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Cablegate: Impact of Rising Food/Commodity Prices - Poland

VZCZCXRO2037
RR RUEHKW
DE RUEHWR #0538/01 1211320
ZNR UUUUU ZZH
R 301320Z APR 08
FM AMEMBASSY WARSAW
TO RUEHC/SECSTATE WASHDC 6389
INFO RUEHKW/AMCONSUL KRAKOW 2079
RUEHBS/USEU BRUSSELS
RUEHRC/USDA FAS WASHDC 2039

UNCLAS SECTION 01 OF 02 WARSAW 000538

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EEB/TPP/ABT/ATP JANET SPECK
USDA/FAS FOR OCRA/CURTIS, SEIDBAND; OGA/CHAUDRY; OSFO/LEE,
CURTIS

E.O. 12958: N/A
TAGS: EAGR EAID ECON ETRD PGOV PL PREL
SUBJECT: IMPACT OF RISING FOOD/COMMODITY PRICES - POLAND

REF: SECSTATE 39410

1. (U) SUMMARY: Overall food prices in Poland have risen
about 7 percent in the past year, but are not reflected in
lower rates of consumption as wage increases topped 10
percent in the same period. A continuing increase in prices
could affect at-risk populations in poorer regions. Rising
food prices have had an effect on policy: the Polish
government announced its priority is food production rather
than biofuels. End summary.

---------------
Farm Production
---------------

2. (U) The increase in grain prices stimulated a greater
supply of grain in Poland. Farmers released last year's
grain stocks in response to the price incentive. In
addition, the Polish zloty has appreciated against both the
Euro and U.S. dollar helping to stimulate grain imports both
from within the EU and from other suppliers such as
Argentina. Despite high world commodity prices the strong
Polish currency has kept imported feeds, mainly soybean meal,
relatively inexpensive for Polish farmers. Higher prices for
major grains and rapeseed are expected to result in expanded
acreage in 2008 and 2009.

3. (U) Higher prices for feed grains have had a minor impact
on livestock production to date. There has been no impact on
pork prices due to the current oversupply of hogs in Poland.
In addition, Poland is importing cheaper pork from Denmark
and other EU countries. The effects on poultry prices have
been negligible as well due to sufficient supply and
relatively cheap pork, an easy substitute for consumers.
Later in 2008 the supply will diminish and increasing feed
grain prices should begin to raise meat prices. The
introduction of a potential GM feed ban in August 2008 could
have a major effect on animal production if the Polish
government does not delay its implementation.

-----------
Consumption
-----------

4. (U) According to the official data published by Poland's
statistical office from March 2007 to March 2008 food prices
increased 7 percent, while the general price and service
index increased 4.2 percent. Higher food prices are not
reflected by lower consumption because average wages
increased more than 10 percent over this same period due to
Poland's fast growing economy.

5. (SBU) The level of income and consumption in Poland is
very different between rural and urban areas. In rural areas
income levels remain much lower, but many of those are
involved with farming and therefore have access to cheaper
and self produced food. Poland does have pockets of poverty.
A food relief agency in Poland, The Foundation for Corporate
Responsibility, reports that Poland has the largest
percentage of children at risk for poor nutrition in Europe,
above 30 percent, or 3 million children, and if food price
increases continue it could have an effect on the children in
the poorer regions, such as northeastern Poland.

------
Policy
------

6. (U) In response to the rising world food prices, the
government of Poland has announced several times that its
priority is food production rather than grain-based biofuel
production. Poland will instead focus on the use of second
generation cellulosic biofuels from grasses and wood rather
than grain-based biofuels.

7. (SBU) The Polish government has also expressed a
willingness to delay to 2012 a GM feed ban scheduled for
implementation August 2008. If the Government of Poland and
the Polish Parliament are able to delay the ban the Polish
livestock industry will avoid dramatic feed-related price
increases.

8. (SBU) As an EU member, Poland enforces all of the
non-tarriff trade barriers introduced by the European Union.
In addition, Poland enforces its own GM seed ban, hindering
its own feed grain production. The Common Agricultural

WARSAW 00000538 002 OF 002


Policy (CAP) continues to heavily subsidize Polish farmers.
Poland will receive USD 5.7 billion from the European Union
in direct and rural development subsidies to farmers in 2008.
Despite high prices, support for the CAP remains strong and
Poland opposes major CAP reform.


ASHE

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