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Article

Changes in the Price of Food and Agricultural Raw Materials in Poland in the Context of the European Union Accession

by
Dariusz Kusz
1,*,
Bożena Kusz
1 and
Paweł Hydzik
2
1
Department of Computer Science in Management, Faculty of Management, Rzeszow University of Technology, Al. Powstańców Warszawy 12, 35-959 Rzeszów, Poland
2
Department of Quantitative Methods, Faculty of Management, Rzeszow University of Technology, Al. Powstańców Warszawy 12, 35-959 Rzeszów, Poland
*
Author to whom correspondence should be addressed.
Sustainability 2022, 14(8), 4582; https://doi.org/10.3390/su14084582
Submission received: 3 March 2022 / Revised: 7 April 2022 / Accepted: 8 April 2022 / Published: 12 April 2022
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Abstract

:
Shaping of prices of agricultural raw materials results from the impact of a wide range of factors that influence prices in different links in the marketing chain. Political changes, especially sudden ones, which abruptly changed farming conditions, were one of the reasons for the asymmetry in price transmission. The main purpose of the paper was to estimate the trends in changes in agricultural raw materials prices in comparison to the trends in food prices in Poland in two time frames, differing in political and economic conditions: before (1999–2004) and after Poland’s accession (2005–2019) to the European Union. It was found that the accession to the EU improved the situation of farmers in agricultural markets. There was a reversal of downward price trends in agricultural raw materials and their stabilization. In the years 1995–2005, for most of the prices of agricultural raw materials and food under the analysis, the differences between the trends were not statistically significant. This situation was consistent with the model of market operating under perfect competition. The trends in the prices of wheat, rolls, and bread, as well as the prices of livestock for slaughter-pigs and roast beef were the only exceptions. In turn, in the years 2005–2019 statistically significant differences between the trends in the prices of agricultural raw materials and food were recorded for wheat, bread, and flour; milk, butter, and cottage cheese; eggs and egg retail prices; as well as livestock for slaughter, cattle, and sausages. No statistically significant differences were found for the remaining relationships of the analyzed prices of agricultural raw materials and food. These data indicate a different level of price transmission depending on the product group.

1. Introduction

Price developments in agri-food markets are the subject of many analyses. The issue on the relationship between the prices of agricultural raw materials and the prices of finished products obtained from these raw materials plays a special role in these analyses. The literature on the subject discusses the issue of the price spread (the relation of finished products prices to purchase prices) and the mechanism of transmission of market signals between vertically and spatially integrated markets [1,2,3,4,5,6,7,8,9]. These analyses are of great theoretical and utilitarian importance. The analysis of the changes in the prices of agricultural raw materials and food is subject to the increasing interest of the public opinion in the whole world due to its possible influence on the situation of both agricultural producers and foods consumers. An increase in the level of food prices and their variability has a negative impact on protection of basic food needs. It is especially noticeable when it comes to the people in need and non-affluent societies. An increase of poverty levels, political insatiability, as well as the intensity of social conflicts might be an effect of the threat to stability, and sustainability of economic and social development [10,11,12,13,14,15,16,17,18].
Economic theory emphasizes the importance of the efficiency of the market mechanism in pricing of goods. The theoretical concept of the relationship between the prices in agricultural markets and food products was proposed by Gardner [19]. This model assumes equilibrium in three related markets: retail food, farm output, and marketing services and should be achieved in parallel and simultaneously, with the assumption of perfect competition. In such a situation, the differences between the prices of food and agricultural raw materials should result only from the costs of transforming one product into another. However, such a condition does not occur in reality. This would require perfect competition and an immediate flow of price information within a given marketing chain.
Differentiation of prices, deviating from those postulated by the theory, allow its verification and capturing the mechanisms of market failure. On the other hand, the analysis of the price transmission process allows the development of appropriate agricultural policy tools that enable an effective adjustment and evaluation of its productivity. Additionally, the price differentiation is used by market players in the process of making decisions on resource allocation and output mix decisions. The assessment of the course of price transformation is very often carried out for two markets: the agricultural raw materials market and the food market. This research concerns changes in trends in the prices of food and agricultural raw materials, as well as the symmetry of the transmission of market signals. The results of the research conducted in this area show that in the countries with a developed market economy, there is an increase in the price spread between agricultural raw materials and food, with a decreasing share of the agricultural producer in the price paid by the consumer. The widening price spread is seen as the rule rather than the exception [20].
The paper focused on vertical price relationships, mainly the assessment of the relationship between the prices of agricultural raw materials and retail prices of food produced from these raw materials. In the scientific literature the importance of research of price changes in the domestic markets is emphasized. The domestic price indices broadly follow world price movements, whereby changes of the domestic price indices may be lessened by the government policies. Furthermore, the changes in world market prices are not always transmitted into changes in the domestic prices due to a different level of transportation costs, changes in the exchange rates, and market failures such as imperfect information [21,22,23]. Moreover, domestic prices influence the poverty and welfare, as these are the actual prices that are paid by the consumers and received by the farmers, and the level of domestic prices will determine the stable and sustainable basis of the economic development. In the case of the analysis of the price changes in Poland, two time frames were taken into consideration: from 1995 to 2004, before Poland’s accession to the European Union (EU), and from 2005 to 2019, after the accession. In 2004, Poland joined the EU. The choice of these two-time frames allows the assessment of the impact of changes in the political and economic area on the process of price transformation in agribusiness. Previous analyses in the economic literature concerned the issues of market failure, redistribution of welfare between individual links in the marketing chain, and responses to cost shocks [20]. A large part of the literature on asymmetric price transmission concerning agri-food markets focuses its attention on statistical issues, and to a lesser extent on the causes underlying it [2]. The approach presented in the paper allows filling the research gap in terms of the impact of abrupt political changes and economic conditions on the process of price transmission in agri-food markets.
The main purpose of the paper was to estimate the trends in changes in agricultural raw materials prices in comparison to the trends in food prices in Poland in two-time frames: before and after the accession to the EU. The paper also points to the changes that have taken place in the scope of the impact of the common agricultural policy of the EU on the domestic prices of agricultural raw materials and food. It is assumed that Poland’s accession to the EU abruptly changed the political and economic conditions of the functioning of agriculture and food industry in Poland. During the accession period, significant changes were made in Poland in the agri-food sector, especially in the field of modernization and adaptation of the production processes and organizational structures to the requirements of the European Union market. However, there are still some differences when it comes to the production efficiency of the food industry, and the structural disadvantages of agriculture are noted (especially low level of agricultural farms concentration, agrarian fragmentation, and overemployment in agriculture), which make the agri-food sector ineffective [24]. The analysis of the functioning of the agri-food sector in Poland, which was undertaken in the paper, provides an opportunity to look through the prism of regional specificity. The analysis of the trends in the price changes of agricultural raw materials and food prices trends was conducted using the linear trend model.
Such an approach allows drawing attention to the issues of food and agricultural commodity prices from the perspective of consumers and farmers in terms of changing political and economic conditions. The analysis conducted also highlighted the impact of changes in the demand for agricultural raw materials and food resulting from free access to the EU food market. However, such an analysis may also be helpful in the context of the growing possibilities of using agricultural production in new industrial applications, including, among others, the production of renewable energy sources. The results of this analysis can also be used in shaping government policy in line with the need to ensure food security, both in terms of physical and economic access to food. A growing demand for agricultural raw materials may increase the risk of the possibility of ensuring food security or cause the necessity to intensify and improve the scale of agricultural production and increase pressure on the natural environment.

