'Elevated concern' over Polish farmland reforms

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Agrimoney.com | 28 December 2011
Only 27,000 farms in Poland are larger than 50 hectares, and many of these have foreign backers.

Farmland reforms which could force large-scale farmers in Poland to give up sizeable chunks of land are prompting "elevated concern" over investment in a country which has appeared to hold significant agricultural promise.

Poland's president, Bronisław Komorowski, earlier this month signed off on a law which will accelerate the sale of the 2.0m hectares of land remaining unsold from the 4.7m hectares on state farms left over from Communist rule.

The move comes ahead of deregulation, imposed as part of Poland's entry into the European Union, under which the country will from May 2016 allow unrestricted land purchases by investors from the bloc, and from Iceland, Lichtenstein and Switzerland.

Rather than representing a sign of Warsaw's enthusiasm for land reform, the sell-off has left the investors fearful that it is trying to give domestic farmers a head start before foreign money arrives without restriction, US Department of Agriculture attaches in Warsaw said.

Indeed, one farm industry group, the Federation of Employers' Associations-Leaseholders and Agricultural Land Owners, has pledged to appeal the new law to EU courts in Strasbourg.

Large vs small

The smallprint of the land sales dictates that while current farmers on state-owned land will get first chance to buy the land they now lease, they will be able to buy only 70% of their holding.

The remaining 30% will be returned to the state for sale at auction.

Should leaseholders buy, a decision which must be made within three months, they will be ineligible for further purchases.

The legislation - which applies only to farms above 300 hectare and offers preferential payment terms - is viewed by critics as favouring the passage of farmland to smaller, domestic farmers before foreign investors - who must currently purchase as minority partners with a local investor – enter the market.

Farms are overwhelmingly skewed towards smaller enterprises, with government data showing just 27,000 farms larger than 50 hectares, many with foreign backers.

"Large farmers who are operating under long-term lease agreements with the state would be forced to liquidate a substantial portion of their holding," the attaches said.

'Elevated concern'

Indeed, the reaction to the law among producers and investors "has been of elevated concern", the attaches added.

"Some companies believe that they can restructure to divide operations into units less than 300 hectares to minimise productivity loss to the organisation.

"Other companies indicate that they may forego purchase of their leased land and scale back operations."

At a broader level, the budgetary pressures given as a reason for the accelerated land sales, "have both European and non-European companies now operating in Poland concerned over the safeness of their long-term investments in Polish agricultural production".

Farming major

Poland is one of the EU's largest agricultural farm states, ranking fourth in rapeseed output and third in grains, including top rank this season in oats, rye, sorghum and triticale, according to Coceral figures.

It has attracted investment from farm sector majors such as Archer Daniels Midland and Cargill, which operate trading and processing operations in the country, besides the likes of Irish-based Origin Enterprises, which owns a Polish agronomy chain.

Origin Enterprises also owns a stake in London-listed farm operator Continental Farmers, which manages land in Poland and Ukraine.
Original source: Agrimoney
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