View of Review of Dairy Sector in Poland

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Rocz. AR Pozn. CCCLXVII, Ekon. 4: 113-125

MICHAŁ SZNAJDER, OLGA KRUSIŃSKA, ANNA WIELICKA

REVIEW OF DAIRY SECTOR IN POLAND

From Department of Food Management Economics of The August Cieszkowski Agricultural University of Poznań

ABSTRACT. The paper presents general situation in Polish dairy. The sector thrives on

concentra-tion in milk producconcentra-tion. Dairy farms increase herd-size, some ineffective dairy farms go out of business as milk production requires vast investments due to high hygiene standards and econo-mies of scale. Changes result in rising effectiveness as milk yield grows, and on farm use de-creases. After collapse in 1989 and downward trend in 90’s production of basic products like milk, butter and fermented drinks increases. Situation on goods export market is highly affected by global prices. However the development of the production depends on milk quota, which will limit Polish dairy in future. Overall consumption is declining. On the upward trend is only cheese. These tendencies are consistent with the changes in Western Europe.

Key words: dairy, dairy industry, dairy farming, consumption, dairy products

Introduction

Being involved in daily problems of dairy industry we often overlook some general trends and broader aspects of changes, which would help us better understand individual decisions of farmers, consumers and processors in the past and in the future (Sznajder et al. 1998).

Purpose of this paper is to present the general situation of dairy industry, consump-tion and define some prospects for them. Review is divided into three following sec-tions:

1) dairy farms and dairy cows, 2) production and prices, 3) consumption.

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Dairy farms and dairy cows

Decline in overall farm numbers by 4% as an effect of shrinking profitability in small entities is observed. More serious drop by 33% appears in dairy farms as a result of rising cost of production: high-cost equipment and breeding connected with acute hygiene standards (Jażdżewski 2001). A dairy farm, which makes profit, is no longer for everybody – it needs significant investments. Non dairy farms thrive- growth in numbers by 17% (Fig. 1).

Fig.1. Number of dairy farms, non dairy farms and all farms (based on data from CSO)

Ryc. 1. Liczba farm mlecznych, liczba farm nie zajmujących się produkcją mleka, ogólna liczba farm (na podstawie danych GUS)

Changes in structure – growing number of dairy farms (mainly specialized in an-other production) with one cow, dedicated to self-provisioning and exponential increase of large and mid-sized herds starting from 10 cows (Szymańska 2005). Polish milk production starts concentration process (Fig. 2).

Fig. 2. Percentage of dairy farms according to cow numbers in a farm (based on data from CSO)

Ryc. 2. Odsetek farm mlecznych w zależności od liczby krów (na podstawie danych GUS)

42 28 19 10 1 46 22 15 11 5 0.10 0.11 1.15 0.15 0 5 10 15 20 25 30 35 40 45 50 1 2 3-4 5-9 10-19 20-49 ≥ 50

Number of cows – Liczba krów

1996 2002 % 1309 1758 3067 875 2058 2933 0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 Dairy farms Farmy mleczne

Non dairy farms Farmy bez produkcji mleka

All farms Wszystkie gospodarstwa 1996 2002 M. mln

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Production and prices

In period 1989-2003 increase in milk production per cow by 22% did not offset the cow loss – drop by 42% – milk production fell down (Fig. 3).

Fig. 3. Cow numbers and milk yield per cow (based on data from CSO) Ryc. 3. Pogłowie krów i wydajność mleczna jednej krowy (na podstawie danych GUS)

The shrinkage of cow numbers resulted in overall drop in milk production by 3% during latest 10 years (1994-2003) but changes in the structure of dairy farms and grow-ing per-cow production affected milk collection (Sznajder 1999), which went up by 17% in the same period (Fig. 4).

Fig. 4. Milk production and milk collection (based on data from CSO) Ryc. 4. Produkcja i skup mleka (na podstawie danych GUS)

63% of milk production is delivered to processing plants and we project further growth thanks to specialization, profitability and falling number of small dairy farms producing milk for own purposes or local sales (Fig. 5).