2. Theoretical Framework

Price theory plays a key role in neo-classical economics. Flexible prices are responsible for efficient resource allocation, and price transmission integrates markets vertically and horizontally. The mechanism of price transfer between markets separated in space and time, as well as within one marketing chain is the subject of interest of economists. The theoretical equilibrium models by Enke, Samuelson, and Takayama-Judge [25], which refer to the law of one price, are the starting point. Perfectly competitive market models imply the existence of fully proportionate price responses between markets. In the real world this principle is often violated, which is manifested in the asymmetry in price transmission. It consists of the fact that price responses in one market vary depending on whether prices in another market are rising or falling.
The causes of disturbances in the price transmission mechanism can be found in various areas. As Sexton [26] noted, agricultural markets were characterized by a large dispersion of farmers that were numerous and were price takers. This leads to a situation specific to oligopsony or monopsony. The extensive literature on the subject refers to non-competitive market structures as the causes of price transmission asymmetry [2,27,28,29,30,31,32,33,34]. In addition, farmers often do not have adequate warehouses to store raw materials, which reduces their market power in relation to processors and wholesalers. [26,35,36]. Additionally, the specificity of many agricultural products related to their perishable nature and the fact that most farmers do not have adequate warehouses and show capital shortages that prevent investments in warehouses cause weakening of the market position of farmers. In such a situation, the improvement of the market position of farmers is possible through appropriate agricultural policy mechanisms subsidizing the investment activity of farmers. Such a situation had to be dealt with in Poland after accession to the EU. Farmers could and still can benefit from programs to subsidize productive investment in agriculture [37], which can improve their competitive position in the market and bargaining power in relation to the other links in the marketing chain.
Adjustment and menu costs are other frequently mentioned causes of asymmetry in price transmission [2]. Adjustment costs arise when a company changes the quantities and/or prices of inputs and/or outputs. When the price of the final product changes, we are dealing with menu costs [38]. Other causes of price transmission asymmetry mentioned in economic literature include: search costs [39,40], firm size [41] and inventory management costs [42,43,44,45], government intervention [27,46], and information asymmetries [47,48].
Another of the reasons for the asymmetry in price transmission is also political changes, especially sudden changes in economic conditions. Such a situation occurred in the countries of the Central and Eastern Europe in 2004, when 10 countries (including Poland) joined the EU. The agriculture of these countries was covered by the Common Agricultural Policy of the EU and gained access to the European Single Market. The problem of market integration in the subject literature is considered from the point of view of spatial price transmission. However, there is a lack of research showing how the integration of domestic markets with markets with a larger geographic scope influences changes in the price level. The enlargement of the European Union in 2004 with 10 new countries was an opportunity for such research. The new members of the European Union gained free access to the EU market, unlimited by customs, duties, and other barriers. The inclusion of the Polish agricultural market in the structure of the European Union market allowed a more intensive influence of horizontal price transmission. The spatial analysis of price transmission has a long tradition in the literature on the subject. However, as Lloyd [34] noted, microeconomic analysis prevails. There is a clear need for in-depth research in the field of macroeconomic analysis.
Previous studies on the impact of macroeconomic, economic, or political changes focused on the impact of market turbulences on price transmission, e.g., price bubbles [49,50], inflationary pressure, of the general commodity price boom, which has often been characterised as the “perfect storm” [51,52], commercial policy measures, international food prices to domestic markets [7,53,54], exchange rates [55,56,57], and the level of economic development [58]. From the point of view of the analysis contained in the paper, the issue of the impact of the integration of domestic agricultural markets with world markets or with regional groups in the conditions of liberalization of international trade is particularly important. The research regarding the benefits and threats of regional economic integration is the subject of many studies that focus on the economic and non-economic effects [59]. The perspective of development in the broad sense is considered to be the basic economic benefit, and the reinforcement of the state group in the international area is the political benefit. With regard to the European integration, the following arguments are considered to be of significant economic importance: the market-size argument, the welfare argument, and the development funding argument. The regional economic integration, among other things, serves free and unfettered trade exchange. This favors the development of trade, and the positive effects are even more visible in the agricultural sector than in the nonagricultural ones [60]. Whereby, it also should be kept in mind that the trade policy has a direct impact on price formation, but also on horizontal and spatial price transmission. The removal or reduction of barriers to foreign trade can have a strong impact on price transmission. Empirical work and theoretical issues are the subject of many studies which show that most of the variations in world prices are transmitted and that they constitute the dominant component in the variations of domestic prices [61]. This is due to the effect of the Law of One Price. The econometric models that justify the Law of One Price show that price transmission is complete with equilibrium prices of a commodity sold in competitive foreign and domestic markets differing only by transfer costs, when converted to a common currency [62,63]. Research also emphasizes that on the one hand open economies and free trade enhance a country’s food security; however, such a situation may favor the transfer of price shocks from the world market to the domestic level [23]. The analysis of the effects of political reforms on price transmission in developing countries was carried out by Baffes and Gardner [64], where a different degree of world price changes transmission was found depending on the degree of integration of domestic markets with world markets. The analyses of price transmission on agri-food markets in the EU can be found in the study by García-Germán et al. [65]. The results of the research concerned the transmission of prices between the world agri-food market and the EU market and the influence of national currencies on the scale of price transmission. Consumer prices in different member states and categories of member states respond differently to specific world price indices, suggesting that there are disparities in the structure and the efficiency of their food markets. Additionally, the issue of food and agricultural commodity price volatility within the common market of the EU was discussed in other studies, where attention was drawn to the diversified scale of price transmission between the markets of the Member States, whose causes were sought in both macro and microeconomic factors. Attention was paid to the following determinants: differences in the functioning of the food chain, the composition of consumer food expenditure, the importance of imports, the degree of market integration, exchange rates, agricultural policy, and market structure and market power [66,67,68,69,70,71,72]. In the literature on the subject there is a lack of research on price changes in the conditions of liberal integration of the domestic market with regional markets. The analysis introduced in the work is a part of the research gap regarding changes in the prices of agricultural raw materials under the conditions of changes in the political and economic situation that results in the sudden liberalization of the agricultural markets. Furthermore, the literature on the subject includes research regarding the price transmission on the individual agricultural markets in Poland [73,74,75,76], and shows that there is a lack of research that concerns a broader view that involves a bigger number of agricultural and food markets, as well as interactions between them. Moreover, the research seeks answers to the question to what extent changes in the food prices translate into changes in the markets of agricultural raw materials, and to what extent the farmers can benefit from them. The results from such research can be helpful in shaping the agricultural policy of the counties that aspire to be accessed into the regional integration groupings, as well as in developing government policy tools that allow limiting the negative effects of integration or promoting it.

