Monday, July 14, 2008

What I think I learned (Part I)...

Having spent last week in meetings and visits in Poland and Denmark, and several hours on planes returning, and finally all of Sunday figuring out what time it is, I can share some impressions and reactions from the whole exercise.


Poland and Polish immigrants are to the EU as Hispanic workers are to the US. They have supplied Ireland, Great Britain, Denmark, and other countries with skilled, energetic and above all cheap laborers, especially in the building trades. Hence the "Polish plumber" jokes.

That may be on the cusp of changing. As Poland's economy picks up steam, the need for such workers is rising at home, and wages are becoming more competitive. Poland has been a focus for foreign investment to capture their competitive wages and other lower costs as a result of accession to the EU. While they cannot meet the requirements to convert to the euro, the zloty has increased in value considerably (compared to the dollar).

Polish students have in past decades studied Russian as a second language, and the rising economic power of the their neighbor to the east is attracting many there for good jobs. The growing ties to Russia adds a new wrinkle to foreign affairs for both the EU and US, I believe. In the past few years a few more English speakers are common, making business easier to consider there for Western countries.

Their farming sector is struggling to adjust, but despite the enormous number of 8-10 acre farms and badly splintered land ownership, some very large operations are emerging. I toured one such farm - a former state research farm - where the previous director under the communist government somehow managed to not only continue to manage the farm, but also buy roughly half of the 6000 acres and continues to add to his share of the ownership each year. Go figure.

It's good to be high up in the Party, even as it is disappearing, it would appear.

On the road in central Poland, I was struck by the amount of maize (corn) being grown. While dry weather had taken a toll, it is obvious a growing source of corn for the Eu will be eastern Europe. However, their corn machinery technology was poor compared to ours. They still seem to be adapting small grain planting principles to corn, for example. I saw few double disk seed units such as below, mostly just old runner-type shoes.

Thanks to EU subsidies, young Polish farmers can buy a tractor for half-price, and understandably, the waiting list is about 15 month long. As you can imagine, the paperwork is considerable, but even with the bureaucratic legwork, it's good to be a tractor salesman in Poland. Looking ahead, I wonder how this injection of mechanical technology will impact farm consolidation. You can't just put far more efficient tools in farmer hands without pressure to expand. Since the land is not only chopped up into small farms, each farm can be owned by a myriad of owners, meaning either farmers must buy the land to rationalize the fields or work out some different cropping/rental schemes. My guess is this will happen over the next ten years, as producers are slowly coming to some free-enterprise solutions after years of simply doing what was ordered. We often forget how powerful "the way we do things" is for retarding even profitable change. The availability of alternative employment in the country is also an issue.

The arrival of CAP checks from Brussels has also frozen many producers into simply enjoying the good times, but the rewards to early, ambitious consolidators could be immense. Poland could lend itself easily to large scale agriculture, and I think it will not be as long in coming as many there feel.

We will doubtless be hearing more about about Poland in ag news, as their potential to rival France and the top EU ag producer is clear. But to me the more interesting comments concerned where the "next Poland" might be.

More anon.

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