regoverning markets cee regional summary regoverning markets regoverning markets: with special...

Regoverning MarketsCEE Regional Summary

Regoverning Markets

Regoverning Markets:With Special Reference to Small-holders

CEE Regional Summary

Hungary, Poland, RomaniaRome, March 1, 2005.


OVERALL CHARACTERISTICS OF THE SUPPLY CHAINS

• Primary production: after disruption of reforms dual structure with a large number of small farms

• Whole-sale trade: basic restructuring which is still going on

• Processing: Privatization with FDI and significant improvements in technologies and product quality

• Retailing: Unfinished change in three phases resulting a major transformation



Concentration in the dairy industry, Hungary; share of the 7 leading companies

(Net sales in 1998 and 2002)

0

10

20

30

40

50

60

70

80

1 2 3 4 5 6 7

Firms (in descreasing order of market share)

Co

nce

ntr

atio

n r

ati

o

2002

1998


Retail concentration (share of top 5 chains in food retail in 2003)

28

59

32

0

10

20

30

40

50

60

70

Romania Hungary Poland

%


Selected commodities Hungary: milk and onion

Poland: pig meat and apple

Romania: milk and wheat



• The inherited processing industry: technologically backward, financially insolvent, state owned

• Quick privatization in Hungary and Poland

• The FDI entered relatively rapidly this sector first in Hungary and Poland, later in Romania

• Rapid increase in high quality production, demanding homogenous, high quality, standardized supply.

• Increased concentration and regionalization of industry


Processing industry


• Dramatic change in the structure in three phases

• International chains have appeared during second half of 90s in most of the cases by making green field investments

• Locally owned stores developed successfull survival strategies /CBA, Coop in Hungary/

• The super- and hypermarket sector is characterized by increased competition


Retail sector


• Strong influence on the position of wholesale companies,

• New buying structure, company brands directly involving the suppliers, mainy processing industry

• Tight competition with small local markets (Poland, Romania)

• Noticeable impacts:

• improvement of products quality,

• Increased vertical and horizontal integration

• rationalization of the delivery system (regional procurement)


Retail sector /Cont./


Main problems influencing the production and procurement of pork according to surveyed farmers in

Poland (scale of 1-5, where 5 is the most important)

2,2

1,7

3,1

2,3

2,3

4,8

1,4

2,7

0 1 2 3 4 5 6

Unfa ir pra ctice s of buye rs

Ba d coope ra tion with othe rproduce rs

De la ye d contra cts pa yme nts

Ente ring of fore ign compa nie s

Strong compe tition

Significa nt price fluctua tions

Purcha s ing good qua lity fe e d

Qua lity of a nima ls for bre e ding


Profit margin (%) along the bakery chain, Romania (2002)

Stages of the chain Free chain Vertically integrated chain

Farming -12.7 4,8

Storage 14,1 13,0

Milling 13,0 13,0

Bakery 15,0 10,3

Trade 16,1 29,7


• Majority are out of vertically coordinated systems

• Changing vertical coordination has an impact mainly through processing and wholesaling: both positive and negative impacts

• There is a need for a nuanced view

• Processors and traders are working with small farmers if there is an economic rationality for them

• More small farms on the supply side is an advantage for the small farmers


Small Producers: Status


• Bias against the different forms of cooperation

• Delayed payments

• Inadequate rural infrastructure

• Limited resources for investments

• Government policies: mixed impacts on the small farms

• Limited access to CAP pillar 2 and SAPARD funds

• Need to be more innovative and market oriented


Small Producers: Constraints


Critical issues for the future

• Removal of policy bias against small farmers

• Access to EU funds

• Increased cooperation among farmers and establishment of producers’ organisations

• Guaranteeing the level of playing field for small farmers on the markets in the vertical chains


Critical issues for the future (2)

• Access to credit and financing

• Better extension services and marketing information system

• Accelerated development of rural infrastructure

• Land consolidation and access to land

• Promotion of non-farm rural economic activities


Thank you!

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regoverning markets cee regional summary regoverning markets regoverning markets: with special...

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