11.5 16 7.3 11.4 0 2 4 6 8 10 12 14 16 18 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Years – Lata mld l

milk production – produkcja mleka milk collection – skup mleka 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Years – Lata C o w num ber s (M. ) Po g ło w ie k ró w ( m ln ) 2.898 4.994 3969 3260 0 1 2 3 4 5 6

cow numbers – pogłowie krów

milk yield – wydajność mleczna 1000 2000 3000 4000 5000 6000 Milk yie ld (l) Wydajno ść ml ec zna (l)

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Fig. 5. Share of milk collection in milk production (1949-2003) (based on data from CSO) Ryc. 5. Towarowość gospodarstw mlecznych (na podstawie danych GUS)

After “stable price period”, entrance to EU became growth factor for farm gate milk prices, which went up to 86 PLN/hl in 2004. In comparison with year 1995 prices nearly doubled (95% growth), and probable scenario for 2005 was 100 PLN/hl and even more (Fig. 6).

Fig. 6. Average farm gate price and retail price of 2% fat milk (based on data from CSO)

Ryc. 6. Średnia cena skupu i średnia cena detaliczna mleka o zawartości tłuszczu 2% (na podstawie danych GUS)

0.44 0.51 0.62 0.61 0.61 0.78 0.78 0.72 0.75 0.88 0.98 1.12 1.32 0.72 1.32 1.31 1.28 1.03 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1995 1996 1997 1998 1999 2000 2001 2002 2003 Years – Lata PLN/l

average farm gate price – średnia cena skupu average retail price of 2% fat milk

średnia cena detaliczna mleka o zawartości tłuszczu 2% 0 10 20 30 40 50 60 70 80 1949 1955 1961 1967 1973 1979 1985 1991 1997 2003 Years – Lata %

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Polish economy survived the period of centrally planned prices. Gate milk price of-fered to farms between 1971-1989 excelled retail price, which was regulated to be stable from 1971 to 1981. You were allowed to produce as much as you could – state guaran-teed sales. Since 1989 we have accepted liberalized economy and prices are at mercy of State Agencies (ARR) and open market (Fig. 7).

Fig. 7. Farm gate price vs retail price (retail price = 100%) (based on data from CSO)

Ryc. 7. Relacja ceny skupu do ceny detalicznej (cena detaliczna = 100%) (na podstawie danych GUS)

We observe stable ratio of farm gate and retail milk price – about 55%. Visible peaks are caused by enormous increase in farm gate prices as a result of transient pros-perity in dairy industry (Fig. 8).

Breakthrough in milk production and cow numbers in 1989 caused by falling profit-ability (no guaranteed prices and markets) and huge imports from Western countries, which additionally subsidized exporters limited growth in recent years. Year 2003 started recovery in the sector (Fig. 9).

Shift in agricultural production and consumer preferences resulted in a sudden drop of fluid milk production in 1989. Slow recovery is visible in recent years (Fig. 10). Future depends on domestic consumption, which will not elevate if the state or dairy industry does not finance educational campaigns.

The available data reflect the change in consumer habits. Since 2000 we have in-creased yoghurt consumption by 37%. Marketing and wider, tasty assortment as well as recommendation from food scientists made us eat and drink more fermented products (Fig. 11).

Butter production got through the same process as milk production with one heavier storm in the 90’s, when margarine lobby profited from information about harmful action of butter fat on blood tension (Seremak-Bulge et al. 2003). Now the production grows slowly as country demand rises (Fig. 12).

