper provides an overview of the development of the Polish dairy market in 2000-2008, i.e. before and after Poland's accession to the European Union which took place in 2004.

Materials and methods. This paper is a monograph. Based on the cited resources, it analyzes the condition of the Polish dairy industry prior to the EU accession, and it discusses changes in economic dependencies on that market in the course of successive years. References are made to production indicators such as the population size of dairy cattle and milk yield. The presented results focus on the functioning and the development of the dairy market relative to prices, supply, demand and foreign trade. The paper discusses growth trends on the market of consumer milk, milk beverages, butter, cream, ripened cheese and cottage cheese. It analyzes the causes, consequences and the nature of transformations on the Polish milk market. The paper evaluates the Polish dairy industry's competitive edge on the EU market with an indication of prospects for future growth.

1. Results and discussion

A decline in Poland's dairy cattle population began in the 1980s, and a further decrease was noted in 2004. Upon Poland's accession to the European Union in May 2004, the size of cattle population reached 2,796,000, marking a 2.29% decrease from the previous year (Table 1). Cattle stocks dropped in all types of farms, and the lowest decrease was reported in individual farms (3.5%).

Table 1 Changes in cattle population and milk production in Poland in 1950-2008

Source : Statistical yearbooks: (Central Statistical Office: 1951 - 2009) and Grodzki (2005)

The efforts to modernize and restructure the Polish dairy market continued in 2004, increasing milk yield per cow to 4262 kg in the mass population and to 6152 kg in the active population (Table 2). This period was marked by varied milk yield across different farm types.

The decrease in the cattle population led to a global drop in milk production from 16 million tons (1980) to 11,477,000 tons (2004) and 12,063,000 tons (2008) (Table 1). A production drop was accompanied by an improvement in milk sales and lower milk consumption in dairy farms. According to Seremak-Bulge (2005), with annual output of 12 million tons, Poland became one of Europe's leading milk producers with an 8.5% share of the EU market, the largest exporter of dairy products in the world (around 40% of global exports). After EU's enlargement to incorporate a further 10 Member States, Poland's share of the global milk market increased from 21% to 25%, and milk production in the EU-25 soared from 122 million tons to 143 million tons.

Table 2 Changes in the Polish dairy industry at farm level in 2000-2008

Source : Statistical yearbooks:( Central Statistical Office 2000-2008) and Grodzki (2005)

The restructuring processes on the dairy market were accelerated in 2008. A steady drop was noted in the number of dairy farms from 1,091,000 in 2000 to 734,000 in 2004 and 550,000 in 2008 (Table 2). The market continued to consolidate, and the process of increasing the milk yield of cows was stimulated. This was only the initial stage of market consolidation, and Polish milk producers still lagged far behind the leading EU suppliers. The Polish dairy industry had to consolidate to maintain its cost effectiveness and competitive advantage.

As regards the structure of the dairy market, 2008 witnessed an increase in milk purchasing prices from 2004. A seasonal price drop was not observed in the summer of 2008 for the first time in years. Nonetheless, milk purchasing prices in Poland were among the lowest across all of the EU (EU-25). In Germany, France, Great Britain and the Netherlands, the leading suppliers of milk in the European Union, milk purchasing prices oscillated within the range of EUR 25-27/100 liters. The highest prices of EUR 30.8-40.3/100 liters were reported in the Scandinavian countries.

In the analyzed period (Table 3), vast fluctuations were noted in domestic prices as regards both the quality of the purchased milk and the region of purchase. In July 2004, the prices of prime class milk were more than 50% higher in comparison with class I products. From the regional perspective, the highest prices were paid to farmers in Opolskie and Podlaskie regions (PLN 101/100 liters). High purchasing prices were also reported in the western parts of Poland. The above resulted from a lower supply of milk in those regions. The lowest prices were observed in the southern parts of the country in Maіopolskie, Њwiкtokrzyskie and Podkarpackie regions.

