Overview
Prices
Credit
Overview
The early years of Poland's transition were characterized by completely
unregulated prices and low border protection. In 1992, Poland's
farmers, dismayed by the drop in their real income, lobbied successfully
for increased protection from international competition. The government
responded with the introduction of guaranteed minimum prices for
wheat, rye, and dairy products and an increase in border tariffs
for agricultural products to an average of about 20 percent.
Prices
The Polish government's Agency for Agricultural Markets (AMA) was
established in 1990, and until the eve of European Union (EU) accession
was responsible for setting minimum prices for wheat, rye, and dairy
products. AMA also supported prices of pork and sugar through intervention
purchasing and, occasionally, subsidized exports. The original objective
of the AMA was to stabilize commodity markets through intervention
purchasingbuying up stocks when prices were falling and releasing
them back onto the market when supplies were tight. The role of
the AMA expanded in 1992 when it was given authority to set guaranteed
minimum prices for wheat, rye, and dairy products, which it supports
through intervention purchasing. Later in the 1990s its role expanded
further, and it took on responsibility for managing the strategic
reserve and providing preferential credit to grain producers and
warehouses.
Before Polands accession to the EU, the AMA intervened in
grain markets in the following ways:
- Direct intervention purchasing.
- Procurement through a network of authorized warehouses. A warehouse
agreed to purchase wheat and rye at the intervention price and
AMA provided guarantees for preferential credit to the warehouse.
After 3 months, the AMA purchased the grain at the intervention
price plus storage, interest, and handling.
- Advance payment to selected producers. Wheat producers willing
to store at least 100 kilograms of wheat received an advance payment
of 45 percent of the intervention price. The producer was obliged
to leave his grain in storage for 3 months. At the end of that
period, the producer would either repay the advance plus interest
in cash or forfeit 45 percent of the grain to the agency and take
back the remaining 55 percent.
In 1999, the AMA changed its system of direct intervention purchasing
in an effort to reduce market distortions and to align its procedures
with those of the EU intervention agencies. Previously, AMA established
two sets of pricesa minimum price and an intervention price.
The minimum price was regarded as "indicative" while the
actual intervention price was negotiated with producer groups and
frequently ended up above the world level. After 1999, the AMA set
only a minimum price and paid producers the minimum price plus a
per-ton supplement. The supplement rose throughout the marketing
year in order to encourage producers to store their wheat for a
few months rather than sell immediately after harvest. In another
change, the AMA began its intervention in November (as it does in
the EU). Previously, the AMA began intervention purchasing immediately
after the harvest, which tended to distort the natural seasonal
pattern of commodity prices.
The AMA also set and administered minimum prices for dairy products
and carried out intervention purchasing of pork and sugar. At times,
the AMA imported or exported these commodities, subsidizing some
of the exports. It did not directly engage in trade, but contracted
with commercial companies to carry out transactions on its behalf.
The AMA role in foreign trade varied considerably from year to year
depending on the domestic market situation.
Now that Poland has joined the EU, the AMA is Poland's official
"paying agency" and administers all EU intervention programs
in Poland. It is responsible for intervention purchasing of all
commodities eligible for intervention under the EUs Common
Agricultural Policy (CAP). It also allocates sugar and dairy
quotas among producers (see the EU
Briefing Room For information on EU commodity programs.)
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Credit
Until EU accession, the mission of the Agency for Restructuring
and Modernizing Agriculture (ARMA) was to reduce input costs for
farmers by granting credit at preferential interest rates. ARMA
offered the following programs:
- Credit for construction of new buildings, food processing plants,
etc. Loans were offered at half the commercial rate (the commercial
rate was about 35 percent);
- Five-percent loans for new farmers under 40 years of age;
- Five-percent loans for the purchase of additional farm land;
and
- Loans for the creation of new farms as approved by the Ministry
of Agriculture. Interest rates for these loans were between 5
and 13 percent.
In 2002, ARMA became the paying agency for the EU SAPARD
(Special Accession Program for Agriculture and Rural Development)
Program. This program was created to support sustainable agricultural
and rural development during the pre-accession period through improvements
in conversion structures, marketing channels, and food quality control.
The total EU allocation to Poland through 2006 under SAPARD is 1.2
billion euro. The fund carries a 50-percent cofinancing requirement,
and in order to receive the funds, Central and East European (CEE)
governments were required to demonstrate they had established government
structures capable of administering the funds.
The SAPARD Program began in 2000, but Poland did not begin disbursing
funds under the program until 2002. Initial delays were caused by
difficulties in setting up the appropriate government agenciescalled
"paying agencies"to administer the funds. Farmers
also had trouble accessing funds due to complicated forms; the requirement
that they provide up-front cash to be reimbursed later; and strict
age, education, and farm ownership criteria. But in 2003, Poland
had obligated nearly the full amount allocated under the program.
The main beneficiaries were processing firms, but a number of larger
farmers also took advantage of the program. Beneficiaries have until
the end of 2006 to complete their projects.
These funds will now be replaced by the EU Structural and Cohesion
Funds, which are available to all regions of the EU whose per capita
income is less than 75 percent of the EU average. On July 8, 2004,
the EU Commission approved a 1.192 billion euro rural development
program for Poland for 2004-06. These funds include 839 million
euro for support of Poland's agriculture and food industries, 335
million for support to rural areas (mainly infrastructure development),
and 18 million for technical assistance. These funds carry the same
cofinancing requirements as the SAPARD funds.
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for more information, contact:
Nancy Cochrane
web administration: webadmin@ers.usda.gov
page updated: July 12, 2004
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