Will the state create its own trade network?

On April 20, the Council of Ministers passed a resolution authorizing the establishment of the National Food Group or, in fact, the inclusion of the assets of other agricultural companies in the National Sugar Company, which will form the basis of the holding.

– In fact, all we have to do is use the regulations, sign a notarial document and register in the National Court Register. At this point, we can say that the food holding has already been established. I think the official uprising, the entry into the National Judicial Register, should take place in late May and June, says Henryk Kowalczyk, deputy prime minister and minister of agriculture and rural development at the Newseria Business Agency.

It will be a state-owned agro-food concern involving 15 companies from sectors such as seed production, sugar production, starch and processing. They will include Elewarr, Danko Hodowla Roślin, who is responsible for grain stocks, Livestock and Plant Seed Production in Polanowice, Kutnowska Hodowla Beet Cukrowego or Kombinat Rolny Kietrz.

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This is a joint initiative of the Ministry of State Assets and the Ministry of Agriculture, which control the companies of the State Treasury. According to the government, the holding’s task will be to create a competitive advantage in the domestic agricultural market and strengthen the position of Polish agriculture in foreign markets.

– First of all, the National Food Holding is to be a very good partner for farmers and to break the price deal, because, unfortunately, such cases often happen, – says Henryk Kowalczyk. – For example, when processing plants take advantage of the ASF situation and the inability of a farmer from the zone to sell pigs, they are completely healthy pigs. Processing plants offer prices completely below cost, even less than 2 PLN per kilogram. The same goes for soft fruits – when farmers harvest fruits that they can’t even stand for ten or more hours, processing companies sometimes offer prices that don’t quite fit that value.

He stressed that this type of market practice makes it necessary for farmers to take protective measures. Especially in crisis situations such as the presence of ASF. It is the responsibility of the Office of Competition and Consumer Protection to respond to the unfair use of contract advantages in the agro-food market. From 2017 to December 2021, when such interventions were allowed, the department initiated 16 proceedings, resulting in 10 decisions related to unfair actions. He also filed more than 90 complaints against entrepreneurs for misuse of contract benefits, and the total financial fines amounted to more than 800 million PLN.

– Recently, I also visited the producers of hops, who complained about the price deal, the processors do not buy hops from them, even if they are in great demand, and instead of buying them from Polish farmers, they bring them only from Germany. So, there are many examples of this, says the Minister of Agriculture.

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The government explains that one of the goals of the Polish food holding will be to build a supply chain from the farm as part of a hook strategy. The relationship between the companies within the group will provide control over each stage of production in the sugar, starch, grain and grinding and food processing segments. As a result, companies will be able to refuse the services of intermediaries.

– If there are fewer intermediaries between the farmer and the end consumer and these intermediaries earn less, the first price will be higher for the farmer and the lower price for the consumer on the other side of the food chain. So the role of the holding is really big here, and I hope it will use it, – says Henryk Kowalczyk. – Fears that the holding may dictate prices are completely unfounded. Yes, it is possible to break price agreements, but it is impossible to dictate prices. However, this will not be one hundred percent of the market or even the majority of the market, but a small market share, but this price impulse is quite significant. On the other hand, I think that the fears that the holding may dictate prices are completely unfounded.

The Minister cites the Polish dairy industry as an example of a well-functioning market. According to him, this is due to the fact that milk processing belongs to the Polish capital.

– This market is very stable. Farmers have a decent income, stable production and sales, so it is clear that there is no need for the intervention of the food holding company, because the dairy industry is working well. I think this is not a coincidence, because all the processing is in the hands of Poland, in most cases in the hands of farmers – emphasizes Henryk Kowalczyk.

Implementation of the tasks of the Polish Food Group is to contribute to improving the country’s food security.

– We also need to think about some processing, processing, strategic resources, strategic storage, because we have enough grain for six months or longer due to the war in Ukraine, and now we are worried. The holding can be an enterprise that buys grain for strategic reserves. There may be a lot of this work, and maybe in the future there will be some kind of trade network, who knows, there are some elements that can prevent the farmer from being helpless in the face of great worries. – says the Minister of Agriculture.

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