3. Materials and Methods

3.1. Study Area

Poland belongs to the countries of Central-Eastern Europe, which in the early 1990s began the process of transformation of the political system from a centrally planned to a market economy (Poland as the first in 1989). The transformation process highlighted several weaknesses resulting from poor efficiency in the use of production factors in the centrally administered economy and its maladjustment to market-oriented economies. Additionally, the agriculture the transition period featured a weakness resulting from defective agrarian structure and socio-professional and technological backwardness compared with Western European countries. The introduction of market principles to the Polish economic system forced on farmers a need to adapt to the new reality to cope with international competition. The year 2004 was another challenge for Polish agriculture modernization. It was the moment of Polish accession to the EU and the ensuing the need to adapt agricultural production to EU standards. The accession of Poland to the EU allowed the access of agri-food products to the large EU market. This situation resulted in an increase in the demand for Polish agri-food products in the common market of the EU. The Polish food industry took advantage of this situation, significantly increasing the level of exports from year to year, maintaining, since 2004, the growing positive balance in foreign trade in agri-food products. The main target market for agri-food products from Poland are EU countries (in recent years this accounts for about 80% of exports). Since the start of the transformation process, the changes in agriculture in Poland have been considered beneficial but slow [77,78]. Currently, the main problem of Polish agriculture is an excess of population working in agriculture, resulting in low efficiency of labor utilization and a defective labor relationship in relation to the other two factors of production: land and capital [79].

3.2. Data

The statistical data from the Central Statistical Office of Poland for the years 1995–2019 were the empirical material. The selection of the length of time resulted from availability and comparability of the data. The data from before 1990 (due to the different economic system) are not comparable with the data after 1990. In turn, the first years of political transformation in agriculture were characterized by the need to carry out measures to adapt to new economic conditions, which also hampers the comparability of data. In the analysis carried out in the work, the data on agricultural production were and the prices obtained by farmers for sold agricultural products and the prices of selected food products were used. The analysis applied constant prices of 2019; annual average prices were considered, converting current prices for fixed prices with inflation. The analysis included agricultural products with a significant share in the sold production in agriculture: cereal, pork, and cow’s milk and basic food products manufactured based on these agricultural products.

3.3. Method of Data Analysis

The existing empirical literature regarding price transmission indicates the existence of many econometric models that are used for its analysis. Frey and Manera [80] proposed an exhaustive classification of asymmetries into eight categories, namely contemporaneous impact, distributed lag effect cumulated impact, reaction time, equilibrium and momentum equilibrium adjustment path, regime effect, and regime equilibrium adjustment path. These authors indicated the advantages of the relative merits of the most popular econometric models for price asymmetries, namely autoregressive distributed lags, partial adjustments, error correction models, regime switching, and vector autoregressive models. The application of the linear regression is also common in researching trends in the prices of the agricultural raw materials [81,82,83,84].
In this paper, the trend model was used to describe the price changes:
y i t = β i 0 + β i 1 t + ε i t
where: yit—observed value of i-th price index at time t, βi0—the intercept of the trend line, βi1—the trend coefficient (the slope of the trend line), t—the time variable, εit—the error term of i-th price equation at time t. The problem of serial autocorrelation is solved by employing the generalized least squares methods using the Prais-Winsten procedure [85]. This procedure is particularly effective in the case of short time series [86,87], as is the case of this research.
The hypothesis adopted in the study is: accession of Poland to the EU and the free access of Polish agri-food products to the EU market resulted in a change in trends in the prices of agricultural raw materials and food. The effects of the change in the political and market situation for the Polish agri-food sector are mainly manifested in the observed time difference in the trends describing the changes in the prices of the final food product and price changes of raw materials which constitute the main component of the food product. Therefore, in the same time interval: (i) the price of agricultural raw material (e.g., grain) increases in the period faster than the price of the product made from this material (e.g., bread) or (ii) the price of the raw material decreases and the price of the product prepared from this material increases, or (iii) the price of the raw material grows as well as the price of the product manufactured from this material but at a greater pace. Statistically, this means that the coefficients βi1 should be significantly lower for the equations that describe the trend of the development of the raw material prices compared with βi1 rate equations describing the trend of development of the price of the product. This hypothesis was tested using statistical test where the null hypothesis that assumes the difference between the above defined trend coefficients equals zero, and was tested against the alternative hypothesis that this difference is different from zero. The test statistics in this case are [88]:
t = b 1 − b 2 S b 1 2 + S b 2 2
where: b1, b2—the βi1 estimators of the trend lines in raw material and product equations respectively, S b 1 2 —the variances of the above defined estimators. That statistic has t-Student distribution with n–4 degrees of freedom (n is the number of observations). The null hypothesis is rejected when the probability of type I error (p-value) is smaller than the critical value (usually it is 0.05 or 0.1).