Table 3 Average milk purchasing prices in PLN per liter in 2004 and 2008

Source: Central Statistical Office (2005-2009)

The first half of 2004 brought an increase in the production of dairy products (Table 4). The highest growth rate was observed in respect of non-perishable goods with a vast share of dairy exports, including skimmed powdered milk, ripened rennet cheese, cream and butter. The changes in the structure of milk production improved the consumption of milk fat. The use of milk fat in the production of ripened cheese increased steadily (26.1%), while lower quantities of this raw material were applied in the production of butter (41.7%). In the first half of 2004, the financial performance of the dairy industry improved due to higher exports (high prices). The key export products were marked by particularly high growth. The prices of skimmed powdered milk and butter blocks increased by 36.6% and 30.0%, respectively, from 2003. In the analyzed period, the prices of ripened cheese (Edam) increased by 21%, and semi-skimmed cottage cheese - by 14.7%. Owing to a growing demand on the German market, the prices of pasteurized milk grew by 14%.

Table 4 Production of selected dairy products in Poland in 2002-2008

Source: Central Statistical Office (2003-2009)

The year 2006 witnessed an increase in the production of whey (by 18%), cream (12%), ripened cheese and cottage cheese (9%) and yogurt (5%) in comparison with 2004. Poland's butter and consumer milk output grew by only 1.5%, while the production of skimmed powdered milk fell by 4.5%. Milk consumption continued to be low due to a further reduction in the number of dairy farms. The balance of trade showed an increase in the export of milk and milk products by a high 33%. The vast majority of exports, in particularly cream, were shipped to the "old" EU countries. Poland continued to import casein due to low levels of domestic production. This raw material was imported mainly from Ukraine and Belarus and it was re-exported (Mierzwa 2004).

A rapid increase in milk supply was noted as of the beginning of 2007 following the information that the quota for that year would not be exceeded. The producers also took advantage of the rising prices of milk on the domestic and the global markets. Net profitability on the dairy market reached 3.57% with liquidity ratio of 1.41%. The highest improvement was reported in the segment of processed and fried cheese. The supply of cream, whey, yogurt, milk beverages and butter also increased from the previous year.

The price hike continued to lower milk consumption which reached 173 l/capita. A significant drop in butter consumption (by 2.3% from the previous year) was also reported. A record-breaking increase in global milk prices boosted the value of Polish exports by 23%. In 2007, the demand for powdered milk and whey rose in developing countries. Polish ripened cheese and cottage cheese enjoyed popularity on foreign markets with most exports reaching Germany, France and the Czech Republic (130,000 tons in 2007). The leading importers of Polish butter were Germany, the Netherlands, France and Russia.

As demonstrated by the data in Table 5, more than 95% of the cattle population was owned by individual farmers. In successive years, milk production remained fairly constant, excluding 2008 when it increased to 12.36 billion liters. Total milk purchases in 2004 amounted to 7.7 billion liters, and most produce (7.55 billion liters) was purchased for industrial processing. In 2008, the volume of purchased milk increased to 8.686 billion and 8.543 billion liters, respectively.

Table 5 Cattle population, milk production and milk purchase in Poland in 2000-2008

* cattle population as of June. Source: Central Statistical Office (2001-2009)

The above improvement was stimulated by a higher national quota (Reps-Bednarczyk 2009). Record-breaking growth was reported in the segment of powdered milk, and a steady increase was observed in the production of whey (17%), ripened rennet cheese (11%), processed and fried cheese (7%) and other cheese (9%).

Table 6 Balance of trade in dairy products in 2000-2008

Source: own compilation based on Central Statistical Office data

The volume of exports in terms of the raw milk equivalent reached 866 million liters already in 2000, and it continued to increase steadily to reach 2,781 million liters in 2008. Export revenues in the analyzed period soared by EUR 784 million, marking a 37.54% increase from 2004 (Table 6) (Seremak-Bulge 2006). The export surplus was 2,231 million liters. This highly satisfactory balance of trade was aided by duty-free quotas to the EU-15 Member States, the European integration, the expansion of the European Economic Area, high prices of dairy products on global markets, a weakening of the Polish zloty against the Euro (PLN 4.47 from PLN 4.24 in the previous year) and an improvement in the veterinary standards observed in the dairy industry.

