REVIEW OF DAIRY SECTOR IN POLAND. Introduction

Roczniki Akademii Rolniczej w Poznaniu CCCLXVII (25) 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 concentration in milk production. 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 economies of scale. Changes result in rising effectiveness as milk yield grows, and on farm use decreases. After collapse in 1989 and downward trend in 9 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, consumption and define some prospects for them. Review is divided into three following sections: 1) dairy farms and dairy cows, 2) production and prices, 3) consumption. The data were collected from Central Statistical Office (Roczniki... 195-24). Rocz. AR Pozn. CCCLXVII, Ekon. 4: 113-125 Wydawnictwo Akademii Rolniczej im. Augusta Cieszkowskiego w Poznaniu, Poznań 25 PL ISSN 1731-261

114 M. Sznajder, O. Krusińska, A. Wielicka 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 21). 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). M. mln 3.5 3. 2.5 2. 1.5 1..5 139 875 Dairy farms Farmy mleczne 1758 258 Non dairy farms Farmy bez produkcji mleka 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 another production) with one cow, dedicated to self-provisioning and exponential increase of large and mid-sized herds starting from 1 cows (Szymańska 25). Polish milk production starts concentration process (Fig. 2). 367 2933 All farms Wszystkie gospodarstwa 1996 22 % 5 45 4 35 3 25 2 15 1 5 46 42 28 22 1996 19 15 22 1 11 5 1.15.11 1.15.1 1 2 3-4 5-9 1-19 2-49 5 Number of cows Liczba krów 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)

Review of dairy sector in Poland 115 Production and prices In period 1989-23 increase in milk production per cow by 22% did not offset the cow loss drop by 42% milk production fell down (Fig. 3). Cow numbers (M.) Pogłowie krów (mln) 6 5 4 3 2 1 4.994 326 cow numbers pogłowie krów milk yield wydajność mleczna 3969 2.898 6 5 4 3 2 1 Milk yield (l) Wydajność mleczna (l) 1989 199 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 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 1 years (1994-23) but changes in the structure of dairy farms and growing per-cow production affected milk collection (Sznajder 1999), which went up by 17% in the same period (Fig. 4). 18 16 14 12 1 mld l 8 6 4 2 16 11.4 Fig. 4. Milk production and milk collection (based on data from CSO) Ryc. 4. Produkcja i skup mleka (na podstawie danych GUS) 11.5 1989 199 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 milk production produkcja mleka milk collection skup mleka 7.3 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).

116 M. Sznajder, O. Krusińska, A. Wielicka 8 % 7 6 5 4 3 2 1 1949 1955 1961 1967 1973 1979 1985 1991 1997 23 Fig. 5. Share of milk collection in milk production (1949-23) (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 24. In comparison with year 1995 prices nearly doubled (95% growth), and probable scenario for 25 was 1 PLN/hl and even more (Fig. 6). 1.4 1.2 1..8.6.4.2. PLN/l.75.44.88.51.98 1.3.62.61.61.78.78 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) 1.12 1.28 1.32 1.31.72 average farm gate price średnia cena skupu average retail price of 2% fat milk średnia cena detaliczna mleka o zawartości tłuszczu 2% 1995 1996 1997 1998 1999 2 21 22 23 1.32.72

Review of dairy sector in Poland 117 Polish economy survived the period of centrally planned prices. Gate milk price offered 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 guaranteed sales. Since 1989 we have accepted liberalized economy and prices are at mercy of State Agencies (ARR) and open market (Fig. 7). % 45 4 35 3 farm gate price (retail price = 1%) cena skupu (cena detaliczna = 1%) retail price cena detaliczna 25 2 15 1 5 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 23 Fig. 7. Farm gate price vs retail price (retail price = 1%) (based on data from CSO) Ryc. 7. Relacja ceny skupu do ceny detalicznej (cena detaliczna = 1%) (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 prosperity in dairy industry (Fig. 8). Breakthrough in milk production and cow numbers in 1989 caused by falling profitability (no guaranteed prices and markets) and huge imports from Western countries, which additionally subsidized exporters limited growth in recent years. Year 23 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. 1). 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 2 we have increased 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 9 s, when margarine lobby profited from information about harmful action of butter fat on blood tension (Seremak-Bulge et al. 23). Now the production grows slowly as country demand rises (Fig. 12).

118 M. Sznajder, O. Krusińska, A. Wielicka % 7 6 5 5 55 49 59 58 63 59 54 61 59 55 55 4 3 2 1 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 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) mld l 6 5 1989; 5.1 4 3 2 1.9 1 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 21 23 Fig. 9. Production of milk (normalized and defatted) (based on data from CSO) Ryc. 9. Produkcja mleka (spożywcze i odtłuszczone) (na podstawie danych GUS)

Review of dairy sector in Poland 119 M. l mln l 5 4 1984; 433 3 1989; 335 2 1992; 159 23; 215 1 198219831984198519861987198819891991991199219931994199519961997199819992212223 Fig. 1. Production of cream including homogenized cream (based on data from CSO) Ryc. 1. Produkcja śmietany i śmietanki (na podstawie danych GUS) M. l mln l 3 25 213 225 241 2 176 15 1 5 2 21 22 23 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).

