BUDOUCNOST MLÉČNÝCH PRODUCENTŮ POLSKA V KONTEXTU EU
18.09.1998 | Odborné konference
Threats and opportunities for the Polish dairy sector in the EU context
Budoucnost mléčných producentů Polska v kontextu EU
Dr. Andrzej Krasnodćbski, Dr hab. Czesław Nowak
Agricultural University of Cracow, Poland
The article presents some problems which Polish dairy sector faces in the context of Poland s integration with European Union. Presented were problems concerning both milk producers and dairy market limited to the dairy cooperatives activities. Raw product base of collected milk is considerably scattered and inadequately supported financially which is reflected in poor quality of milk and transportation costs. Dairy cooperatives predestined to the role of dairy sector integrator are broken as an organization and reach financial results which limit their ability for independent development. In order to survive and compete effectively with domestic and foreign subjects cooperatives will have to undergo capital restructurization which will create a possibility to bring in capital and intensify their development on the way to integration with EU.
Autoři se v článku zabývají problémy polských producentů mléka související s integrací do struktur Evropské Unie. Jsou zde uvedeny problémy samotných mléčných producentů a nedokonalosti trhu s mléčnými výrobky související se stavem zemědělských družstev zabývající se mléčnou produkcí. Celková mléčná výroba je značně rozptýlena mezi malé producenty a je nedostatečně finančně dotována, což se odráží v horší kvalitě mléka a ve zvýšených nákladech na transport. Zemědělská družstva s mléčnou produkcí se jako integrační činitel mlékárenství potýkají s organizačními a finančními problémy a nemají prostor k nezávislému rozvoji. V zájmu zachování výroby a schopnosti družstev konkurovat domácím i zahraničním subjektům je nutné provést celkovou restrukturalizaci, která umožní přiliv nového kapitálu a urychlí rozvoj družstev v souvislosti s procesem integrace do evropských struktur.
milk, cooperatives, processing, integration
mléko, zemědělská družstva, zpracování, integrace
During the period of transformation of Polish economy dairy industry had to adjust to completely new conditions in a very short time. In 1988 it still benefited from state funds, but the financial support has been finally withdrawn since 1990. Increase in food prices, particularly dairy products caused a significant decrease in demand for those articles: from 271 kg per inhabitant in 1988 (calculated in milk equivalent) to 195.0 kg in 1996. For comparison: in Sweden the index is 357.5 kg, in Holland 314.6 kg, in France 281.2 kg, in Germany 227.9 kg and in Spain 159.1 kg. Considering dairy products of Western firms which appeared on Polish markets and intensive advertisement of margarine, it is clear that dairy plants faced challenges hitherto unknown.
Milk producers market
In Poland milk is produced and sold to dairy plants by about 800 hundred farms, which is many times more than for example in France, where milk is produced on less than 150 thousand of farms. At the same time it should be emphasized that an average French farm produces 150 thousand liter per year, whereas Polish farm only about 8 thousand. This confrontation shows a considerable scattering of Polish dairy sector and extremely difficult situation of dairy plants. Small scale of production with simultaneous deficiency of raw product resulted in a situation when dairy plants cannot just stop purchasing small amounts of milk, which would be economically justified decision also because of the product quality. Milk collection from several hundred or several thousand of suppliers, which is the case of many dairy enterprises causes high costs of transport and higher investments on quality assurance. On the other hand producers of small amounts of milk cannot afford expensive coolers, which will be indispensable on farms under new conditions of milk collection defined by new standard.
It is impossible to cool milk to the temperature below 8o C without proper equipment. However, it must mentioned here that the requirement is much less strict for Polish farmers than for EU producers. In EU the limit temperature for raw milk collected on farms is 4o C.
The demand is troublesome particularly for smaller farms. The only solution would be an increase in the number of dairy cows on farms that plan dairy production in future. It is worth recommending as such farms are supposed to gain most out of the integration with EU. Milk prices in Poland are still much lower than in EU countries. (Tab.1).
Table 1.: Relations between purchase prices of milk in Poland and EU in % (purchase prices in ECU/100kg).
