Poland: Livestock and Products 2008
USDA Foreign Agricultural Service Report by Pawel Flakiewicz, Kacie Fritz and Piotr Rucinski, subtitled Pork Industry Continues to Suffer. A link is provided to the full report. Competition from other EU producers, inefficient production, high feed prices and a strong zloty have resulted in the lowest number of pigs for 25 years. No improvement in the condition of the industry is expected for the next couple of years.Report Highlights
Competition from pork producers across the EU coupled with inefficient production in the Polish pork industry, high feed prices, and a strong zloty during the bottom of the hog cycle has resulted in the lowest number of hogs in Poland in 25 years. This is a new paradigm for Poland's farm economy. With open borders, it will process other EU member states' products. While inventories are down all around Europe, these lower levels have a further downside in Poland. The condition of the Polish pork industry is not expected to improve over the next couple of years, with average-sized slaughterhouses and meat processing facilities facing difficult times. This situation indicates Poland's need to argue for stronger CAP reforms .
The Polish pork industry is facing a number of challenges, which have led to the decline of the industry over the last year. A decline in hog production across the EU has caused an increase in both production costs and cost of meat products in Poland. Inefficiency in pork production in Poland means that the local pork industry is unable to compete with other more integrated pork industries across the EU. Last year, Polish hog producers faced a fall in livestock prices and high feed prices. A strong Polish currency versus the Euro together with decreased production continues to encourage imports of pork to Poland.
Currently, Poland is importing more pork than it exports. According to preliminary data from the Institute of Rural Economics, in the first six months of 2008 Poland imported 190,600 metric tons (MT) of pork (carcass weight equivalent) compared to 107,800MT in the first half of 2007. Exports rose from 155,700MT in the first half of 2007 to 186,900MT in the same period of 2008. Polish processors have switched to cheaper pork produced outside the country and many local slaughterhouses also are now importing livestock from other EU countries. Most imported pork comes from Denmark (105,000MT in 2007), with Germany and the Netherlands also exporting large amounts to Poland. Polish farmers are having difficulty competing with imports of cheaper pork produced by other EU countries. The breeding sector is scattered and inefficient. Many farmers have stopped raising hogs and many sows have been culled.
According to data published by the Main Statistical Office, swine inventories were 15.7 million hogs as of March 31, 2008, the lowest number since 1983 during the communist era. However, the drop in pork production is not as drastic as the decrease in inventories due to a higher efficiency of production compared to 25 years ago.
Costs in hog production are expected to remain high in 2008 due to high feed prices and the inefficient structure of the swine industry. Since April 2008, farm-gate prices for hogs have been above the average price in the EU. As a result, imports of pork meat from the former EU-15 countries continue to grow. In the first six months of 2008, a negative balance in value of trade between Poland and the EU-15 countries tripled compared to the same period in 2007.
This year, many farmers and slaughterhouses are limiting production and some could be facing bankruptcy. While there are about 1000 slaughterhouses currently, the pork market is only big enough now to support a couple hundred of them.
The meat industry is becoming more vocal in asking for help. The government has been criticized for not encouraging farm consolidation and concentration of production to reduce costs for producers. To counter the growing import/export gap, some suggest a subsidy on exported Polish meat heading outside the EU. Poland has been advocating higher export subsidies without effect, but if it exported more pork, it would also simply import more.
It is difficult to predict when the current crisis situation will improve as major economic indicators of swine production do not show that changes will occur in the near future. The Institute of Rural Economics (IRE), in a recent report, estimates that pork production will drop 12 per cent in the second half of 2008, and in the first half of 2009, production will be down another 10 per cent. The IRE forecasts a 3 per cent increase in pork production in the second half of 2009. According to representatives of the pork industry and agricultural economists, the current crisis will have a long-term impact on hog inventories in Poland and force hog farmers to integrate and to lower costs of production.
The situation in the pork industry indicated Poland’s need to argue for stronger CAP reforms. The current structure is more favourable to EU-15 member states, which for many years had access to the EU structural funds and subsidies.
Other Reports in this Series
To view our complete list of 2008 Livestock and Products Annual Reports covering pigs from USDA FAS GAIN, please click here
September 2008