The dairy sector in Poland has seen a significant shift in financial performance during the first three-quarters of 2023. With a net revenue of PLN 38.3 billion (US$9.62 billion), there has been a 10.1% decrease compared to the previous year. This decrease has been largely attributed to a drop in export revenue by 6.9% to PLN 6.8 billion (US$1.71 billion).
But what exactly led to this decline in revenue? One of the key factors influencing the financial health of the dairy sector has been the cost of milk delivered to dairy plants. It totalled PLN 11.6 billion (US$2.91 billion), which is a significant 2% increase compared with the previous year. Despite this increase in costs, the average purchase price dropped by 8.3% to PLN 2.07 (US$0.52) per litre.
### Milk price compensates for soaring costs
Interestingly, cheaper raw milk has played a crucial role in bolstering the profitability of the dairy processing segment. Despite operational costs standing at PLN 38.3 billion (US$9.62 billion), which was 6.2% below the previous year, there have been significant increases in other areas. Energy costs jumped by 13.7%, while costs associated with external services like transport and logistics increased by 7.2%. Additionally, wages and salaries witnessed a 7.9% increase.
The fluctuating financial landscape of the Polish dairy industry has caught the attention of experts. Agnieszka Maliszewska, director of the Polish Chamber of Milk, pointed out that although the financial health of the industry has deteriorated compared to the same period in 2022, it has shown improvement compared to the first half of 2023.
### Dairy profit
In the first half of 2023, the Polish dairy industry experienced a net loss, leading to negative forecasts about its future. However, recent statistical data indicates a positive turnaround. The industry’s net profit in the first three-quarters of 2023 amounted to PLN 139.8 million (US$35.11 million), a significant rebound from the previous year’s PLN 1.653 billion (US$410 million) net profit.
Despite this improvement, there is cause for concern as only 49.5% of dairy companies managed to generate a profit, compared to 79% in the previous year.
### Investments in dairy farming
Interestingly, the financial challenges faced by the dairy sector have not deterred companies from pursuing their investment plans. In the first three-quarters of 2023, Polish dairy businesses invested PLN 563.9 million (US$141.6 million), almost matching the investment levels from the previous year.
However, despite these investments, the outlook for the future remains uncertain. Maliszewska has expressed worries about the rising production costs in 2024, which could potentially make Polish dairy products less competitive in foreign markets.
As the Polish dairy industry navigates through these financial challenges, it is crucial for businesses to carefully monitor their costs and adapt to the evolving market conditions. Making strategic decisions and exploring new opportunities for growth will be essential for sustaining profitability in the industry.
Are you keeping a close eye on the financial performance of the dairy sector in Poland? How can businesses in the industry pivot to overcome these challenges and thrive in the current market landscape?
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