October 24, 2003
Overview of Poland's Higher Milk Output 2003
Executive Summary
Poland's fluid milk production is expected to increase one percent in 2003 as a result of increasing milk yields. In 2003, higher output of milk is expected to lead to higher output of non-fat dry milk (NFDM) and whole dry milk (WDM). Due to two consecutive years of drought, availability and quality of roughages are expected to decrease in the first half of 2004.
A 12 percent grain crop reduction in 2003 will also have a detrimental impact on the quality of feeds used in dairy cattle nutrition. Deterioration of feeding is expected to be offset by genetic improvement of dairy herds. As a result milk output in 2004 is expected to increase another one percent.
Poland will join the European Union (EU) May 1, 2004. As a result of a new law regulating the Polish dairy market approved by the Polish parliament in 2001, Poland will enforce similar regulations to the European Union's rules regarding the milk quota system, intervention on the market through governmental stocks of NFDM and butter, as well as subsidies for storage and consumption of dairy products.
Production
Poland faces rapid dairy industry changes. The average size of dairy herds is growing while dairy processing plants are rapidly modernizing and restructuring. Both cooperatives and privately owned dairy plants are adjusting to new stricter hygiene requirements introduced and supervised by the Polish Veterinary Service in order to meet EU dairy product quality standards. According to the Polish Veterinary Service as of September 19, 2003, there were 49 dairy plants which were eligible to export to the EU market, 170 plants which are going to adjust to EU standards until EU accession in May 2004, 110 plants which will be eligible for a transition period for adjustment and 80 plants which will have to discontinue production after EU accession.
Strong prices for non-fat dried milk on the world market are expected to stabilize output and stimulate exports of NFDM in 2003 and 2004. Total 2003 output of NFDM is estimated at 152,000 tons.
Output of whole dry milk is expected to increase in 2003 due to lower demand for exports of butter and a strong world market for WDM.
In 2004, milk output is forecast to grow one percent as a result of growing milk yields of dairy cows and expected higher milk procurement prices caused by a shortage of good quality raw milk for processing.
Consumption
Higher raw milk output is expected to result in greater consumption of milk. Dairy plants procure about 74 percent of total milk production. The average milk procurement price in July 2003 was 0.68 zls per liter ($US .17), compared to 0.66 zls ($US 0.16) in July 2002.
As a result of a Polish Government decision dated May 20, 2003, the AMA was authorized to subsidize production of 60,000 tons (35 percent of total output) of NFDM and WDM. The subsidy covers NFDM and WDM produced from May 1 to September 30, 2003, produced out of Polish origin raw milk meeting Polish quality standards. The average subsidy amounts to 0.65 zls ($US 0.16) per kilogram of NFDM/WDM. Until September 30, 2003, 54,000 tons of NFDM/WDM was produced with the subsidy. In the summer of 2003, AMA was eligible to subsidize exports of 33,700 tons of NFDM. As a result of tenders, until September 30, 2003, AMA issued permits for export of 24,000 tons of subsidized NFDM. The average subsidy amounted to 0.70 zlotys per kilogram ($0.17).
Trade
Poland is a net exporter of dairy products. Growing exports of Polish dairy products result mainly from strong prices for dairy products on the world market. Polish dairy exports also benefited from the agreement on liberalization of bilateral trade signed with the EU in September 2000. According to the agreement, the EU opened duty free quotas, which in 2003 allow for export of 13,000 tons of NFDM. In the first six months of 2003, Poland exported to the EU 8,900 tons of NFDM.
Imports
Dairy product imports are extremely small in comparison to exports. Growing milk output and stable domestic demand for dairy products resulted in reduced dairy products imports. In 2002, casein was the major dairy product imported by Poland. Imported casein is mostly re-exported. In 2002, total imports of casein amounted to 16,900 tons compared to 20,100 tons in 2001. The average import price of casein was $3,020 per ton. Major supplying countries were Ukraine, Russia and Belarus.
Imported NFDM is mostly re-exported. Despite high world market prices for NFDM, import for re-export was reduced in 2002. In 2002, the average import price for NFDM from FSU countries was US$ 1,320. The tariff for NFDM is 70 percent. There is a preferential tariff of 37 percent for the Czech and Slovak Republics, Romania, Hungary, Slovenia and Bulgaria, while for Lithuania it is 20 percent.
Exports
NFDM is the biggest export item of the Polish dairy industry in terms of quantity and value. It is expected that exports of NFDM in 2003 and 2004 will grow due to favorable world prices. Polish exports of NFDM in the first half of 2003 amounted to 37,712 tons compared to 34,500 tons in the first half of 2002. In the first six months of 2003 exports of WDM amounted to 3,600 tons compared to 6,100 tons in 2002. The majority of WDM was exported to the EU and Croatia, Saudi Arabia and Algeria.
