cashed in Polish chips
Poland is very much at the forefront of countries planning
to join the EU early in the new millennium. Europe editor
Philip Clarke looks at how a Dutch chipping firm and a
British farmer are hoping to capitalise on this opportunity
ONE of the first tasks facing most westerners taking on farms in central and east European countries (CEECs) is shedding staff in a bid to improve efficiency.
For Dutch chipping outfit, Farm Frites, the problem has been rather the opposite, as it has had to double the labour force on its Polish farm, Bobrowniki, to cope with major improvement works and a much-expanded potato acreage.
Farm Frites moved into Poland in 1994. As Europes number three processor, it initially intended to set up a chipping factory only, and rely on local producers to help it supply a rapidly growing fast food sector.
"The country as a whole was producing 30m tonnes of potatoes – more than the EU put together. We did not think we would need to grow any ourselves," recalls Chris Lehmann-Barenklau, director of operations in Poland. "But we soon found that none of the local supplies were suitable for French fries, being too small and too round."
As such, the company had to find a farm of its own, within striking distance of the northern town of Lebork, where work on its state-of-the-art chipping factory was due to begin.
Bobrowniki was one of the 20% of Polish farms still owned by the state and put up for rent by the Agricultural Property Agency (APA) – a department of the treasury based in Warsaw. Farm Frites tendered, in competition with another Dutch farming company, eventually winning the lease for 3000ha (7400 acres) on a 15 year contract. Another 1000ha (2470 acres) was added in 1995.
"One of the many attractions of farming in Poland is the cheap rent," says Mr Lehmann-Barenklau.
Payment is based on quintals/ha of wheat. The land at Bobrowniki is valued at 4.7 quintals, equivalent to 470kg of wheat/ha. The actual price is fixed by the APA and this year has been set at about 450 zloty a tonne (£75/t), giving rise to a rent of £35/ha, payable in two instalments.
While farmers escape any income tax in Poland, they are charged a land tax of about 80-100 zloty a hectare (£14-£17/ha).
Having secured the land, attention then focused on turning it into an effective potato unit.
"In the first year we had major problems with couch grass, as well as suffering from low soil pH, a lack of nutrients and no irrigation," says procurement manager, Leon Boer. "Yields were very poor, with wheat doing just 3t/ha and potatoes 30t/ha, of which only 20t were useable."
The arrival of the Dutch also coincided with one of the hottest summers on record, which devastated quality and yield. This had severe implications for the new chipping factory, with predicted throughput halved to 35,000t.
To increase production, a big works programme was instigated, to improve weed control and soil structure. A new cropping plan was also introduced, based on a three-year rotation of cereals, potatoes and grassland (see table).
In the first year, 1200ha (2965 acres) of potatoes were grown, rising to 1600ha (3950 acres) by 1996, though this has since been cut back as more supplies for the factory have been grown on contract.
Investment in buildings and machinery has also been extensive, not to mention expensive.
"When we first came here, there was virtually nothing for potatoes," says Mr Boer. Since then, four new stores have been erected, each with a capacity for 12,000t. Fitted with 12cm foam insulation to counter the winter chill, and refrigeration facilities to contend with the scorching summers, the aim is to achieve a constant storage temperature of 8C (46F).
With three graders and conveyor lines – two from Climax and one from Netagco – plus another 10,000t store at the factory site 25 miles away, total investment in storage comes to about £3m.
A similar amount has also been spent on machinery. Polish Ursus tractors have been largely replaced by New Holland models for heavy-duty work such as ploughing, drilling and lifting. And seven axial flow Reekie potato harvesters allow 60ha (150 acres) a day to be cleared at harvest.
New planting, de-stoning and spraying equipment has also been bought (mainly from local representatives of west European manufacturers), as has a pivot irrigation system. Preferential interest rates, (of 5% compared with the 20% norm), were available for irrigation investments, though these dried up in 1998.
Part of the lease agreement with the APA was that Farm Frites should make no staff redundant for the first three years. That meant taking on about 100 employees.
But given the labour intensive nature of potato production, this has been increased to 130, with the equivalent of another 70 full time staff a year taken on as seasonal workers. "At peak times we can have as many as 250 people here, working about 85 hours a week," says Mr Boer.
