DLG e.V. - DLG-Agrifuture Insights Report Poland 2018 - Business climate and Willingness to invest

Country Report Poland 2018 - Business and Investments

Business environment continues to be good, focus of investments on expansion of production and increasing productivity

Farmers in Poland evaluate the business climate as approximately equally as good as in the previous year. The investment confidence of farmers once again reaches a top value in Europe and is equally great for indoor livestock systems and for field operations. A focus of investment will lie on the construction of new dairy cattle barns. DLG-Agrifuture Insights provides insights into the investment plans of agricultural entrepreneurs in Poland.

  • Farmers in Poland evaluate the current business environment as average. After the positive climate in autumn 2017, farmers' expectations are settling at a comparable level.
  • Relatively speaking, pig farmers are most optimistic with regard to the business development of the coming 12 months. Cash crop producers, who in some cases suffered greatly under the drought in 2018 and go into 2019 with mixed expectations, paint a heterogeneous picture. The great majority of dairy cattle farmers are approaching the near future with average expectations.
  • As in the previous year, Polish farmers once again intend to invest strongly. Investments are primarily intended to expand production and increase working productivity.

Farmers in Poland evaluate current business environment as average

Farmers in Poland assess the current business environment as average. Over one-third of the pig farmers assesses the current business environment as good, while 20 percent of cash crop farmers evaluate it as only satisfactory.

Polish pig farmers have used the usually good prices in the past year to further increase the size of their stocks. According to Eurostat, the pig population in December 2017 was 11.908 million animals. That was 7.21 percent more than in the corresponding month of the previous year.

Cash crop farmers in Poland suffered greatly under the draught of 2018. According to estimates of the National Institute for Soil Science and Crop Production (Nationales Institut für Bodenkunde und Pflanzenbau - INUG), approximately 2.272 million hectares were affected by the drought. According to various estimates, the decrease in grain production is said to be between 11 and 17 percent. The Polish government has put together an aid package for farmers seriously affected by the drought.

Compared to autumn 2017 the mood of Polish farmers has changed only little. They assess the business environment in autumn 2018 to be approximately as good as one year previously.

Expectations for business development: Mood of pig farmers heterogeneous

Most Polish farmers have good to satisfactory expectations for the business development in the coming 12 months. However, Polish pig farmers show a heterogeneous picture. While over one-third of them evaluate their prospects as good, 25 percent only considers them to be satisfactory. An important factor for business expectations is the development of outbreaks of the African swine fever (ASF). Affected farmers must expect restrictions, while pig farmers who are not affected will benefit from the resulting gaps in supply. Farmers who are not affected by the ASF benefit from exports to Germany, which have increased by ten percent since 2017.

The expectations of Polish farmers for business development are stable overall. For example, despite ASF, pig exports are on the rise and cash crop producers not affected by the drought expect increases in turnover due to higher grain prices.

As in the previous year, those surveyed see exports of agricultural products and low interest rates on the capital market as the key drivers behind business development in Polish agriculture. The country has been a net exporter of agricultural products for many years. As the domestic demand is growing more slowly than agricultural production, exporting of agricultural products represents an important economic cornerstone for Polish agriculture. Here approximately 80 percent of commodity exports flow into the EU market. And the current phase of low interest rates, which can be used by farmers to tackle urgently needed investments, are also favourable for farmers.

As already mentioned the previous year, 50 percent of those surveyed named agricultural policy as the greatest obstacle to a positive economic development. In their negative estimation, stricter environmental requirements will follow which, in the opinion of farmers, can only be met with additional costs. Farmers also perceive measures for more animal welfare as a burden. The further pork and grain prices, which are too low from the standpoint of farmers, are viewed critically. Although grain prices have increased as a result of the drought, Polish farmers appeal for a rapid expansion of the fibre-optic network in order to use the advantages of digitalisation for their farming operations.

Investment confidence: Farmers in Poland continue to be in the mood to invest

In a European comparison, the investment confidence of Polish farmers continues to hold a peak position and is only exceeded by that of British farmers. As was already the case in the previous year, the fact that almost 50 % of those surveyed intends to invest remains unchanged. Among other things, investments are intended to reduced the backlog in productivity in Polish agriculture. In particular the larger farms are undertaking a great deal to overcome the technical underdevelopment with regard to their competitors in the EU.

Polish dairy cattle farmers show an especially great investment confidence. As production costs are several cents lower than in Germany, milk production pays off even at the currently low average price of 30.38 ct/kg of milk (July 2018). According to Eurostat, in the first half of 2018 farmers delivered 6.04 million tonnes of milk to dairies. That is an increase of 2.98 percent compared to the same period of the previous year. The dairy cattle farmers are planning additional investments for boosting productivity and milk output and for increasing competitiveness.

Reasons for investment: Farmers in Poland continue expansion course

Polish farmers intend to make increasing investments, in particular to expand their production and to increase working productivity. Polish agriculture is still characterised by a high personnel intensity. Small family-run businesses with an agricultural area of under 10 hectares dominate the operational structure. The working productivity in Polish agriculture continue to be considerably lower than the average in the EU. Farmers also intend to invest in digitalisation and in greater efficiency or to make investments for implementing legal requirements.

With regard to the distribution of investments, the investments flow in equal parts into cash crop production and animal husbandry. 44 percent and 45 percent of investments are to flow into indoor livestock systems and field operations respectively. This emphasises the broad expansion course the farm managers surveyed in Poland are on.

Investment fields: Dairy cattle barns in demand

Polish farmers intend to invest heavily in dairy cattle barns in the coming 12 months. For the targeted productivity increases are only possible if the milk cows can be kept under optimum conditions and workflows can be structured with a high work quality and routine. Investments also focus on fattening barns and feed storage areas. In addition, major investments in feeding technology and breeding animals are also planned.

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