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Vegetable prices will have to rise in Poland

2022-03-15 10:11

This is not good news for consumers, but next season vegetable prices in Poland will have to rise or vegetables may disappear from the offer, as their production will become unprofitable and farmers will go bankrupt if they do not raise prices. Indeed, even an increase in the price of vegetables (and fruit, of course) does not guarantee the maintenance of current production levels. There will certainly be a large proportion of producers who will leave the sector in the new economic reality.

This percentage will be greater if the current high inflation and such a sharp increase in costs as is currently occurring (see the increase in fertiliser prices by 500 per cent) continue. With such skyrocketing costs it is difficult to plan production even on an annual basis, let alone over many years. This increase in costs may set off a spiral of very unfavourable phenomena - prices will have to be raised to a level at least equalling inputs. This will certainly have an impact on demand, especially with inflation causing real impoverishment of society. And lower demand will force production to fall.

In addition, one of the consequences of the war in Ukraine is the blocking of grain exports both by Ukraine and by Russia. This means a jump in prices on this market, so those vegetable producers who have the conditions for this will move to this sector. It can also be assumed that the drop in production will be exacerbated by the fact that non-commodity farms will focus on diversified production for their own needs.

The weakening of the zloty and high production costs in other countries, as well as high transport costs, will make imported vegetables more expensive. This will give some support to domestic production, but it must be remembered that the complementarity of domestic and imported products is limited. On the other hand, Poland already has 1.5 million refugees from Ukraine, and there are likely to be even more. These people need to eat. And even if they receive food for free, someone has to pay for these products, because, as we know, there are no free lunches.

The question is, how much will this someone (meaning the state) be willing to pay for it and where will the money come from? Because if it comes from taxes, it means that we will pay for it ourselves. If it comes from borrowing, then we and our children will pay for it. Of course we need to help, but at the same time we need to prevent refugees from remaining on long-term 'welfare'. In Poland, there is a shortage of labour in many areas, for example in medical care (even basic care) and in agriculture. If these few hundred thousand Ukrainian women are able to work, then with the help of EU and American aid (which Poland deserves like a dog), it will be possible to avoid a collapse, and domestic demand may even strengthen instead of collapsing. However, even in this more optimistic scenario, new higher price levels will not be avoided.

 

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