Wages are set at about 800 zloty (£136) a month, though the employer has to pay the state 40% tax on top of this.
Each farm enterprise has a Polish and a Dutch manager, the Polish one to oversee day-to-day operations and the Dutch one to take care of strategic planning, though most important decisions are taken jointly.
Investment in proper equipment and staff has been instrumental in seeing potato yields increase to about 45t/ha (18.2t/acre), though varietal improvement has also played a part.
"We have tried many varieties," says Mr Boer. "But import restrictions and problems with registration make it difficult and expensive to bring in material from outside."
Bintje has been used extensively, however, though susceptibility to wart disease means this is now being forced out of the cropping plan. Similarly, US variety Russet Burbank, which accounts for 25% of the area, has a limited future as the management looks for greater disease resistance.
Instead, Farm Frites is now turning to varieties such as Fresco, Felsina, Asterix and Victoria. About 100ha (247 acres) a year is given over to seed multiplication from super-elite stock, which attracts the lowest level of import duty.
And, even though attitudes to foreign seed registration are easing, the company is also extensively involved in trialing new Polish varieties.
As the business has developed, increasing use has been made of other growers to meet the factorys healthy appetite for potatoes. There are 25 contractors, including 15 westerners, mainly Dutch, but also Scottish, German and Belgian farmers.
Together they account for 2750ha (6800 acres) of potatoes, an area which has been increasing by 20% a year as more west European farmers have been attracted to the country.
Prices are similar, or slightly better than those paid in Europe, says Mr Boer. "We are paying 20% more than in Holland, though that is for samples over a bigger (40mm) sieve."
The basic price is equivalent to 17fl/100kg (£50/t), with a 4fl (£12/t) premium for early August delivery. There is also a 1fl (£3/t) a month storage premium, taking the end season value to 26fl/100kg (£76/t).
Irrigated Russet Burbank supplies for McDonalds earn another 2fl/100kg (£6/t).
The company is still on the look out for more contractors, as demand continues to grow, and as it aims to spread its supplies over a wider geographic area to counter the risk of climate variability.
Having a ready-made market is a huge advantage for anyone thinking of investing in a new country, says Henry Wilkes of UK land management company, FPDSavills. He reports a "second wave" of farms coming to market in Poland and is putting together a consortium of British farmers to take on an arable unit to feed into Farm Frites.
But both FPDSavills and Farm Frites warn that farmers should not expect an easy life or instant profits. "Farming in Poland has many challenges," says Mr Wilkes. "But there are good potential rewards for those who put the work in. And with the prospect of EU membership in a few years time, there is also the opportunity to lock into uplifting capital values, both in terms of land and crop production."
With Farm Frites poised to double its capacity in the next few years, potatoes could provide the route for those looking for a new investment.
FARM FRITES IN POLAND
• Set up in 1994 as a 50:50 joint venture with rival Dutch potato company, Aviko. (Japans Mitsubishi also has a small shareholding.)
• Owns modern chipping factory at Lebork, in north Poland.
• Total investment of £27m, plus £3m in stores and £5m on farm.
• Throughput now at 140,000t of potatoes a year, producing 70,000t of chips.
• About 30% of supplies come from own farm at Bobrowniki, the rest from contracted farmers.
• Supplies 65% of Polish chip market.
• Aviko brand targeted at retail trade, Farm Frites for catering.
• 30% of output is exported, mainly to neighbouring countries.
• 25% of output goes to McDonalds. (There are 135 McDonalds restaurants in Poland alone.)
• Produces 24 hours a day, seven days a week.
• Employs 200 staff at factory, 130 permanent staff on farm.
Farm Frites 1999/2000 cropping plan
Winter wheat 1,593
Spring barley 400
Oilseed rape 97
Grass (rotational) 200
Grass (permanent) 100
Total population 39m
Total area 31m ha
Agricultural area 18.5m ha
GDP per capita $7800 (£4875)
Farmings share of GDP 5%
Food trade deficit $1bn
State farms 20%
Private farms 80%
Farm workforce 3.5m
Share of total workforce 25%
Cereals 26m tonnes
Potatoes 27m tonnes
Sugar beet 16m tonnes
Dairy 12bn litres
(3.6m cows, av yield 3350 litres)
Pigmeat (to abattoirs) 308,000t