Purchase price of milk in EU countries = 100
Source: IERiGŻ Warszawa, K. Świetlik /5/
Differences in prices of milk between Poland and EU result mainly from different costs of production and intervention costs on the dairy market. Lower costs of milk production in Poland result primarily from lower labor costs, extensive production on a majority of farms and lower quality requirements defined by dairy plants for suppliers, in spite of growing competition. Price relations are diversified for individual EU countries. For example: in 1996 an average milk purchasing price in Poland (ECU) was c.a. 40% of price paid to Italian framers, where it was the highest and 54% of price in Belgium where the prices were the lowest within EU. Today, from the point of view of prices, Polish milk is competitive for EU produced milk. It may be assumed that in the nearest future milk purchasing prices in Poland will raise as a result of increasing costs of production and an improvement of its quality, as well as due to grown domestic demand. However, in EU milk prices will probably fall due to intended limitation of protectionism in the dairy sector. Thus the analyzed price levels will be approximate. At present prices of ”extra class” milk constitute already 66% of average EU price. EU experts anticipate that milk prices in Poland will reach the EU level by 2002 /5/.
However, apart from the enumerated there are other reasons why this scenario may be disturbed and those are also on the side of Polish dairy sector.
For a number of years an average Polish farm has owned 2 or 3 cows. Considering average milk yield per cow c.a.3.3 thousand liter yearly, it is clearly seen that equipment for mechanical milking is beyond the means of most farms. Thus a majority of dairy farms still have neither milking machines nor coolers.
A small number of cows often means also a lack of proper program of forage production and conservation. Like mechanization of milking it also would involve access to expensive specialist equipment. Moreover, modern machinery has been designed for bigger farms and its application on smaller units is practically unjustified. For example, a good technology of production of silage in rolled bales means a possibility to produce silage from slightly withered plants (grasses or alfalfa), but a single bale weighs about 500 kg and should be fed to animals within a day or two after its opening. So it would be of no use on farms keeping statistically 2 or 3 cows.
Milk processing market
Efficient cooperative movement is characteristic of EU countries which achieved success in dairy sector. It has a considerable share in purchasing and processing of milk, e.g. in Ireland it is 96%, in Denmark 92%, in Holland 84%, in Germany 77%, in Italy 68%, whereas in Poland 80%. Statistically, initial situation is favorable for Polish cooperative movement. However, some organizational problems remain and those resolve the situation to its proper dimensions.
Modern cooperatives are efficiently managed, able to bring in external capital and characterized by a tendency to consolidation. For example, in the Republic of Ireland (3.5 million inhabitants and 11% employed in agriculture), there used to be 5 dairy cooperatives up till recently, whereas at present there are four after Avonmore and Waterford have united. For comparison, in Poland there are about 280 dairy cooperatives. Owing to new market situation new organizational and financial relationships emerged between them and suppliers. On one hand regionalization disappeared and especially bigger producers of milk became attractive suppliers for many, often distant dairy cooperatives, on the other many farmers stuck to their cooperatives even when the latter owed them payments. It was a form of crediting their activity aimed at allowing the cooperatives to adjust to new conditions. A necessity for suppliers to identify with their cooperative and see their future as connected with their own dairy cooperative became a prerequisite for success.
Polish cooperative movement is disorganized and does not function as an integrator of dairy production. Most cooperatives reach low profitability and insufficient financial fluency, which limit their ability for independent investments and affect a low investment rate. Firms on the world market compete in technologies. Capital base of Polish dairy sector is incapable to meet the demands of continuous introduction of technical innovations, modern technologies or use organizational solutions which would lower the costs of production or change the product range structure according to consumer expectations and European Union requirements. Thus, both concentration of capital and organization of dairy cooperatives are necessary, as well as their integration with other units from the same sector in order to achieve greater economic power. /1/.
Domestic dairy cooperatives face new threats and challenges. The following may be enumerated among others: /3/
· competition of strong EU firms which may increase and accelerate the bankruptcy of smaller, less experienced dairy plants with small resources,
· possible loss of a considerable section of market to EU suppliers
· decrease in competitiveness of Polish dairy producers due to considerable scattering of production, low effectivity, diversified quality levels
· decrease in competitiveness of dairy products due to a raise of milk prices, increase in competition costs in distribution nets, costs of advertisement and other costs of adjustment to global market.
So far processes of cooperative restructurization have not yielded expected results. The main reason is the legal structure of enterprises, i.e. cooperative form of property. According to Z. Smoleński”...the particular problem is a peculiar distortion of the concept of cooperative movement. Cooperative members, i.e. dairy producers should be its motive power, but the conception of self-government transferred from the previous regime led to a situation when dairy plant activity became submitted to the employees interests, but treated as temporary. Executive body was submitted to the employee self-government and trade unions to a greater degree than to a board of governors, where the staff representatives are dominant.”/2/. Reluctance to introduce any changes prevail in many cooperatives where neither attempts at restructurization nor any investments have been made. The problems are aggravated by difficulties in gaining capital.