0 50 100 150 200 250 300 350 400 450 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 Years – Lata

farm gate price (retail price = 100%) cena skupu

(cena detaliczna = 100%) retail price – cena detaliczna %

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Fig. 8. Farm gate price in retail price of 2% fat milk (based on data from CSO) Ryc. 8. Udział ceny skupu w cenie detalicznej mleka o zawartości tłuszczu 2% (na podstawie

danych GUS)

Fig. 9. Production of milk (normalized and defatted) (based on data from CSO) Ryc. 9. Produkcja mleka (spożywcze i odtłuszczone) (na podstawie danych GUS)

1.9 1989; 5.1 0 1 2 3 4 5 6 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 Years – Lata mld l 50 55 49 59 ₅₈ 63 59 54 61 ₅₉ 55 55 0 10 20 30 40 50 60 70 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Years – Lata %

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Fig. 10. Production of cream including homogenized cream (based on data from CSO) Ryc. 10. Produkcja śmietany i śmietanki (na podstawie danych GUS)

Fig. 11. Production of yoghurt (based on data from CSO) Ryc. 11. Produkcja jogurtu (na podstawie danych GUS)

From 1988 to 1992 there was a decrease in cheese production which resulted from lower household incomes and initial lack of trade partners. From 1993 the industry enjoys growing production as an effect of rising popularity, affluence and open markets – EU and Russia. The highest growth is observed in hard cheeses (“industrial types”), which are eagerly used in food service (Fig. 13).

2003; 215 1984; 433 1992; 159 1989; 335 0 100 200 300 400 500 1982198319841985198619871988198919901991199219931994199519961997199819992000200120022003 Years – Lata M. l mln l 241 225 213 176 0 50 100 150 200 250 300 2000 2001 2002 2003 Years – Lata M. l mln l

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Fig. 12. Production of butter (based on data from CSO) Ryc. 12. Produkcja masła (na podstawie danych GUS)

Fig. 13. Production of cheese (based on data from CSO) Ryc. 13. Produkcja sera (na podstawie danych GUS)

Strong exporting position resulted in growing production of concentrated milk and whey – trend seems to be long lasting (Fig. 14).

Production strongly depends on export profitability, bloomed till 1989, later had to adapt to open market (Fig. 15).

1989; 290 202 1994; 119 787 167 036 0 50 000 100 000 150 000 200 000 250 000 300 000 350 000 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 Years – Lata t 2003; 548 159 1992; 283 317 1988; 470 819 195 165 101 979 134 782 286 461 164 777 312 825 61 917 16 561 23 212 0 100 000 200 000 300 000 400 000 500 000 600 000 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 Years – Lata cheeses – sery hard cheese – ser żółty fresh cheese – twaróg

processed cheese and others – sery topione i inne t

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Fig. 14. Production of milk and concentrated whey (based on data from CSO) Ryc. 14. Produkcja zagęszczonego mleka i serwatki (na podstawie danych GUS)

Fig. 15. Production of milk and cream powder (based on data from CSO) Ryc. 15. Produkcja mleka i śmietany w postaci stałej (na podstawie danych GUS)

Decrease of subsidies to this good resulted in miserable competitiveness of Polish casein (Richarts 2003) on world market (Fig. 16).

1979; 20 705 1993; 12 615 1989; 21 413 1999; 21 507 1982; 12 346 0 5 000 10 000 15 000 20 000 25 000 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 Years – Lata t 175 453 1989; 238 195 1998; 186 018 0 50 000 100 000 150 000 200 000 250 000 300 000 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 Years – Lata t

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Fig. 16. Production of casein (based on data from CSO) Ryc. 16. Produkcja kazeiny (na podstawie danych GUS)

Consumption

Milk loses to competitive drinks with heavy marketing behind (Fig. 17).

Reduction in fats consumption and artificial and plant substitutes limit cream con-sumption. Annual consumption of cream amounts to 5 kg per person (Fig. 18).

Fig. 17. Consumption of milk drinks per one person (based on data from CSO) Ryc. 17. Konsumpcja napojów mlecznych na osobę (na podstawie danych GUS)

91 ₈₈ 84 ₈₂ 79 ₇₆ 73 69 ₆₅ 63 62 0 20 40 60 80 100 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Years – Lata l 1990; 38 224 1994; 2 985 2003; 3 434 0 10 000 20 000 30 000 40 000 50 000 60 000 70 000 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 Years – Lata t

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Fig. 18. Consumption of cream per one person (based on data from CSO) Ryc. 18. Konsumpcja śmietany na osobę (na podstawie danych GUS)

Drop in the beginning of 90’s caused by price factors and plant substitutes supported by information campaigns was stopped by growing popularity and fashion for butter, now associated with tasty, healthy diet when in reasonable quantities (Fig. 19).

