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Early season start and VAT increase bring challenges for Polish fruit and vegetable producers

FOOD & AGRICULTUREEarly season start and VAT increase bring challenges for Polish fruit and vegetable producers

Warm temperatures in March and April caused this year’s season in orchards and plantations to start much earlier than in previous years.

“However, there are concerns about the weather, because in April and May in Polish conditions we have periods of cold weather and frost,” says Witold Boguta, president of the National Union of Groups of Fruit and Vegetable Producers. He points out that an additional challenge for producers this season will be the deepening shortage of seasonal workers. The industry is also closely watching how the return to the 5% VAT rate on food will affect the market. There are concerns about lower consumer purchasing power and price pressure from retail chains.

The zero VAT rate on food products was introduced at the beginning of February 2022 in connection with high inflation, exceeding 9% year-on-year. The coalition government decided not to extend it for another period. Therefore, since April 1, many items have been again subject to the previous rate. This applies to, among others, fruits and vegetables and their products, meat, fish, dairy products, eggs, bread and grain products – from April 1, sellers are required to charge 5% VAT on them. The government argues that the abandonment of the zero VAT rate on basic food products and the return to the 5% rate is due to the fall in inflation, which in March amounted to less than 2% year-on-year.

“Sellers have charged the new VAT rate and consumers will certainly pay for it. It is estimated that this VAT increase will be an additional 12-13 billion PLN for the budget per year. We are afraid that the ongoing price war between retail chains may lead to the fact that the chains will also pass on this increase to suppliers, producers and processors of not only fruits, vegetables, but all food products that previously had this reduced VAT rate,” Witold Boguta tells Newseria Biznes.

Even before Easter, the largest chains in Poland announced that hundreds of products in their stores would still be offered at prices including zero VAT. However, this situation may hit producers and suppliers, whose condition in the last two or three years has already been severely weakened by the more difficult market environment.

“The return to the previous VAT rate comes after a time when we had many important events in the economy, caused by the pandemic or the war in Ukraine. All these changes have reshaped the relationships in supply chains, so now we are afraid that there may be unpleasant turbulences,” assesses the president of the National Union of Groups of Fruit and Vegetable Producers. “If consumers buy less, it will also have a negative impact on producers of food products, fresh and processed, who will sell less. In addition, if consumers buy less, then we can also expect greater price pressure from retail chains, which will also result in the chains forcing the lowest possible prices on suppliers.”

The Lewiatan Confederation estimates that the restoration of the 5% VAT rate on food will provide about 12 billion PLN of additional income to the state budget, but will result in an increase in inflation in April by about 0.9 percentage points. Taking into account that food has a significant share in the GUS basket and constitutes a significant part of consumer spending (27%), the change will be noticeable for consumers, especially those with lower incomes. However, due to the strengthening of the zloty, which weakens the effect of rising food prices, and the growth of real wages, experts believe that there is no better time to remove the anti-inflation shield from food than now.

“Today it is difficult to say unequivocally what the effects of this decision will be, we will be watching and analyzing it,” says Witold Boguta.

The president of the National Union of Groups of Fruit and Vegetable Producers points out that the industry has been under pressure for a long time from rising costs, disproportionate to the increase in prices that could compensate for them. This season, an additional challenge for producers will once again be the lack of workers.

“The issue of employees is probably one of the main challenges. Since the outbreak of the war, we have had a very limited influx of workers from Ukraine, there are not enough of them. In turn, the so-called visa scandal has made it increasingly difficult to recruit workers from distant countries, which we as a sector were counting on,” says the expert. “We must remember that in fruits – especially our main species such as apple, currant, raspberry or strawberry – without workers, without labor, production simply loses its meaning, because you can use machines, tools, but in most cases the harvest must be done manually. Meanwhile, at the moment we are faced with the fact that the worker is expensive, more and more expensive or simply does not exist.”

**Producers are also concerned about the early start of the season due to the exceptionally

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