12 M. Sznajder, O. Krusińska, A. Wielicka 35 t 3 1989; 29 22 25 2 15 1 1994; 119 787 167 36 5 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 21 23 Fig. 12. Production of butter (based on data from CSO) Ryc. 12. Produkcja masła (na podstawie danych GUS) t 6 5 4 1988; 47 819 23; 548 159 3 312 825 1992; 283 317 286 461 2 1 195 165 164 777 134 782 11 979 61 917 23 212 16 561 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 21 23 cheeses sery hard cheese ser żółty fresh cheese twaróg processed cheese and others sery topione i inne 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).

Review of dairy sector in Poland 121 25 2 t 1979; 2 75 1989; 21 413 1999; 21 57 15 1 1982; 12 346 1993; 12 615 5 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 Fig. 14. Production of milk and concentrated whey (based on data from CSO) Ryc. 14. Produkcja zagęszczonego mleka i serwatki (na podstawie danych GUS) t 3 25 1989; 238 195 2 1998; 186 18 175 453 15 1 5 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 21 23 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 23) on world market (Fig. 16).

122 M. Sznajder, O. Krusińska, A. Wielicka t 7 6 5 4 199; 38 224 3 2 1 1994; 2 985 23; 3 434 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 21 23 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 consumption. Annual consumption of cream amounts to 5 kg per person (Fig. 18). l 1 8 6 91 88 84 82 79 76 73 69 65 63 62 4 2 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 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)

Review of dairy sector in Poland 123 kg 8 6 7.1 6.7 6.4 6.1 5.6 5.8 5.6 5.5 5.4 5.3 5. 4 2 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 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 9 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). kg 6 5 4 3 5.4 4.3 3.4 3.7 4. 4.1 4.2 3.7 4. 4.1 4.2 2 1 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 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 9 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 23 (Fig. 2).

124 M. Sznajder, O. Krusińska, A. Wielicka kg 1.5 1. 1. 1. 1.3 1.3 1. 1.1 1.1 1.3 9.5 9. 9.6 9.2 9.6 cheeses sery trend 8.5 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 Fig. 2. Consumption of cheese per one person (based on data from CSO) Ryc. 2. 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 23 there is still a decline in cow stock but increase of milk yield per cow altered decreasing trend in milk production. 4. Steady increase of collected milk ratio connected with attractive prices and production specialization. 5. Production of basic dairy fresh products for local markets declined from 1989 to 22 with serious collapse in 1999 and 2 as a result of economic crisis. In latest years opening of foreign markets: EU (Richarts 24) 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 fluctuation. 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 2 a remarkable decline in cheese and butter consumption resulted from incomes reduction. Consumption and growing acceptance for cheeses and butter bounces back in recent years.

Review of dairy sector in Poland 125 Literature Jażdżewski K. (21): Praktyczne zastosowanie wymagań Unii Europejskiej i Polski w sektorze mleczarskim. Związek Prywatnych Przetwórców Mleka, Warszawa. Richarts E. (23): Bull. Int. Dairy Fed. 384. Richarts E. (24): ZMP-Marktbilanz Milch 24. Deutschland. Europäische Union. Weltmarkt. ZMP Zentrale Markt- und Preisberichtstelle, Bonn. Roczniki statystyczne rolnictwa 1949-23. (195-24). GUS, Warszawa. Seremak-Bulge J., Gronowicz M., Jażdżewski K., Świetlik K., Szajner P., Nitecka E. (23): Polskie mleczarstwo. Raport o stanie branży i perspektywach jej rozwoju w poszerzonej Unii Europejskiej. Związek Prywatnych Przetwórców Mleka, Warszawa. Sznajder M. (1999): Ekonomika mleczarstwa. Wyd. AR, Poznań. Sznajder M., Senauer B., Asp E., Kinsey J. (1998): Zmieniający się konsument żywności. Horyzont, Poznań. Szymańska A. (25): Rolnik uśredniony hodowla bydła i produkcja mleka a rozwój obszarów wiejskich. Roln. Dzierż. 5: 38-39. TENDENCJE W POLSKIM MLECZARSTWIE Streszczenie 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 1989-22 obserwowaliśmy tendencję spadkową w większości kategorii i wzrost produkcji od 23 roku. Jednakże konsumpcja produktów mlecznych wyrażona w ekwiwalencie mleka spada od 1989 roku (z wyjątkiem 1998 roku) i w 23 roku osiągnęła rekordowo niski poziom 181 l na osobę.