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Poland’s Emerging Role: Premier Marketplace in Eastern Europe
By Michael Dwyer
U.S. exporters seeking to break into the Polish agricultural market should expect a tough fight, especially against nearby suppliers from the European Union (EU). However, should they succeed, they could be rewarded handsomely, as Poland has developed into a first-class agricultural growth market. Since its transformation to a market economy in 1990, imports jumped from $1 billion to $3.5 billion in 1996. Imports were up 17 percent just this past year.
At this rate, Polish agricultural imports could easily reach $5 billion by 2000. This impressive trade performance places Poland as the leading growth market in Europe, Africa or the Middle East, and on a par with the growth markets of the developing countries of Asia and Latin America.
Most promising for U.S. exporters is the consumer food sector, with 1996 Polish imports projected to reach $1.5 billion, up from just $285 million in 1990. Consumer foods account for more than 40 percent of the country’s total agricultural imports.
Despite these very favorable trade trends, U.S. exporters have some catching up to do, as EU suppliers are off to a fast start in this newly transformed market. With more than a 40-percent market share, the EU dominates the Polish import market, while U.S. exporters remain a distant second. Since 1990, the U.S. share of Polish agricultural imports has been volatile, showing no clear trend, ranging from 3 to 11 percent. In 1996, it is expected to have reached 7 percent.
Wheat, Poultry Top Current U.S. Export List
U.S. agricultural exports to Poland for 1996 could top $200 million, up 75 percent from 1995. However, 65 percent of these exports are wheat and poultry — accounting for only 6 percent of Poland’s agricultural imports from all sources. This means U.S. exports are highly concentrated in a market that is highly diversified.
Several factors contribute to the strong performance by EU suppliers:
Proximity. EU’s location reduces transportation costs and transit times.
Established Relationships. EU and Polish firms have longstanding trading relationships.
Tariff Advantages. The 1992 bilateral Association Agreement gives the EU a 10-percent tariff preference on more than 200 products (mostly consumer foods) not widely produced in Poland. In late 1995, Poland granted additional tariff preferences to the EU.
EU Subsidies. EU exporters enjoy export and processing subsidies on some products that help them compete where they would ordinarily be uncompetitive.
Niche Markets Promising
Against such odds, how can U.S. exports garner a larger share of the Polish market? Perhaps the best approach is to tap into niche markets, especially for unique processed products not produced in the EU, or for which the United States has a competitive advantage over EU rivals.
Exporters and Market Access Program (MAP) participants who invest time and funds in developing this market could see a solid return on their venture. The MAP is one of USDA’s largest export promotion programs. It partially reimburses program participants conducting foreign market development projects for eligible products in specified countries.
USDA programs provide the U.S. exporter with long-term benefits. For example, the Export Credit Guarantee Program underwrites credit terms for exports, while the Cochran Fellowship Program promotes broad-based agricultural development with our trading partners. FAS plans to sponsor travel and arrange programs for about 50 to 60 Polish importers under the Cochran Program.
U. S. exporters can be competitive in the Polish food market because U.S. origin and brand identification are clear strengths for the food processing industry.
Best Bets
The Foreign Agricultural Service’s (FAS) agricultural counselor in Warsaw has identified the following product categories as having the best potential for U.S. exporters:
Food preparations. Believed to be the best area for U.S. development, this category already accounts for a lot of EU brokered pass-through business for U.S. products. Polish imports in this category are estimated to have reached a record $250-300 million in 1996.
Miscellaneous food preparations such as salad dressings and salsas generated the most interest among products included in the 1996 FAS catalog at the Polagra Trade Show held Sept. 20-24. More proactive export marketing by U.S. firms and trade associations would boost U.S. exports.
Livestock genetics. Poland needs to upgrade its entire dairy herd, and plans are underway to develop beef cattle production capacity. The Central Animal Breeding Office (CABO) erected some import barriers against U.S. genetics. The U.S. Department of Agriculture (USDA) is working with U.S. exporters and Polish importers to overcome CABO’s resistance.
Poultry genetics are another promising area for expansion. Some Polish egg producers are buying baby chicks from U.S. suppliers. However, tariff rate quotas currently limit importation of baby chicks to protect local producers. If this import protection can be reduced, U.S. export prospects should brighten.
Meat. U.S. poultry meat and beef and pork offal exports are growing. However, a significant share of the poultry meat is being transshipped to Russia, Belarus and Ukraine. Despite a large domestic swine industry, Poland imports $100-150 million a year worth of pork, leading all other categories of meat.
Protein meals. Poland currently imports 700,000 tons of soybean meal, virtually all from South America and the EU. Imports are expected to reach a million tons within a few years. Much of the EU meal is from U.S. beans. U.S. meal is currently price-competitive with South American meal.
Fish. Niche potential exists as Poland’s total fish imports amount to $150 million yearly. Market research is needed to identify the particular products and type of promotion activities needed.
Grains. U.S. grain exports have been erratic, depending on the size of Polish harvests. Long-term growth is not expected, but the outlook for U.S. rice and durum wheat exports is brighter, with promotion efforts underway.
Fresh fruit and juices. U.S. exports will be $1 million in 1996. Poland currently imports $100 million a year worth of citrus and non-citrus (excluding bananas) fruit from all sources. Many fruit products are transshipped through Western Europe to Poland. The Florida Department of Agriculture and Consumer Services promoted citrus at the Polagra Trade Show.
Dried fruit and nuts. This category shows dramatic development from virtually nothing up to an expected $8-10 million in U.S. exports in 1996. Income growth in Poland will determine prospects in this category. The National Peanut Council does have promotion efforts underway in Poland.
Wood products. Wood has definite expansion potential. Sectors such as the furniture and paper industries are becoming very strong components of the Polish economy. Demand for raw material is constantly increasing. U.S. wood exports to Poland exceeded $10 million in 1995 and are expected to have reached $15 million in 1996. Wood-frame construction is an attractive alternative for the estimated 1.5 million Polish families who would like to buy a home. USDA is conducting a series of seminars on wood-frame construction to teach proper technology and promote U.S. lumber and lumber products.
Vegetable oils. Poland imported $200 million worth of vegetable oil in 1995. U.S. oils are not currently considered to be price-competitive, but soybean oil might be a future possibility as market conditions change.
For further market information on Poland, contact:
American Embassy, Warsaw
Department of State
Attn: Roger Wentzel, Agricultural Counselor
Washington, DC 20521-5010
Tel: (011-48-22) 621-3926
Fax: (011-48-22) 628-1172
This report was prepared by Michael Dwyer, Special Assistant, Commodity and Marketing Programs, Foreign Agricultural Service. Tel. (202) 720-3124; Fax (202) 690-3606.
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