Fig. 19. Consumption of butter per one person (based on data from CSO) Ryc. 19. Konsumpcja masła na osobę (na podstawie danych GUS)

After decline caused by dietary precautions and high price in the beginning of 90’s consumption of cheeses started to grow till 1998. Later crisis in economy affected the consumption. Households started buying and eating more cheeses again in 2003 (Fig. 20).

5.4 4.3 3.4 3.7 4.0 4.1 4.2 _3.7 4.0 4.1 4.2 0 1 2 3 4 5 6 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Years – Lata kg 7.1 _6.7 6.4 _6.1 5.6 5.8 5.6 _5.5 _5.4 5.3 _5.0 0 2 4 6 8 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Years – Lata kg

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Fig. 20. Consumption of cheese per one person (based on data from CSO) Ryc. 20. Konsumpcja sera na osobę (na podstawie danych GUS)

Conclusions

1. Decease of dairy farm numbers and overall farm numbers – low profitability if no economies to scale.

2. Structural changes in milk production sector are caused by fast growth of large herds and farms which own one cow for a their use.

3. In 2003 there is still a decline in cow stock but increase of milk yield per cow al-tered decreasing trend in milk production.

4. Steady increase of collected milk ratio connected with attractive prices and pro-duction specialization.

5. Production of basic dairy fresh products for local markets declined from 1989 to 2002 with serious collapse in 1999 and 2000 as a result of economic crisis. In latest years opening of foreign markets: EU (Richarts 2004) and Eastern countries and rising dietary conscience of Poles can elevate production but only up to the quota granted by EU.

6. More stable products are slightly affected by changes in domestic demand, but more sensitive to cyclical factors on world market, what is mirrored by temporary fluc-tuation.

7. Cheese production grows from 1992 thanks to domestic demand and export. 8. Drop in milk drinks (mainly milk) and cream consumption is caused by change of consumption habits and competition from other drinks and plant substitutes.

9. In 2000 a remarkable decline in cheese and butter consumption resulted from in-comes reduction. Consumption and growing acceptance for cheeses and butter bounces back in recent years.

10.0 9.6 9.2 9.6 10.0 10.3 10.3 10.0 10.1 10.1 10.3 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Years – Lata cheeses – sery trend kg 10.5 10.0 9.5 9.0 8.5

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Literature

Jażdżewski K. (2001): Praktyczne zastosowanie wymagań Unii Europejskiej i Polski w sektorze

mleczarskim. Związek Prywatnych Przetwórców Mleka, Warszawa.

Richarts E. (2003): Bull. Int. Dairy Fed. 384.

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ZMP Zentrale Markt- und Preisberichtstelle, Bonn.

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Polskie mleczarstwo. Raport o stanie branży i perspektywach jej rozwoju w poszerzonej Unii Europejskiej. Związek Prywatnych Przetwórców Mleka, Warszawa.

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wiejskich. Roln. Dzierż. 5: 38-39.

TENDENCJE W POLSKIM MLECZARSTWIE

S t r e s z c z e n i e

Polskie mleczarstwo jako ważna cześć gospodarki żywnościowej jest sektorem, wewnątrz którego w ostatnich latach dokonały się bardzo istotne zmiany. Zaobserwowane tendencje mają charakter długookresowy i będą w najbliższym czasie kształtować oblicze branży. Podstawowymi tendencjami po stronie gospodarstw zajmujących się produkcją mleka są: koncentracja produkcji surowca, wzrastająca wydajność i towarowość. Z kolei w przetwórstwie w latach 1989-2002 obserwowaliśmy tendencję spadkową w większości kategorii i wzrost produkcji od 2003 roku. Jednakże konsumpcja produktów mlecznych wyrażona w ekwiwalencie mleka spada od 1989 roku (z wyjątkiem 1998 roku) i w 2003 roku osiągnęła rekordowo niski poziom 181 l na osobę.