In the period that followed Poland's accession to the European Union, the prices of milk quoted in the EU-25 were lowest in Poland. At the same time, Poland's consumption of milk and dairy products was relatively low in comparison with Germany, Denmark, the Netherlands, Great Britain, Ireland, France and the Scandinavian countries.

Table 7 Retail prices of milk and dairy products in 2005-2008 [PLN]

Source: Central Statistical Office (2006-2009)

In 2008, retail prices of consumer milk with a 3% to 3.5% fat content increased by 13.82% from 2005 (Table 7). The highest growth was noted in respect of semi-fat cottage cheese whose prices went up by 25.19% in the discussed period. An increase was also observed in the prices of Gouda ripened cheese and cream with an 18% fat content. The price of Gouda cheese increased from PLN 16.38/kg in 2005 to PLN 18.82/kg in 2008. A falling trend was noted in the prices of skimmed powdered milk (41% from the previous year) and butter blocks (26% from the previous year).

The data presented in Table 8 show a rising trend in the production of ripened cheese and cottage cheese from 606,000 tons in 2005 to 700,000 tons in 2008. A drop was noted in the production of liquid processed milk (by 4%), butter (1%), skimmed powdered milk (1%), cottage cheese (1%) and cream (1%). Milk prices saw a gradual decrease due to a higher supply and a drop in global prices (Sankiewicz 2009). In July 2008, the average price of milk in Poland reached EUR 31.14/100 kg, and it was 10.6% below the EU average.

Surplus domestic supply and relatively high global prices contributed to an improvement in trade turnover. Poland's dairy exports increased by around 14%. As regards State intervention on the dairy market, in 2008, the rate of compensations paid on the termination of individual milk quotas decreased from the previous year. An estimated 9,000 compensation requests were submitted to the Agricultural Market Agency (Szajner 2004; Sych-Winiarek 2008A and 2008B). The terms of managing the national reserve of the milk quota have been modified. In the previous system, the producer had to demonstrate improved sales of milk and dairy products in the quota year preceding the year in which the request was submitted. The "Glass of Milk" program subsidized by the EU was continued with the aim of increasing milk consumption.

Table 8 Supply of dairy products in 2005-2008

Source: Central Statistical Office (2006-2009)

With a progressing increase in quota limits and Poland's growing significance as a country with a vast production potential and lower production costs, highly-specialized milk suppliers were able to increase their production volume, and supplies were maintained at the level of the available quota which increased to 9,663,000 tons. According to Jarka (2007), the highest level of production effectiveness can be attained only by farms that recognize the benefits of economies of scale. According to the data collected by the author of this study, an improvement in the productivity of fodder production areas followed from an expanded scale of production and the use of more effective feed production technologies.

Conclusions

The analysis of the development of the Polish milk and dairy market after Poland's accession to the European Union leads to the following conclusions:

1. Before Poland joined the European Union, milk and dairy products had been the most heavily subsidized group of food commodities marked by low prices relative to incomes and high consumption.

2. The onset of a market economy witnessed a rapid increase in food prices which limited the consumption of milk and dairy products.

3. A decrease in the cattle population (including cows) directly contributed to a drop in Poland's milk production (from around 16 billion liters before the EU accession to around 11.5 billion liters after accession).

4. The EU accession opened new markets for Poland's dairy industry, and it boosted exports. Nevertheless, a higher milk quota would contribute to a further improvement in dairy exports.

5. The high quality of Polish dairy products can be attributed to the natural grazing of dairy cattle in grasslands unpolluted by industrial activity.

References

1. Baran J., Koіyska J. 2008. Porуwnanie wykorzystania zasobуw maіych, њrednich i duїych przedsiкbiorstw przemysіu mleczarskiego w latach 1998-2005. PTE Toruс Working Papers, nr 56, s. 159-169.

2. Bobeі Ј. 2007. Transfer kwot mlecznych bez gospodarstwa w prawie polskim. Przegl№d Prawa Rolnego, nr 2 , s. 271-288.

3. Daniluk A. 2007. Kierunki zmian w sektorze mleczarskim w aspekcie poprawy konkurencyjnoњci. Zarz№dzanie i Edukacja, nr 55, s: 87-98.

