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 purchasing—buying 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 Poland’s 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 prices—a 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 EU’s 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 agencies—called "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
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page updated: July 12, 2004