Poland: Outlook dairy sector

That there is enough space for further growth and development for the dairy sector in Poland, is something all experts agreed on during the webinar on June 22. But what will the business model look like, what are the challenges hampering investments and what is the current policy for supporting investments? These questions and more were discussed in the studio and on a dairy farm in Bukowiec.

Dairy farm
Beeld: C. Spaans

Perspective for growth

The dairy sector in Poland developed fast in recent years with an increasing herd size per farm, increased milk production due to higher productivity and consolidation which is also observed in the dairy processing industry. Currently the processing capacity is higher than the production. According to the overview presented by BNP Paribas Polska, the volume of milk production is quite similar to the Netherlands, but there are still significant structural differences, also in the export structure (total € 2,1 bln). Although the dairy sector in Poland is still characterized by family farms, according to Andrzej Adryan of the Dutch company Lely, the trend that farms are changing will continue especially because of the change of generations. He sees currently approximate 15.000 farms with more than 50 cows, which are considered professional and approximately 250 barns with more than 500 dairy cows.

Beeld: C.Spaans
Arend Jan Hendriks (Hendripol, Bukowiec, Poland)

Increasing costs of production and uncertain future

During the webinar we had a chance to virtually join Arend Jan Hendriks at his dairy farm in Bukowiec in north central Poland. Arend Jan started on a state farm about 20 years ago in Poland where in contrast to the Netherlands, it was possible to start milk production without buying milk quota. He sees that the costs of dairy farming significantly increased in these 20 years in Poland. Especially the labor costs which went up with approximately 700% on top of having difficulties to find qualified and motivated personnel. After being able to expand the farm in 2013, Arend Jan invested in milking robots to decrease labor costs and recently in solar panels which supplies 25% of his energy consumption. Future long-term investments is depended on the possibility to prolong leasing contracts of agricultural land. Arend Jan, as most other bigger farmers, have leasing contracts which in his case were given for 30 years of which 7 years are left. The government gives no information about the possibility to prolong and if so, for how many years. According to Arend Jan Hendriks ‘the actual situation is blocking dairy farmers to make investments, since there is no certainty about what will happen in the future’. Later in the webinar professor Babuchowski commented that the situation with land is complicated and limiting activities and that there is no real governmental policy to solve this issue.

Beeld: C.Spaans
Behind the screens of the broadcast

Did you miss the webinar on June 22? You can watch the whole broadcast back, including interviews with Arend Jan Hendriks and Andrzej Adryan from the dairy farm Hendripol here

Subsidy for farmers

The situation with the agricultural land lease is according to professor Babuchowski connected to the policy of the Polish government to support smaller farms. Currently according to Arend Jan, the subsidies for dairy farms are limited to 20 milking cows and 20 young stock animals. For the animals above these numbers, the subsidy doesn’t apply. The same goes for subsidy for improving animal welfare. The subsidy is 100% till 100 dairy cows, 75% between 100 and 150 dairy cows and 50% for 150 dairy cows and more.

Andrzej Adryan sees an increasing willingness of the younger generation to make investments because they are more open for new technologies and innovations.

Future investment and business model

Klaas Johan Osinga (LTO) presented the current status of the EU future policy of Farm to Fork, Green Deal and the Common Agricultural Policy. Although it is currently limited till north western Europe, the debate on animal welfare and sustainability might play an increasing role for Polish consumers also because of upcoming EU legislation. He sees an increased demand of 1,8% per year for milk production which will mainly take place outside of the EU due to the risk that farmers are being squeezed between legislation and market realities. According to Klaas Johan Osinga, farmers should think about their business model and since the role of the CAP will diminish, not rely on subsidies. Also COVID has shown, that the unexpected should be something to prepare for.

All agree that the role of consumers in the transition is crucial as well. According to Dariusz Zielinksi (CEKO), customers have to adapt that for quality the price will rise and food will be a more important item in the share of costs. For producers it is important to differentiate from others by telling a true story or by selling a more niche product.
Prof Babuchowski added that he expects that the situation will be that there is not one stable milk price but that it will vary, based for which product (powder, fresh etc) it is being produced for. When mixing milk, the profit for producers will go down. In addition, he sees that farmers in Poland are trying to cut costs of energy by installing biogas installations, solar panels and use of co-generation. In his view, farmers should be paid for reduction of emissions including the use of green energy and of increasing animal welfare. It is however difficult to find the right parameters for this.

According to Andrzej Adryan, a change of approach is necessary where automatization and innovation play a more important role. This positive change he sees in the younger generation.

Beeld: C.Spaans
Andrzej Adryan (Lely)

Advice for Dutch newcomers on the Polish market

Andrzej Adryan mentioned that the Netherlands and Dutch companies in the dairy sector have a good image in Poland. He encourages Dutch companies who are not active in Poland yet, to come and try build relations with the Polish (and Dutch) farmers. He adds it is important to stay then as well in Poland and try to manage the market from Poland itself. 

Organization and speakers

The webinar on June 22 about the Outlook for the dairy sector in Poland was organized by the Dutch embassy in Warsaw, together with the Netherlands Polish Chamber of Commerce (NPCC) and BNP Paribas Polska. It is part of a serie called ‘Agri knowledge circle’, of which 4 are planned for this year. The first in this series was about the market for protein crops in Poland. You can read the article and market study here.

Speakers and panelists during the event of June 22:
•     Arend Jan Hendriks, Dutch dairy farmer in Poland, Hendrikpol Sp. z o.o.
•     Andrzej Adryan, Sales Manager, Lely East Sp. z o.o.
•     Andrzej Babuchowski, President and CEO, Dairy Industry Innovation Institute Ltd., Polska Izba Mleka
•     Klaas Johan Osinga, Senior Adviser, Dutch farmers organization LTO
•     Paweł Wyrzykowski, Food and Agri Sector Research Analyst, BNP Paribas Group AgriHub CEE & Africa
•    Dariusz Zieliński, CEO, president of management board of dairy processor CEKO

The event was moderated by Elro van den Burg (managing Director NPCC) and Michal Siwek (Head of International Food&Agri Hub Department, BNP Paribas Group AgriHub CEE & Africa). Carolien Spaans, Agricultural Counsellor at the Embassy of the Netherlands in Warsaw, was the interviewer at the dairy farm.