Poland mulls setting minimum wheat, rapeseed prices, idea flawed: lobby

26 Sep 2019 | Andy Allan

A Polish bill meant to help domestic farmers by setting minimum prices for some agricultural goods is flawed as it undermines the EU’s single market for trade in goods, will stifle liquidity and end up actually hurting farmers, according to a letter from lobby groups criticising the bill.

The Polish bill has been submitted to the EU Commission and member states to clarify whether it contravenes EU law.

It plans to set an annual minimum price for goods, including cereals and rapeseeds, using a formula based on production costs for the previous three years.

Designed to ensure a fair price for Polish farmers, it effectively puts a floor under what price the goods can be sold to feed and other industries for.

Should a buyer pay below the minimum price, it would trigger an investigation into the transaction.

And if the practice was found to contravene the law, then the buyer could face a fine up to 3% of their annual revenue.

However, Polish cereal lobby group IZBA has engaged with European cereals lobby group Coceral and global wheat association Gafta to try to block the bill from becoming law because it would undermine the principles of the internal market.

“Our concern that this goes against the competence of the EU in agricultural matters and the good functioning of the single market. As the reference price would only be for products produced only in Poland,” said a source within the European grain trade.

“There would be a distinction between prices in the domestic market and other EU member states' markets.”

Under EU law, no member state can pass legislation that favours domestic producers of goods over those in other member states.

In addition to contravening EU law, it would also mean that Polish farmers could struggle to sell their crops in a bumper year of production as they would be out-competed by cheaper origins, lobby groups claim.

The law would also dry up liquidity by making it difficult to enter into futures contracts due to uncertainty over future minimum prices.

It would also make it difficult to export to foreign markets and make the Polish feed market uncompetitive, due to higher feedstock prices.

“Trading companies and final producers (millers/feed companies) will be forced to purchase more expensive products than on the free market, where the equilibrium price would be lower,” said IZBA in its letter to the EU Commission asking it to reject the bill.

EU lawyers have until October 16 to give an opinion - legal speak for an instruction - otherwise the bill will become law.

Poland exports around 1.2 million mt of wheat a year out of a crop of around 12 million mt, but the country exports very little rapeseed and produces just 3.5 million mt.