4. Results

4.1. Changes in the Agriculture in Poland after Accession to the EU

Agriculture in Poland is subject to constant adaptation processes. The determinants of these processes are complex and determined by many factors. One of these factors are the political events that have occurred in the last few decades. The first one was the systemic transformation (from a centrally planned economy to a free market economy) in the early 1990s. Poland, as well as other countries of the former Eastern Bloc, at the beginning of the 1990s were in a deep recession and a decline in industrial production—GDP per capita and PPS in Poland accounted for only 35.7% of the level of Germany [89]. The second was the accession to the EU, which resulted in favorable economic changes in the newly admitted countries [90]. The integration meant the reconstruction of the entire institutional environment of the agri-food sector and allowed a quick modernization of this sector and facilitated the access of Polish producers to the EU agri-food markets. When analyzing the value of the gross agricultural output and the final agricultural output, it was found that from 1995 to 2004 there was a downward trend (Figure 1). After Poland’s accession to the EU, this trend was reversed. Similarly, the gross added value in the agriculture after 2004 was characterized by an upward trend, which indicates an improvement in the income situation in agriculture and created opportunities for further modernization of this sector. The level of agricultural income is one of the main factors determining investments in agriculture, and these in turn affect the level of competitiveness of farms and their further development opportunities [91].
Manifestation of changes taking place in agriculture related to the application of new solutions in the field of farm organization, new techniques, and production technologies is, among others, an increase in the production volume and an increase in the efficiency of agricultural production. When analyzing the cereal yields in Poland (Figure 2), a clear progress can be seen. The five-year average for the period 2015–2019 of cereal yields (38.12 dt/ha) was 28.3% higher than the five-year average for the period 1995–1999 (29.7 dt/ha). A similar tendency was also noted in the case of milk yield from one cow (Figure 3). On average, in the years 1995–1999, 3351.2 kg of was were obtained from one cow, and in 2015–2019 it was 68.3% more (5639.0 kg of milk from one cow). An increase of the production of eggs from one laying hen was noted (Figure 3), whereby the average egg production per laying hen in 2015–2019 was higher by 29.2% than in 1995–1999. The production of milk and livestock for slaughter per 1 ha of agricultural land also showed an upward trend (Figure 2). In the years 2015–2019, the production of livestock for slaughter animals per 1 ha of UAA was 103.9% higher than the average in 1995–1999, while the production of cow’s milk per 1 ha of UAA was 42.5% higher than in 1995–1999. Similarly, the value of final agricultural production obtained for 1 ha of UAA in the analyzed period showed a clear upward trend (Figure 4). In the years 2015–2019 it was higher by 240.5% than in the years 1995–1999. The increase in land productivity should be considered as an important aspect of changes taking place in agriculture, especially in the aspect of decreasing agricultural land resources, both in Poland and worldwide. The process of modernization of agriculture can also be considered from the point of view of demographic trends related to the increase in the world’s population and the need to provide adequate amounts of food. Considering the global food needs, it is estimated that by 2030 the production of cereals should increase by 50% and meat by 80%. The growing demand for energy resources from agriculture should be also added to this.
When analyzing the data on the production volume per capita in Poland, an increase in the level of physical food safety was noted (Figure 5 and Figure 6). This should be considered as a positive aspect of the ongoing process of modernization of agriculture in Poland, manifested in the improvement of the standard of living of citizens. The average consumption of food and non-alcoholic beverages in the years 1999–2019 was characterized by an upward trend (Figure 7). On the one hand, it resulted from the increase in the level of wealth, but also from the fact that the greater availability of agricultural raw materials and food in the market allows us to meet the growing demand for food. In developed countries and in most countries that are still developing, the issue of food safety was resolved thanks to technological progress. The agriculture of the industrialized countries increased its production capacity through the modernization process and was able to generate a production far exceeding the capacity of the internal market. This situation, apart from the undoubted benefit related to the increase in food security of citizens, the possibility of providing agricultural raw materials for energy purposes, also generates threats. It manifests itself in the excessive access of consumers to food, which may lead to health problems resulting from obesity. However, attention should also be paid to the aspect of the impact of the increase in the amount of agricultural production in the natural environment and the over-exploitation of resources. The growing volume of production in Poland results not only from the growing demand for agricultural raw materials in the country, but also from the growing demand on the part of international markets. This is reflected in the international trade in agri-food products. Since 1995, Poland has increased exports of agri-food products almost eighteen times, and imports increased almost ten-fold (Figure 8). Such a large increase in exports compared with imports made it possible to manage the increase in the supply of agricultural raw materials on international markets. It is also worth mentioning that in the years 1995–2002 Poland had a negative balance of international trade. Poland’s accession to the EU significantly increased the export possibilities to the EU markets, and since 2003 Poland has recorded a continuously growing positive balance in international trade in food and agricultural raw materials.

