AMA comes under fire

By Aleksander Nowacki

The government's limited resources for alleviating the plight of farmers in the country's oversized agricultural sector are being wasted by the national agency that is responsible for regulating the grain market, observers said.

The Agricultural Market Agency (AMA), the body responsible for the state's intervention on the grain market, has failed to fulfill its mission to create market stability, they said. Critics point specifically to the AMA's recent announcement that it would be necessary for the country to import 700,000-1.5 million tons of grain this year, despite the country's fairly steady output levels.

"There is no intervention strategy," said Aleksander Grad, a PO deputy and the party's agricultural policy expert. "The AMA intervenes at random. It is impossible to stabilize the market in this way."

Grad sees the agency's plans for grain imports this year as a prime example of the shortsightedness of its policy, pointing out that a significant amount of grain was exported earlier this year.

He described the pattern of the AMA's activities as that of "putting out local fires," with no overall view of market development and no medium- to long-term objectives.

"To say that their market analysis is defective would be a massive understatement," he added.

The AMA, however, defends its mission despite the criticism.

"Our job is to create market stability," said Grażyna Leska, head of the grains division at AMA. She declined, however, to explain how the agency's policy promoted that goal.

Other AMA officials declined to respond to the criticism leveled at the agency, saying that it was not their responsibility to defend its policy.

At the beginning of the year grain was sold abroad at prices a third lower than on the domestic market and well below the cost of production. When the grain is imported in May, buyers will likely have to pay higher prices.

"There is an unprecedented shortage on the market, and it was not difficult to anticipate at the beginning of the year," said Grzegorz Wierzbicki, a grain broker at Giełda Poznańska, one of the largest grain markets in the country. "AMA's policy aggravated the situation. I don't see any sense at all in its intervention activities."

Wierzbicki pointed out that the AMA's decision to export more than 350,000 tons of grain from its stock was made as late as December last year and took market watchers by surprise. Food and animal feed producers had not accounted for such a policy in their plans and failed to stock enough grain earlier in the season.

What is more, grain exports did not stop even when it was announced last month that this year's harvest was expected to be 3% less than last year. As a result, prices have been growing steadily for the last three months and have reached more than zł. 500 per ton, or 10%-20% higher than the usual price per ton.

That is good news for grain producers, but it also drives up animal feed prices and thus hurts another important group of agricultural producers.

"It is primarily demand for animal feed grain that is driving prices up," said Andrzej Dembowski, a Łódź-based market analyst. "Wheat is now being bought to be fed to animals. I have never seen anything like it."

With feed producers shouldering most of the burden of price increases, meat producers have not seen their costs skyrocket as of yet. But that, Dembowski said, is bound to change.

Grad of the PO has little doubt as to the AMA's reaction in such a case.

"Pig farmers will protest, and the agency will intervene on that market to keep them quiet," he said. "It is a familiar scenario. Huge amounts of money are spent every year with no clear goal in view." Grad went on to criticize the practice of intervention for social rather than economic reasons as a waste of resources.

The AMA "tries to be all things to all people," Grad said, therefore it lacks a coherent set of objectives and a consistent policy. He believes that the primacy of short-term political considerations in the thinking of the agriculture authorities is a problem that will persist and will only end when the country adopts the European Union's Common Agricultural Policy (CAP), a program that supports rural development, after EU accession expected in May 2004.

Some agricultural professionals believe that, despite its huge costs, the CAP will be an efficient and logically structured tool to help stabilize the country's agricultural products market where the AMA has largely failed to do so.

But until that happens, no long-term strategy of market intervention can be worked out since there are too many mutually exclusive interests involved, the critics said.