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Production
Estimates and Crop Assessment Division |
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Production
Estimates and Crop Assessment Division |
January 14, 2003
Rising farm consolidation in Poland could mean greater efficiency and more production under EU accession. The effect of EU accession on Polish farm production will generally be positive in terms of rising output. However, there are major structural and market technical obstacles that will slow Poland’s production expansion vis-à-vis other East European countries joining the European Union.
Approximately 25 percent of the agricultural land belongs to larger private farms (farms holding more than 20 hectares) producing up to 75 percent of total agricultural production, similar to the European Union. At accession, May 1, 2004, these farms and smaller farms will have EU cash injections in the form of direct payments for the next three to five years. Poland chose a simplified aid scheme, which means that for the first three to five years, direct payments are distributed as a flat-rate amount per hectare, irrespective of a farmer’s crop choice or productivity. This method may prove to be more beneficial to the smaller non-specializing farmer. According to the Copenhagen Summit results, the first three years farmers can receive 55 percent, 60 percent and 65 percent of the payments, rising to 100 percent in 2010. Despite their receiving nearly half of the payments of their new partners in the European Union, this is positive for Polish farmers because of their lower cost of production. The larger farms already produce at higher yields and are expected to improve, and output will likely increase. Another advantage for Poland is that a large concentration of the production comes from a small sector, which makes it easier to increase productivity for this sector since a smaller sector is more adaptable to change.
The average private farm size is 7.2 hectares, compared with the EU average of 17 hectares. As shown in Figure 1, more than 50 percent of the farms hold one to five hectares, which are mainly subsistence farms. These farms are independent of market operations and will probably continue to exist unless there are new desirable employment opportunities created off the farms.
For the small commercial farms, some analysts say they are expected to benefit more from the simplified aid scheme payments in comparison with large farms because they do not specialize in a particular crop and currently do not have high debts. Payment is made irrespective of crop choice, which means small farms may produce crops currently not under their EU-15 counterparts’ aid scheme. Also, small farms will receive payments on lower-yielding plots which may otherwise not have been able to sell the crops for the equivalent amount of the payment.
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Figure 1. Distribution of Farms in Poland |
According to the Polish Statistics Office (GUS), these farms, located on fertile land mostly in the western region, range from 20 to 2000 hectares. According to private sources, large farms already produce at very high yields and are expected to progress further with added technology. Despite the lower direct payments received compared to their new partners, production is expected to expand. In the last several years, cereal prices in Poland have been significantly lower than prices in EU, ranging from 6 to 21 percent lower. After accession, prices are expected to increase to EU levels, while cost of land and labor are still relatively lower. These farms specialize mostly in the following crops: wheat, corn, sugar beet, and rapeseed. These producers seem well prepared to weather the transition to Common Agricultural Policy (CAP) farm programs.
The remaining 25 percent of agricultural production comes from Poland’s smaller farms (i.e. farms holding less than 20 hectares) which may not be able to compete in the long run. Some analysts estimate that in the next ten years, more than half of these farmers, will leave commercial agriculture, due to lack of farm mechanization, cooperatives and credit. Officials say they expect these small and medium labor-intensive farmers to survive accession because they lack huge debts and use less credit than larger farms. It is more likely for these farmers to try to take on debt and increase their farm holdings as they grow. In that way they can purchase machinery for specialization and enjoy the economies of scale. The pitfall is the cost of capital and debt repayment.
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Figure 2. Changes in Farm Size Distribution in Poland |
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Source: GUS Polish Statistics Office |
There has been a growing trend toward farm consolidation, but there has been no significant change in total crop acreage. According to the Polish Statistics Office (GUS), shown in Figure 2, from 1996 to 1998 large farms experienced a growth of 2 percent, while growth accelerated to 18 percent from 1998 to 2000. For the smaller farms, from 1996 to 1998 there was a 2 percent drop followed by a 7 percent drop for 1998 to 2000. Unfortunately, more current statistics on consolidation are not available, however, based on the historical trend we can expect the pace to continue. The consolidation’s effect on overall acreage has not yet been seen, as it remains constant. While output may rise overall in Eastern Europe, Poland’s output will not benefit as quickly from accession as Hungary and the Czech Republic -- countries with a better farm structure and fewer investment barriers.
The larger field sizes in Hungary and the Czech Republic, giving farmers the benefit of economies of scale, can be seen in the satellite imagery in Figures 4 and 5, while the smaller field sizes of Poland’s agriculture can be seen in the satellite imagery in Figure 3. A map showing the location of the images is in Figure 6. Poland’s larger, more mechanized farms are expected to expand more quickly.
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| Figure 3. Poland |
Figure 4. Hungary |
Figure 5. Czech Republic |
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Figure 6. Regional Map |
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