4.2. Changes in the Level of Agricultural Commodity Prices and Food Prices before and after Poland’s Accession to the EU

An increase in productivity in agricultural production and an increase in food security can be observed in Poland. This may result in changes in the level of prices obtained by farmers for agricultural products and prices paid for food. Figure 9, Figure 10, Figure 11, Figure 12, Figure 13 and Figure 14 show changes in trends in constant prices for basic agricultural raw materials in the period from 1995 to 2019. There is a clear change in price trends after 2004, i.e., the year of Poland’s accession to the EU. The change in political conditions and access to the agricultural markets of the European Union inhibited the downward trends in the prices of agricultural raw materials and contributed to the improvement of the economic situation of farmers, which is reflected in the increase in gross value added in agriculture (Figure 1).
In the further part of the paper, a statistical analysis of trends in agricultural raw materials prices and trends in food prices for the years 1995–2019 was conducted, divided into two sub-periods: the first was 1995–2004 and the second 2005–2019 (Table 1). This division resulted from the changes observed in trends in agricultural raw materials after Poland’s accession to the EU (Figure 9, Figure 10, Figure 11, Figure 12, Figure 13 and Figure 14).
In the case of wheat and food products in which wheat is used, it was observed that the average annual rate of decline in wheat prices in the period 1995–2004 amounted to bR = −6.413%, while the prices of bread, rolls and pasta increased (the annual average of bread by bp = 6.534%, rolls with bp = 2.1559%, pasta bp = 2.2795%, respectively) (Table 1). The differences between the slope of the trend for wheat (bR) and of bread, rolls, and pasta (bp) were statistically significant (p-value ≤ 0.05). This indicates that, in the case of these products, farmers did not benefit from the increase in food prices (Table 2). The surplus was captured by the remaining links of agri-business. On the other hand, the prices of flour showed a downward trend (bp = −5.468%), while the trend of changes in the price of flour was downward, but not significantly different from the trend of changes in the prices of the product (p-value = 0.302). In turn, in the subsequent period from 2005 to 2019, wheat prices were characterized by no trend (bR = 0) (Table 3). Similarly, in the case of the price of rolls and the price of pasta, no changes in the trend were recorded (bp = 0). However, in the case of bread prices (bp = 4.6465%) and flour prices (bp = 1.6686%), there was an upward trend (Table 3), higher for bread than for flour. In the case of these two products, bread and flour, changes in their prices compared to stable wheat prices meant that farmers did not benefit from the increase in their prices (Table 2). The differences between the trend slope coefficients for wheat (bR) and bread and flour (bp) in 2005–2019 were statistically significant (p-value ≤ 0.05). In the case of livestock for slaughter—cattle prices in 1995–2004, the raw material was characterized by an average annual downward trend (bR = −3.686%), while retail prices of roast beef showed no trend (bp= 0). The differences between the trend slope coefficients for livestock for slaughter—cattle and roast beef were statistically significant (p-value ≤ 0.05), i.e., farmers did not benefit from the difference in trend changes (Table 2). In the period from 2005 to 2019, the situation clearly changed. Both the average annual trend in the price of livestock for slaughter—beef (bR = 1.7526%) and roast beef (bp = 2.8722%) showed an upward trend, but the difference between the trend slope coefficients for livestock for slaughter—beef and roast beef were not statistically significant (p-value = 0.056688). In this case, it can be said that the difference between the trend slope was significant at p= 0.1. The higher upward trend in roast beef prices than the price received by farmers for livestock for slaughter—beef indicated that the agri-food processing sector and trade benefited from these changes to a greater extent. The average annual trend in the prices of milk (raw material) in the period 1995–2004 showed a downward trend (bR = −1.129%), and so did the prices of dairy products, including butter (bp = −2.165%), milk-retail prices (bp = −3.608%), cottage cheese (bp = −2.285%), cheese (bp = −2.399%). The differences between the slope of average annual trends for milk-raw material (bR) and butter, milk-retail prices, cottage cheese, and cheese (bp) were statistically insignificant (p-value > 0.05). This points to the concurrency of these trends. In this case, decreasing trends in agricultural raw materials and dairy products indicate an improvement in consumer welfare and an increase in the availability of these products (provided there is no decrease in household income). In the next period, 2005–2019, the situation changed. In the case of milk prices—raw material, no trend was recorded (bR = 0), similarly for cheeses (bp = 0). In the case of butter (bp = 3.1862%) and cottage cheese (bp = 0.5943%) an upward trend was noted, and the differences between the slope of the trend for milk—raw material (bR) and butter and cottage cheese (bp) were statistically significant (p-value ≤ 0.05), which meant that farmers did not benefit from this change in food prices (Table 2); the surplus was intercepted by the remaining cells of agribusiness.
The analysis of the average annual trends for eggs—raw material and eggs—retail prices showed that in the years 1995–2004 the trends in price changes were decreasing, but the difference between the slope of the raw material trend (bR) and the retail product (bp) was statistically insignificant (p-value ≤ 0.05) (Table 1). In the following period from 2005 to 2019, there was no trend in the prices of eggs—raw material (bR = 0), and in the case of eggs—retail prices, there was an upward trend (bp= 2.189%). The differences between the slope of the annual average trend for eggs—raw material (bR) and eggs—retail prices (bp) were statistically significant (p-value ≤ 0.05) (Table 3). This indicates that the growing trend of retail prices of eggs did not translate into an increase in benefits for farmers (Table 2).
In the further analysis, the attention was drawn to the average annual trends in the prices of live poultry and poultry meat. In the years 1995–2004, both raw material prices (bR = −5.345%) and retail prices of poultry meat (bp = −5.446%) showed a downward trend; however, the difference between the raw material (bR) and retail product (bp) trend direction coefficients were statistically insignificant (p-value > 0.05) (Table 1). On the other hand, the situation changed in the period from 2005 to 2019: the trends of the decline in retail prices and raw material prices stopped, and prices did not change (both bR = 0 and bp = 0) (Table 3). In the case of livestock for slaughter—pig prices, the average annual downward trend in 1995–2004 amounted to bR = −3.713%, and the prices of food obtained from livestock for slaughter—pigs showed a downward trend, but with a different intensity (boneless meat bp = −5.341%, boneless loin bp = −5.342%, sausages bp = −2.758%, ham bp = −3.646%, sausage bp = −2.321%) (Table 1). Whereby, the differences between the trend direction coefficients for raw material prices (bR) and retail prices of pork products (bp) were statistically insignificant (p-value > 0.05) (Table 1). In the following period from 2005 to 2019, the average annual downward trend for livestock for slaughter—pigs from 1995 to 2004 turned into no trend, i.e., the price situation improved for farmers. In the case of food products, no average annual trends in price changes were recorded (Table 3). The exception are sausages whose prices in the period from 2005 to 2019 showed an average annual upward trend (bp = 3.3534%). The difference in the directional coefficients of the average annual trends in livestock for slaughter—pig prices and sausage prices were statistically significant (p-value ≤ 0.05) (Table 3). That is, the increase in sausage prices in this period generated benefits for farmers (Table 2).

