Polish potential
Polish potential
Where can you find first-class arable land at £300-400 an acre, sell milling wheat at £100/t, rapeseed for £120/t, and deal with multiple buyers crying out for quality pre-pack potatoes and veg?
EVEN the best UK arable farmer is struggling to better 5% return on capital invested in agricultural activities this year. So 15-17% must sound like a pipe dream.
Yet, when myth is separated from reality its the level of return that can be achieved by the proficient arable farmer willing to take his chances just outside the EU – in Poland.
The upsurge of interest in farming behind the former Iron Curtain has levelled off in the last few years as farmers realised there were new difficulties in setting up and running businesses in many of the countries then restructuring. Land ownership uncertainty, lack of infrastructure to provide inputs or even sell produce, bureaucratic hold-ups and corruption were often blamed for deciding not to proceed with farm acquisitions in eastern Europe.
However, some of the myths about farming in eastern Europe are now being laid to rest. Poland, in particular, stands out for its economic restructuring and the opportunities that now exist in farming, according to Charles Whitaker, a partner at Brown & Cos Norwich office.
It may still not be possible to get same-day service when an imported tractor breaks down but the spare parts are usually available within 48 hours, he points out, dispelling former notions that eastern Europe lacks an agricultural infrastructure. In fact, for most inputs -except fuel – costs are likely to be lower in Poland, he says. Ammonium nitrate is around £65/t delivered, agrochemicals will cost the same or less than in the UK, and most machinery will work out slightly cheaper. Farm labour is around 10-15% of what it will cost in the UK.
Toss in purchase costs of £740-990/ha (£300-400/acre) for good wheat land valued at £6,175/ha (£2,500/acre) in East Anglia and you have the makings of a heady mixture that can produce returns on capital of 15-17%, adds Mr Whitaker.
There are current downsides that some potential farmers from the UK wont like. Under present rules, foreigners cannot own land directly but it is possible to come to a suitable arrangement with a Polish partner. There is also an essentially corruption-free bureaucracy which insists on everything being done by the book, particularly where imports of machinery or supplies are concerned. However it is relatively cheap to hire local staff to deal with these matters.
It is also undecided how much protection Poland will be allowed to retain for its agricultural products when the country is admitted to the EU in 2003-2005. Tariff barriers contribute to the £100/t wheat price and the £125-130/t fetched by oilseed rape from the 2000 harvest.
Nevertheless, Mr Whitaker is convinced that incoming farmers taking a long-term view can still expect much better returns in Poland than in the UK. This will come from a professional approach. Land is available to rent at under £37/ha (£15/acre) but the prospects on such land producing 4-4.5t/ha of milling wheat are much poorer than on the many thousands of hectares of prime land which is available.
Helping bolster the prospects for new farmers in Poland is the type of investment coming in from outside the country. This includes factories built by Walkers, McCains and Frito-lay, while multiples, including Tesco as well as European giants, are investing in supermarkets that demand the same quality and presentation as the typical UK branch. An improved internal economy means that there is a home market for quality vegetables and for pre-pack potatoes, unheard of five years ago, let alone the prospect of export sales once trade across the border into the EU is eased.
Brown & Co, which has a permanent office in Poland, is still getting interest from UK and Irish farmers in making the move. Those coming forward now are, however, different from five years ago when there was more spare cash in UK farming. Now they are more likely to favour hands-on involvement in farming in Poland rather than investing in someone elses business.
Mr Whitaker warns that there is a lot of land on the market in Poland but potential buyers must make sure they have access to an ample of supply of water in some areas. "We have a number of 2,000-3,000ha arable estates that could be bought for around £200-250 an acre for lightish brashy soils equivalent to our grade 3," he says.