4. Domaсska E. 2000. Organizacja rynku mleka i produktуw mleczarskich w UE. Fundacja Programуw Pomocy dla Rolnictwa, Warszawa, s. 1-36.

5. Grochowska R. 2003. Wspуlna organizacja Rynku Mleka i Produktуw Mlecznych w Unii Europejskiej - zasady i mechanizmy. Urz№d Komitetu Integracji Europejskiej, Warszawa, s. 20-43.

6. Grodzki H. 2005. Hodowla i uїytkowanie zwierz№t gospodarskich. Wydawnictwo SGGW, Warszawa, s. 11-91.

7. Grzegorzewski P. 2004. Przewidywany wpіyw akcesji Polski do Unii Europejskiej na funkcjonowanie spуіdzielni mleczarskich i spуіdzielni „Samopomoc Chіopska”. Studia i Prace Kolegium Zarz№dzania i Finansуw, nr 49, s. 161- 179.

8. Jarka S. 2007. Analiza czynnikуw wpіywaj№cych na efektywnoњж gospodarstw mlecznych. Acta Scientiarum Polonorum Oeconomia, nr 6 (4), s. 13-18.

9. Mierzwa D. 2004. Mleczarstwo w Polsce i innych krajach europejskich. Wiadomoњci Statystyczne, 49(7), s. 69-76.

10. Nosowicz S. 2000. Podstawowe akty prawne Unii Europejskiej dotycz№ce Wspуlnej Polityki Rolnej (cz. 2). Rynek mleka, owocуw i warzyw. Warszawa, s7-21.

11. Reps-Bednarczyk A. 2009. Kwotowanie produkcji mleka. Biuletyn informacyjny Agencji Rynku Rolnego, nr 9(219), s. 13-18.

12. Gіуwny Urz№d Statystyczny. 1950-2009. Rocznik statystyczny rolnictwa. Roczniki branїowe. Zakіad Wydawnictw Statystycznych. Warszawa.

13. Gіуwny Urz№d Statystyczny. 2009. Rolnictwo w 2008. Zakіad Wydawnictw Statystycznych, s. 61-123.

14. Sankiewicz Sz. 2009. Konkurencyjnoњж unijnego przemysіu rolno-spoїywczego. Biuletyn informacyjny Agencji Rynku Rolnego, nr 9(219), s. 60-72.

15. Sarnecki J. 2004. Przetwуrstwo i rynek mleka w Polsce w ujкciu przestrzennym. Instytut Ekonomiki Rolnictwa i Gospodarki Їywnoњciowej, Warszawa, s. 100-145.

16. Seremak-Bulge J. 2005. Produkcja mleka - informacja dla producentуw. Instytut Ekonomiki Rolnictwa i Gospodarki Їywnoњciowej. Polska Wieњ w Europie. Fundacja - Fundusz Wspуіpracy. Biuro Programуw Wiejskich. Warszawa, Kwiecieс 2005, s.s. 1-14.

17. Seremak-Bulge J. 2006. Polskie mleczarstwo w poszerzonej Unii - szanse i zagroїenia w kontekњcie pierwszych doњwiadczeс. Finanse, Bankowoњж, Ubezpieczenia, nr 2, s. 33-45.

18. Sych-Winiarek J. 2008. Rynek mleka w 2008 roku. Biuletyn informacyjny Agencji Rynku Rolnego, nr 5(203), s. 24-35.

19. Sych-Winiarek J. 2008. Rynek mleka. Biuletyn informacyjny Agencji Rynku Rolnego, nr 11(209), s. 29-41.

20. Szajner P. 2004. Rynek mleka w Polsce. Biuletyn informacyjny Agencji Rynku Rolnego, nr 11(161), s. 43-50.

21. Szot E. 2003. Polskie rolnictwo w Unii Europejskiej. Wyd. Fundacja Fundusz Wspуіpracy, Warszawa, s. 20-25.

22. Њwietlik K. 2003. Produkcja i konsumpcja mleka w krajach UE oraz w Polsce. Finanse, Bankowoњж, Ubezpieczenia, Warszawa, nr 3, s. 73-90.

Размещено на Allbest.ru