This is not the end of food price increases. The largest producers will pay a fortune for electricity

The government has prepared protective mechanisms for small and medium-sized enterprises, so these companies can count, that they will pay for energy no more than 785 PLN per MWh. However, this solution does not apply to the largest companies - including those responsible for food production, which is one of the major drivers of inflation. The largest producers indicate, that in the current situation they will have to raise prices significantly next year as well.

- The production costs have already reached a very high level, which, of course, translates into product price increases. No introduction of maximum energy prices for the largest companies in the food industry, which are the main food producers in the country, it will make the situation even worse. Ultimately, consumers will feel it, by making everyday purchases. There is no possibility, by the unfavorable ones, external conditions, avoid completely increasing the prices of products on store shelves - admits Bogusław Miszczuk, president of the Sokołów company.

This is also confirmed by another large Polish producer, Indykpol. In his case, electricity bills will increase several times, although their final height is still unknown. - Unfortunately, price fluctuations for both the spot market, as well as the futures contracts are so big, that is hard to predict, if our bills increase exactly. Despite the great emphasis in our company on renewable energy sources, we can talk about an increase in bills in 2023 r. in millions of zlotys - convinces Michał Bitner, Indykpol board coordinator.
—According to our calculations, throughout the entire sugar production cycle - from cultivation, by sugar factories, all the way to logistics - on average, energy has increased almost threefold - says Roman Kubiak, chairman of the board of a sugar company, Pfeifer & Langen Poland.
The largest producers have a great influence on the domestic market. According to the data of the Central Statistical Office (GUS), it follows, that hiring companies to say the least 250 people in 2020 r. were responsible for 61 proc. value of the sold production of food products in the country. - Introducing maximum prices for electricity for SME customers, coupled with a decline in the growth of the prices of certain agricultural commodities, may ease the cost pressure in food processing, but it will not eliminate it. Even though the scenario of a gradual decline in food inflation after Q1. 2023 r. is most likely, the retail price increases will still be relatively high annually, emphasizes Mariusz Dziwulski, analyst for. agri-food markets in PKO BP.
In the official letter to the prime minister, the largest industry organizations indicate the producer, that if large companies are not covered, there may be huge negative consequences. “For a huge group of entities, energy prices will be significantly higher, which will translate into food prices. As a further consequence, it will cause the production to stop, due to excessively high production costs, loss of export markets, caused by the lack of competitiveness of Polish products on external markets. It will mean in the next steps, that processors will not be able to guarantee the continuity of collecting crops from farmers” - we read.

According to the expert of PKO BP, in fact, high costs may translate into reduced activity of production plants. —Cost pressure in processing can be a factor behind production constraints, which can be seen now in the case of some agri-food products, and demand barriers do not guarantee full transfer of cost increases to end recipients - says Mariusz Dziwulski.

The companies we asked do not want to think about a decrease in production for the time being, because as they admit, this would have to mean a job reduction. - In our group, we cannot afford production limitations, because that would mean a reduction in employment and the need for layoffs, and on top of that - especially in such difficult and uncertain times, as today - we would not like to allow it at all costs - says the representative of Indykpol.
Food is our flagship export commodity. According to data from the Ministry of Agriculture, w 2021 r. goods with a record value of over 170 PLN billion. And to a large extent this is what the largest companies are responsible for - they are responsible for approx. 70 proc. exported food products.
Now they are afraid, that the situation may change. - The challenging situation also has a negative effect on exports. The prices of exported products are also rising, which makes it difficult to remain competitive - says the president of Sokołów.

- If in other EU countries governments decide to support large entrepreneurs in our industry in order to reduce costs, it is definitely a measurable threat to Polish producers. This may result in the loss of a cost-competitive advantage, which, in turn, may affect the export position of our country - notes Michał Bitner.

Mariusz Dziwulski assesses this issue a bit more optimistically. - Many EU countries provide fiscal support to companies in connection with more expensive energy, but these activities need not be uniform. The Polish food sector has proven many times, that it copes relatively well in times of crisis, possibly, that it will also be the case this time - he explains.

CEO Pfeirer also sees the future in brighter colors & Long, which draws attention, that Poland is not alone in its problems. - The increase in energy prices - albeit to a different extent - affects the whole of Europe. Therefore, we anticipate, that the higher price of sugar will be understandable and acceptable also to recipients on foreign markets - says Roman Kubiak.

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