5. Discussion

The relationships between the prices of the agricultural products analyzed and the prices of food indicate the impact of changes in the political and economic situation in Poland resulting from the accession to the EU. This accession assumed, among others, the liberalization of trade between Poland and other EU members. In such a situation, there are political difficulties and adjustment costs, which may adversely affect the situation on individual markets of the candidate countries, especially in agricultural markets, which are usually characterized by the lowest level of liberalization. The costs of adapting these markets to the new situation can be minimized on the condition of full liberalization of markets—not only agricultural markets, but also non-agricultural markets [92]. Such a situation occurred in Poland, where, after accession to the EU, the principle of the free movement of goods became applicable. The Polish market, including agricultural markets, has become more open to trade with EU countries. Opening all markets to the free movement of goods could help to neutralize the weakness of the agricultural sector [79] compared with non-agricultural sectors and facilitate the process of adapting agriculture to the new economic situation. When analyzing the trends in prices of agricultural products in the period before and after Poland’s accession to the EU, it can be clearly noticed that the accession to the EU improved the situation of farmers on agricultural markets. The downward trends were reversed and stabilized. This was especially visible in the beef market, where the situation after the accession was even more favorable for farmers. The downtrend turned into an uptrend. This is due to the significant increase in Polish beef exports. Comparing these trends with the data on gross value added in agriculture, a positive correlation can be clearly noticed. After Poland’s accession to the EU, an improvement in the level of income in agriculture was noted (Figure 1). In the further research, attention should be paid to the extent to which these relationships are statistically significant, and to what extent it is the result of the common agricultural policy of the EU, and how big the effect of changes in trends in agricultural raw material prices is.
In the period analyzed, an increase in the efficiency of agricultural production in Poland was found. According to the theory of the technology treadmill [93] in agriculture of the developed countries, there should a decrease in the agricultural income, but the data analysis did not confirm this. Likewise, Czyżewski et al. [94] noted that the technology treadmill effect has not been observed in the agriculture of EU countries since the mid-nineties. It is certainly a positive effect of the common agricultural policy of the EU, but also an effect related to the openness of the EU agricultural market to a free trade for the member states. The analysis of these relationships may also be helpful in terms of new possibilities of using agricultural raw materials for energy production. Increasing the demand for agricultural raw materials can significantly contribute to improve the income situation in agriculture, but it does not have to disturb food security in economic terms and physical access to food, provided that agricultural productivity progresses. Under such conditions, agricultural policy should promote scientific research into technical progress in agriculture conducive to increasing productivity, provided that the negative impact of agricultural production on the environment is limited.
On the other hand, when comparing the trends in the prices of raw materials and retail prices of food, it can also be noticed that in the case of the prices of flour, roast beef, dairy products, eggs, poultry, meat, and pork products, the decreasing trends changed their return to an increasing or no trend. This may adversely affect consumer welfare. Of course, this requires further research to what extent this situation worsened access to food for consumers. It seems that according to Engel’s law, if consumers become richer, then the expenditure on food as a percentage of total consumer spending decreases [95]. For this reason, increasing food prices should not negatively affect consumer welfare. In the scientific literature it is emphasized that after the period of price stabilization from the year 2007, the world recorded a significant increase in the food prices [65,67,96]. In Poland this situation varied. At the same time, the agricultural raw materials markets (expect beef) noted no trend, while in the food markets it was product-dependent and there was no trend or upward trend. This indicates that integration with the EU structures in some of the markets influenced the inhibition of the upwards trends, which from the point of view of the consumers was beneficial, though the farmers could lose out on it.
It is also worth paying attention to the vertical transmission of prices between the prices of agricultural raw materials and food. In the years 1995–2005, for most of the analyzed prices of agricultural raw materials and food prices, the differences between the trends were not statistically significant. This situation is in line with the model of a perfectly competitive market, where there is a proportional price response between the markets. The only exceptions were the trends in the prices of wheat, rolls, and bread, as well as the prices of livestock for slaughter—beef and roast beef. In turn, in the years 2005–2019, statistically significant differences between the trends in the prices of agricultural raw materials and food were recorded for wheat, bread, and flour; milk, butter, and cottage cheese; eggs and egg retail prices; as well as livestock for slaughter—pigs and pork frankfurters. No statistically significant differences were found for the remaining relationships of the analyzed prices of agricultural raw materials and food. These data indicate a different level of price transmission depending on the product group. These data are not conclusive. They indicate that the free market mechanism in particular markets is subject to a greater or lesser degree of disturbance in the process of price transmission. Such a relationships are also emphasized in his research [65,66], where the relationships between prices of agricultural commodity and retail prices are diversified.
The research also revealed the mechanism of the so-called the price spread, i.e., the difference between the retail (wholesale) price of the final food product and its value as an agricultural raw material—the price paid to the farmer for an equivalent product size [19]. As a result of the price spread, the share of processing and trade in the final value of the food product increases. As a result, there is a gap between the amount of expenditure on food by end consumers and the value of agricultural products, which are the raw materials to produce food products. There is a corresponding gap between the final price of a food product and the price of agricultural raw material [97]. In the case of the data analyzed, such a situation occurred both in the period 1995–2004 and 2005–2019. It did not apply to all products, but only to selected ones. In the period 1995–2004, these were wheat, bread, rolls, and pasta as well as livestock for slaughter—beef and roast beef, and in the period 2005–2019 it was a larger group of products: wheat, bread, and flour; livestock for slaughter—pigs and roast beef; cow’s milk, butter, and cottage cheese; eggs; and livestock for slaughter—pigs and pork frankfurters. In these markets there was a transfer of economic surplus from farmers to agri-food processing and trade. Farmers do not benefit from the growing difference between the trend in food prices and the prices of agricultural raw materials. The problem of the widening price gap in agriculture is well known, is timeless, and results from market failure. This phenomenon has a strong impact on the allocation of the economic surplus in agribusiness, preventing farmers from reaping the benefits of increased productivity [98]. In the authors’ own research, the phenomenon of intercepting the economic surplus by non-agricultural agribusiness cells did not occur in all agricultural markets. However, after the accession to the EU, among the markets analyzed, the number of food markets with such a situation increased. This may be the result of the declining market power of farmers in relation to entities operating in food markets. In the remaining links of agribusiness, these entities may concentrate, and market structures may be oligopolized. However, this should be verified in further research. This section is not mandatory but can be added to the manuscript if the discussion is unusually long or complex.

