An Evaluation of the Pork Industry in Poland INTRODUCTION With a population of 18 million pigs, Poland is one of the leading producers in Europe. Pig production is mainly concentrated in the western and northern part of the country. The main goal of Polish agricultural policy has been to increase the size of herds and to privatize state-owned farms. Pig research is mainly focused on improving pig production through genetic manipulations, production of transgenic pigs and the effect of environmental conditions (feeding, housing and health of pigs). The Polish pork industry is facing a number of challenges, which have led to its decline over the last decade. A decline in hog production across the EU has caused an increase in both production costs and cost of meat products in Poland. Currently, Poland is importing more pork than it exports. The breeding sector is scattered and inefficient. Many farmers have stopped raising hogs and many sows have been culled. TRENDS IN PRODUCTION According to the data published by FAOSTAT 2007, the number of pigs slaughtered in 1961 was 13.5 million, which rose to 19.5 million in 1980 and 22.6 million in 2000. Pig meat production, starting from 1.3 million Tonnes in 1961, increased to 1.71 and 1.92 steadily through the years 1980 and 2000. The country used to have about 500,000 producers and most had a closed cycle of 10-20 incurring high production costs (Pejsak et. al, 2004). In short, commercial chains, dictating prices and rapidly gaining market share, encouraged large and modern farms to grow. The industry witnessed a constant increase in annual pork production till 1974, and thereafter, there were ups and downs in the graph. In 1992, the figures stood at 2.05 million MT. Annual production of fatteners reached 25 millions in 2003. Surging exports to the EU contributed to Poland's strong growth in 2004. The Polish meat market was involved in this upward trend, and investments in the meat industry increased fourfold when compared to 2000-2001 (Pig Progress, 2005). The total number of pigs by the end of 2006 was 18.8 million head. One year later, this was 17.6 million head, whereas by the end of September of 2008, the number had decreased to 13.6 million head (Pig progress, 2008). INTENSITY OF PRODUCTION Poland has a large number of pigs, but production is highly fragmented. In general, pig production in Poland is extensive though the big producers like Smithfield grow them indoors. Until 1989, in the period of centrally planned economy in Poland, the entire animal production was subjected to obligatory contracting. The percentage of private farms increased from 70% in 1989 to 85% in 2000 (Pejsak et. al, 2004). An increase in the scale of production and the degree of integration of a farm with the buyer of its products significantly contributes to a reduction of unit production costs and thus to an increase in unit profit from sold products. Economies of scale in production have resulted in a consistent decrease in the number of pig farms over recent decades, whilst the number of animals per unit has increased to compensate for this. The biggest farms in Poland have 5,000 hogs, which is comparatively only a small number. According to the Smithfield Foods website (2009) these farms produce around 2 million tonnes of pork products annually. Almost 70 % of Polish pig farms are small subsistence farms (with little automation) selling less than 50 fatteners per year, with only 10% of production provided by farms with more than 1,000 pigs. The average number of hogs on farms in Poland is 30, whereas in Denmark, the average is well over 1,000 hogs. Farms engaged in pig production (%) as reported by Krencik and Dawidek (2006) is depicted in Table 1 below. Total number of private farmsNumber of pigs (%)< 1011-2021-5051-100101-200201-300> 300204755318.918.7188.8.131.52.45.9 Table 1. Farms engaged in pig production (%) in Poland In some cases, the cost of production was higher that of the imported product, which forced many pig producers to stop or reduce their production capacity in 2001. Carvajal and Castle (2009) reported that there were 1.1 million hog farmers in 1996, which was reduced to 56 percent by 2008. It was estimated that pork production will drop down by another 10 per cent in the first half of 2009. Flakiewicz et. al, 2008 reported that swine inventories were reduced due to the competition from pork producers across the EU coupled with inefficient production in the industry, high feed prices, and a strong zloty. This has resulted in the lowest number of hogs in Poland in 25 years. However, the drop in pork production is not as drastic as this due to a higher efficiency of production. This year, many farmers are limiting production and some could be facing bankruptcy. The current crisis will have a long-term impact on hog inventories in Poland and force hog farmers to integrate and to lower costs of production. The government has been criticized for not encouraging farm consolidation and concentration of production to reduce costs for producers. AUTOMATION AND ECONOMICS In the traditional rural farms, pigs are raised outdoors in yards or fields. In some cases pigs are allowed to forage in woods. Where there are few commercial and intensive pig farms where, housing facilities, feeding and ventilation systems, and temperature and environmental controls are automated. Studies conducted by Baurn et. al (2008) indicate that entering into horizontal integration is profitable for these farms as they receive higher sale prices as well as record lower production costs, mainly due to the increasing specialization, access to professional knowledge and good quality materials (feeds, piglets, breeding materials) arranged by meat plants. An increasing scale of production resulted in gradually decreasing unit profits. The bigger farmers in horizontal integration become increasingly willing to arrange a permanent and reliable sale channel for their fatteners. Non-integrated farms were characterized by the poorest economic standing. Current limitations to pork production in Poland include weak management expertise, persistent outdated government policy and restricted access to capital. Poland is also required to meet the statutory management requirements (SMRs) on animal diseases and animal welfare by January 2011. It is expected that Polish agriculture will continue to experience significant changes when it implements the 2007-2013 EU Rural Development Program. This program will enable more farms to become economically viable entities through modernisation and workers’ training. The pig breeders should also adopt improved technology to get better quality products. This transformation will be supported by the EUROP classification system which will be introduced in Poland this year. REFERENCES Baum, R. Peplinski, B. and Wajszczuk, K. 2008. The effects of vertical integration on profitability of pig production – Polish experience. Proceedings of the 8th European IFSA Symposium, 6 -10 July 2008, Clermont-Ferrand. Available at http://ifsa.boku.ac.at/cms/fileadmin/Proceeding2008/2008_WS2_ 03_Baum. pdf. Accessed on 6/10/2009. Carvajal, D and Castle, S. 2009. A U.S. Hog Giant Transforms Eastern Europe Published: May 5, 2009 in The New York Times. Available at http://www.nytimes.com/2009/05/06/ business/global/ 06smithfield.html? _r=1 Accessed on 10/10/2009. Krencik, D. and Dawidek J. FAO. 2006. Corporate Document Repository. Breeding strategies for cattle and pigs in Poland. Available at http://www.fao.org/DOCREP/006/AD250E/ad250e0e.htm. Accessed on 6/10/2009. Pig Progress. 2005. Volume 21, No. 10, 12-13 Available at http://www.pigprogress.net/article-database/ poland-shows-strong-interest-in-pigs-id368.html. Accessed on 7/10/2009 Pig Progress. 2008. Focus on Poland from breed to meat. Vol. 24 No.10. Available at http://www. Pig progress.net article-database/focus-on-poland-from-breed-to-meat-id899.html.Accessed on 7/10/2009. Pejsak, Z. Markowska, I and Daniel. 2004. Pig Production in Poland and Central Europe. International Society for Animal Hygiene - Saint-Malo - 2004 466 Contents 474. Available at http://docs.google.com/ gview? www.isah-soc.org/documents/2004/Pejsak.pdf - . Accessed on 8/10/2009. Smithfield 2009. 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