Polish farmers' frowns not lifted by New Look

By bne IntelliNews November 13, 2014

Jan Cienski in Warsaw -


The fallout from the conflict in Ukraine, and Russia's growing isolation, is having a mixed impact on Poland - the EU's leading frontline state.

On the positive side of the ledger, Poland is starting to see an uptick in investor interest as business shies away from the growing risks to the east. The most recent example came from British clothier New Look, which announced on November 11 that it is pulling out of Russia - where it has 20 shops - and will close its six outlets in Ukraine, citing "political uncertainty".

Instead, the retailer plans to expand in China, as well as Poland. It currently has 11 locations in the latter, and plans to open four more by next spring.

But the negative impact of the fallout from the Ukraine crisis is much more apparent, especially in agriculture. Poland has been one of the hardest hit in the EU by Russia's agricultural embargo introduced in August, with apple growers losing their largest export market.

Now Polish farmers are increasingly worried about their Ukrainian counterparts flooding the EU with food thanks to the collapse in the value of the hryvnia and Brussels' decision to allow duty free import of some Ukrainian goods. The Ukrainian currency has lost about half its value over the last year. Few analysts expect any strengthening in the near future.

Among a long list items, Ukraine is allowed to export 950,000 tonnes of wheat and 36,000 tonnes of poultry to the European bloc without paying duty, reports the Puls Biznesu newspaper, citing PWC.

The issue for Polish farmers is that it costs them around PLN12 (€2.86) to produce a kilo of chicken; their Ukrainian peers can do the same at half the price. Even if the Ukrainians have to pay duty, their meat will still come in cheaper than that of the Poles.

With Ukraine hosting some of Europe's largest chicken processing plants, the Poles are probably right to be worried. "From the point of view of the processors this is obviously a good situation because they get cheaper raw materials, but from the point of view of producers it is really dramatic," Kazimierz Pazgan, head of Polish poultry producer Konspol, tells the newspaper.

The gloom gathering over Polish food firms is apparent in their stock prices. The Warsaw Stock Exchange's food-related index, WIG-Spozywczy, has fallen by more than 32% since the start of the year. Meanwhile, the broad WIG index has risen by 2% over the same period.

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