6. Conclusions

In the paper, the analysis of the changes in the prices of agricultural raw materials and food prices against the changes in the political and economic situation in Poland resulting from the accession to the European Union was conducted. It was found that Poland’s accession to the European Union in the analyzed agricultural and food markets influenced the changes in the trends. There was a reversal of downward trends and their stabilization or growth. This should positively affect the income situation of farmers, but at the same time adversely influence the wealth of consumers. It requires a further analysis regarding the changes in the agricultural income, as well as the influence of an increase of the prices on food security of consumers. The changes that occur in the price trends may also result from or cause changes in the production structures in agriculture and in food industry as well as in the retail, which should be the subject of further research. The diverse relationships between agricultural commodity prices and retail prices were found. The results from these analyses were ambiguous. Further research in this field should concern the changes in food consumption pattern and its influence on changes in price level, but also show the effect of the increasing so-called price spread. The increasing effect of price spread may be a factor that stimulates the changes in the production structures in agriculture, which emphasize the importance of the research in that area.
The results obtained from the research can be used in the process of agricultural policy programming, both at the level of individual countries and at the EU level, among others in the context of designing the EU enlargement and in constructing national policies aimed at stimulating the agricultural market, food security, and optimization of household costs. They are of particular importance in the production planning process and in the stimulation of the development of the agri-food production sector. Taking into account the dynamic changes in the environment of the agricultural sector, attention should be paid to the need of continuation of the undertaken research, especially in the aspect of monitoring food and economic security.

Author Contributions

Conceptualization, D.K. and B.K.; methodology, D.K., B.K. and P.H.; formal analysis, D.K., B.K and P.H.; investigation, D.K., B.K. and P.H.; resources, D.K. and B.K.; data curation, D.K., B.K. and P.H.; writing—original draft preparation, D.K., B.K. and P.H.; visualization, D.K., B.K. and P.H.; supervision, D.K.; project administration, D.K.; funding acquisition, D.K., B.K. and P.H. All authors have read and agreed to the published version of the manuscript.

Funding

This research received no external funding.

Institutional Review Board Statement

Not applicable.

Informed Consent Statement

Not applicable.

Data Availability Statement

Not applicable.

Conflicts of Interest

The authors declare no conflict of interest.