Some other obstacles for further development of cooperatives are: /2/
· poor quality of most milk supplied to dairy plants.
· strong conservative peasant lobby interested in maintaining scattered agriculture
· strong position of trade unions, of both individual farmers and employees of dairy cooperatives who generally oppose all changes
· substitutes and change in diet causing limited consumption
· progressive reduction of comparative predominance along with increasing labor costs.
J. Petrykowska presented interesting results of her studies on opinions of 41 dairy cooperative managers concerning opportunities and threats from the environment of their firms in the context of Poland s integration with European Union. Selected and most often mentioned opportunities and threats were ranged according to importance as shown by the surveys
Chances: Frequency of indication
1. Access to new technologies 6
2. Improvement of purchased milk quality 6
3. Unified classification of purchased milk 5
4. Increase in population incomes - purchasing capacity 4 5. Dotations for milk production 3
6. Stabilization of milk and dairy product market 3
7. Possibility for integration with local cooperatives 2
8. Expansion of milk market 2
Threats Frequency of indication
1. Increased competition from abroad 10
2. Increased competition among domestic subjects 7
3. Ambiguous regulations concerning legal bases of integration 6
4. Takeover of milk suppliers by foreign subjects 5
5. Maintaining a considerable scattering of milk producers 4
6. High quality standards of milk and its products 4
7. High costs of transformations and adjustment to EU level 2
8. Change in consumer preferences 2
Foreign competitors with considerable financial resources and strategic possibilities who would appear on Polish market were most feared by the analyzed units. The threats connected with this fact are:
· appearance on Polish market of ready-made, highly processed foreign products of high quality at low prices
· takeover of small and weak cooperatives by foreign subjects
· takeover of big dairy producers who would be able to supply high quality raw product because of favorable prices offered..
The anxiety was often due to ambiguously formulated rules of Polish food sector integration with European Union.
The opportunities were seen primarily in: an access to modern technologies, improvement of purchased milk quality and an increase in purchasing capacity of the society, which would be an indirect result of Polands integration with EU. Generally, considering all answers obtained in the studies, it must be stated that dairy cooperatives pointed to more threats than chances.
Some problems which Polish dairy sector faces on its way to integration with EU were presented. Apart from the problems concerning dairy producers, the most important are connected with restructurization of dairy cooperatives. Increasing competition on Polish market, both with foreign and home enterprises, will accompany integration processes. In order to survive and compete effectively, cooperative will have to seek new forms and ways of activity. Capital restructurization, as emphasized by R. Lorenczewski /2/ may be the sought way out and create possibilities of attracting capital and intensify the development. At the same time, it could not be the hitherto applied restructurization leading to bankruptcy but a transformation of cooperative property into capital property, e.g. joint stock.company or limited liability company. Newly created capital companies could form local or even regional capital groups . Such concentration of capital should accelerate desirable changes in Polish dairy sector, i.e.:
· increase in competitive position towards other members on the market
· intensify the process of milk processing concentration
· enable the integration of the whole dairy sector around processing plants
· create conditions for specialization of firms and increase in the production scale
· concentration of cooperatives to form local structure.
1.W. Kozak, Polskie mleczarstwo w procesie integracji z UE, Agro Serwis nr 1,1998
2. R. Lorenczewski, Formy przekształceń organizacyjnych spółdzielni mleczarskich, materiały z konferencji ”Uwarunkowania rozwoju mleczarstwa w procesie integrowania Polski z Unią Europejską”, t.II, Toruń,1998.
3. S. Michalski, Polskie mleczarstwo na drodze do Unii Europejskiej, Biuletyn Informacyjny
KPSM, nr 4-5,1998.
4. J.Petrykowska, Atuty i słabości spółdzielni mleczarskich w warunkach stwarzanych przez otoczenie w okresie integracji Polski z Unią Europejską, materiały z konferencji ”Uwarunkowania rozwoju mleczarstwa polskiego w procesie integrowania Polski z Unią Europejską”, t.I, Toruń,1998.
5. K.Świetlik, Porównanie cen skupu mleka i cen detalicznych produktów mleczarskich w Polsce i krajach Unii Europejskiej jako miernik kanałów dystrybucji, materiały z konferencji ”Uwarunkowania rozwoju mleczarstwa polskiego w procesie integrowania Polski z Unią Europejską”, t.II,Toruń,1998.
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