The government has decided to introduce subsidies for the sale of grains to farmers who blame the wide opening of borders and increased import of agricultural products from Ukraine for their current difficult situation. Aid worth around 2 billion PLN is expected to help remove a total of about 5 million tons of grain from the market. However, experts point out that this will not solve the problems, which may reappear in the coming season. The reason for the surpluses and low prices is domestic overproduction, which is not compensated by the demand for feed, stemming from the low livestock population. The import of Ukrainian grain after the outbreak of war also contributed to this, but its impact is not as significant as commonly believed.
As recently announced by Deputy Minister of Agriculture Stefan Krajewski, about 30% of the entire grain surplus in the EU is in Poland. It is estimated that around 9 million tons are currently stored in Polish warehouses, which, alongside imports of agricultural products from Ukraine to EU markets and the European Green Deal, was one of the indirect causes of recent agricultural protests across Poland.
“In simple terms, we have too much grain because our current self-sufficiency, the ratio of production to domestic consumption, stands at 130–140 percent. So, we have an overproduction exceeding consumption by about 40 percent, and we need to somehow manage this surplus. In the short term, the only sensible option seems to be export, as we cannot drastically increase domestic demand from year to year,” says Dr. Eng. Wiesław Łopaciuk from the Institute of Agricultural and Food Economics – National Research Institute to Newseria Biznes agency.
As Agriculture Minister Czesław Siekierski pointed out, the difficult situation in the grain market is currently due, among other factors, to the low livestock population. Feed consumption is the dominant component of domestic demand. Therefore, the ministry intends to promote animal production in the near future to ensure market equilibrium.
“Feed consumption has shown a downward trend or stabilization in recent years. This is because a few years ago, we had a pig population in the country at a level close to 18 million head, whereas currently, we have less than 10 million head. This has led to a reduction in demand for feed in pig production, which has not been compensated by increasing demand for feed in the poultry or dairy sectors for milk production,” explains an expert from the Institute of Agricultural and Food Economics.
This market situation was further compounded by the outbreak of war in Ukraine. According to farmers, it was the consequences of the war – particularly the wide opening of EU customs borders, including Poland’s, to the influx of grain and agricultural products from Ukraine – that contributed to the destabilization of the Polish market and a drop in prices. Data cited by the IAFE-NRI expert indicates that between March 2022 and March 2023, 3.3 million tons of grain from Ukraine entered the domestic market, including 2.4 million tons of maize and 851 thousand tons of wheat. Approximately 50–60 percent of this went to export.
“The import from Ukraine is just one of the factors causing the increase in surpluses in the Polish grain sector. Primarily, for several years, we have had grain harvests at a level of 34–36 million tons, which – when combined with initial stocks and imports – translated into a very high level of domestic supply, with stable domestic demand,” explains Dr. Eng. Wiesław Łopaciuk. “The war in Ukraine, in terms of the Polish grain market, was primarily manifested in the increasing import of Ukrainian grain into Poland, mainly corn and to a lesser extent wheat. However, it should be noted that this import did not skyrocket.”
According to the expert, the impact of Ukrainian imports was smaller at the national level than commonly believed, but there were clear differences between individual regions. The most noticeable phenomenon was in provinces directly bordering Ukraine or in provinces through which grain transit trade routes passed. In the expert’s opinion, the situation with Ukrainian exports seems to be normalized today, but it still remains a long-term challenge for Polish farmers, especially in the context of Ukraine’s future membership in the EU.
To remove the excess grain from the market and ensure it is exported before the upcoming harvest, the government decided to introduce subsidies. In April, the Council of Ministers adopted a regulation under which such aid will be provided. It stipulates that farmers who sold grains – wheat, rye, triticale, grain mixtures, or barley – from January 1st to March 10th of this year will receive a subsidy of 200 PLN per ton (meaning that the aid will be retroactive) per hectare of grain crops, while for farmers who sold grains from March 11th to the end of May of this year, 300 PLN per ton is planned. The regulation also specifies aid rates ranging from 740 to 1620 PLN per hectare of cultivated area for grain sales. The funds will be disbursed by the Agency for Restructuring and Modernization of Agriculture, which has documentation and information on the state of sowing, and applications for subsidies can be submitted until June 5th of this year.
The government indicated that the aid for farmers resulting from the regulation is temporary, ad hoc, and serves to remove excess grain from the Polish market. As Agriculture and Rural Development Minister Czesław Siekierski announced, the mere announcement of its implementation accelerated the sale and export of domestic grain in April of this year, raising hopes for emptying warehouses before the upcoming harvest.
“It is still too early to talk about the upcoming season and the volume of harvests in 2024 because we don’t have too much information yet, and secondly, winter grains in the fields have survived well. There are concerns about some delays in spring grain sowings, which – as in previous years – may be compensated for, as has happened several times. So, another year of good harvests is looming with relatively stable demand, meaning we may remain a surplus market. We have less grain import from Ukraine and overall less grain import from other countries,” says Dr. Eng. Wiesław Łopaciuk. “So, there is hope that we will have slightly smaller surpluses, but it will depend on how much we can export.”
As the expert adds, Polish grain is competitive in global markets, as evidenced by the positive balance of foreign trade in this segment. We mainly export to EU countries, North Africa, and the Middle East.
Data from the Grain Market Report as of April 15th, 2024, estimate global grain production for the 2023/2024 season at 2.3 billion tons. This is the highest result in history, 2 percent higher than the previous year. Together with reserves of about 600 million tons, this provides a supply of 2.9 billion tons, with consumption at the level of 2.3 billion tons. Previous forecasts for the next season predict further increases in production and consumption.