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Figure 1. Trend of changes in the value of gross agricultural output and gross value added in 1995–2019 (constant prices, 1995 = 1).
Figure 1. Trend of changes in the value of gross agricultural output and gross value added in 1995–2019 (constant prices, 1995 = 1).
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Figure 2. Trend of changes in the production volume of selected products per 1 ha of UAA in the years 1995–2019 (1995 = 1).
Figure 2. Trend of changes in the production volume of selected products per 1 ha of UAA in the years 1995–2019 (1995 = 1).
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Figure 3. Trend of changes in milk and egg production efficiency in the years 1995–2019 (1995 = 1).
Figure 3. Trend of changes in milk and egg production efficiency in the years 1995–2019 (1995 = 1).
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Figure 4. Trend of changes in final agricultural output per 1 ha UAA in 1995–2019 (constant prices 2019, 1995 = 1).
Figure 4. Trend of changes in final agricultural output per 1 ha UAA in 1995–2019 (constant prices 2019, 1995 = 1).
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Figure 5. Trend of changes in milk and meat production per capita 1995–2019 (1995 = 1).
Figure 5. Trend of changes in milk and meat production per capita 1995–2019 (1995 = 1).
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Figure 6. Trend of changes of gross agricultural output and final agricultural output per capita in 1995–2019 (constant prices 2019, 1995 = 1).
Figure 6. Trend of changes of gross agricultural output and final agricultural output per capita in 1995–2019 (constant prices 2019, 1995 = 1).
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Figure 7. Trend of changes of average monthly expenditures on consumer goods and services per capita in households—food and non-alcoholic beverages in 1999–2019 (constants prices 2019, 1995 = 1).
Figure 7. Trend of changes of average monthly expenditures on consumer goods and services per capita in households—food and non-alcoholic beverages in 1999–2019 (constants prices 2019, 1995 = 1).
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Figure 8. Trend of changes in the value of exports and imports of agri-food products in the years 1995–2020 (1995 = 1).
Figure 8. Trend of changes in the value of exports and imports of agri-food products in the years 1995–2020 (1995 = 1).
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Figure 9. Changes in wheat prices (constant prices from 2019).
Figure 9. Changes in wheat prices (constant prices from 2019).
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Figure 10. Changes in the prices of livestock for slaughter—pigs (constant prices from 2019).
Figure 10. Changes in the prices of livestock for slaughter—pigs (constant prices from 2019).
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Figure 11. Changes in the prices of livestock for slaughter—cattle (constant prices from 2019).
Figure 11. Changes in the prices of livestock for slaughter—cattle (constant prices from 2019).
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Figure 12. Changes in milk prices; prices obtained by farmers (constant prices from 2019).
Figure 12. Changes in milk prices; prices obtained by farmers (constant prices from 2019).
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Figure 13. Changes in prices of livestock for slaughter—poultry; prices obtained by farmers (constant prices from 2019).
Figure 13. Changes in prices of livestock for slaughter—poultry; prices obtained by farmers (constant prices from 2019).
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Figure 14. Changes in egg prices; prices obtained by farmers (constant prices from 2019).
Figure 14. Changes in egg prices; prices obtained by farmers (constant prices from 2019).
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Table
Table 1. An analysis of trends in changes in the prices of food and agricultural raw materials for the years 1995–2004.
Table 1. An analysis of trends in changes in the prices of food and agricultural raw materials for the years 1995–2004.
ProductbRbPSbRSbPtt_krp-Value of the Difference Test
Wheat (Raw Material, Prices Obtained by Farmers) and Wheat-Based Food (Retail Prices)
Bread−0.064130.0653430.0134270.02363−4.7638−1.85950.001
Roll0.0215590.0134270.01026−5.0708−1.85950.000
Flour−0.054680.0134270.011267−0.5388−1.85950.302
Pasta0.0227950.0134270.004736−6.1052−1.85950.000
Beef (Raw Material, Prices Obtained by Farmers) and Roast Beef (Food, Retail Prices)
Roast beef−0.0368600.0125980−2.9256−1.85950.010
Milk (Raw Material, Prices Obtained by Farmers) and Dairy Products (Retail Prices)
Butter−0.01129−0.021650.0084960.0056431.0158−1.85950.830
Milk (retail prices)−0.036080.0056430.0091972.2975−1.85950.975
Cottage cheese−0.022850.0056430.0062421.3746−1.85950.897
Cheeses−0.023990.0056430.0047241.7263−1.85950.939
Eggs (Raw Material, Prices Obtained by Farmers) and Hen Eggs, Fresh (Retail Prices)
Eggs−0.05524−0.034870.0109590.012442−1.2287−1.85950.127
Poultry (Raw Material, Prices Obtained by Farmers) and Poultry Meat (Retail Prices)
Poultry−0.05345−0.054460.0138510.011330.0565−1.85950.522
Pork (Raw Material, Prices Obtained by Farmers) and Pork Products (Retail Prices)
Boneless meat−0.03713−0.053410.0096280.0081171.2929−1.85950.884
Pork loin b.k−0.053420.0096280.0081171.2929−1.85950.884
Pork frankfurters−0.027580.0096280.004685−0.8919−1.85950.199
Ham−0.036460.0096280.007842−0.0538−1.85950.479
Sausage−0.023210.0096280.005363−1.2629−1.85950.121
Table
Table 2. A comparison of trends in raw materials and products.
Table 2. A comparison of trends in raw materials and products.
Raw Material (Prices Received by the Farmer)Food Product (Retail Prices)Type of Trend 1995–2004Type of Trend 2005–2019
Raw MaterialProductConclusionRaw MaterialProductConclusion
WheatBreaddecreasingincreasing**noneincreasing**
Rolldecreasingincreasing**nonenone
Flourdecreasingdecreasing noneincreasing**
Pastadecreasingincreasing**nonenone
Beef meatRoast beefdecreasingnone**Increasingincreasing**
Cow’s milkButterdecreasingdecreasing noneincreasing**
Milkdecreasingdecreasing noneincreasingirrelevant difference
Cottage cheesedecreasingdecreasing noneincreasing**
Cheesesdecreasingdecreasing nonenone
EggsEggsdecreasingdecreasing noneincreasing**
Livestock for slaughter-poultryPoultrydecreasingdecreasing nonenone
PigsBoneless meatdecreasingdecreasing nonenone
Pork loin b.kdecreasingdecreasing nonenone
Pork frankfurtersdecreasingdecreasing noneincreasing**
Hamdecreasingdecreasing nonenone
Sausagedecreasingdecreasing nonenone
** means that the farmer does not benefit from the price behavior of the product.
Table
Table 3. An analysis of trends in changes in the prices of food and agricultural raw materials for 2005–2019.
Table 3. An analysis of trends in changes in the prices of food and agricultural raw materials for 2005–2019.
ProductbRbPSbRSbPtt_krp-Value of the Difference Test
Wheat (Raw Material, Prices Obtained by Farmers) and Wheat-Based Food (Retail Prices)
Bread00.04646500.010198−4.5563−1.77090.000269
Roll000000
Flour0.01668600.003219−5.1838−1.77090.001
Pasta000000
Beef (Raw Material, Prices Obtained by Farmers) and Roast Beef (Food, Retail Prices)
Roast beef0.0175260.0287220.0053530.003852−1.6976−1.35010.056688
Milk (Raw Material, Prices Obtained by Farmers) and Dairy Products (Retail Prices)
Butter00.03186200.009456−3.3693−1.77090.002515
Milk (retail prices)−0.0072600.0016084.5184−1.77090.999711
Cottage cheese0.00594300.002848−2.0867−1.77090.028585
Cheeses000000
Eggs (Raw Material, Prices Obtained by Farmers) and Hen Eggs, Fresh (Retail Prices)
Eggs00.021890.0109590.00439−1.8542−1.77090.04326
Poultry (Raw Material, Prices Obtained by Farmers) and Poultry Meat (Retail Prices)
Poultry0000000
Pork (Raw Material, Prices Obtained by Farmers) and Pork Products (Retail Prices)
Boneless meat0000000
Pork loin b.k000000
Pork frankfurters0.03353400.001363−24.5984−1.77090.0000
Ham000000
Sausage000000
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Kusz, D.; Kusz, B.; Hydzik, P. Changes in the Price of Food and Agricultural Raw Materials in Poland in the Context of the European Union Accession. Sustainability 2022, 14, 4582. https://doi.org/10.3390/su14084582

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Kusz D, Kusz B, Hydzik P. Changes in the Price of Food and Agricultural Raw Materials in Poland in the Context of the European Union Accession. Sustainability. 2022; 14(8):4582. https://doi.org/10.3390/su14084582

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Kusz, Dariusz, Bożena Kusz, and Paweł Hydzik. 2022. "Changes in the Price of Food and Agricultural Raw Materials in Poland in the Context of the European Union Accession" Sustainability 14, no. 8: 4582. https://doi.org/10.3390/su14084582

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