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Organic Opportunities in the New
EU
The
extension of the EU eastwards is widely considered a momentous occasion
with the addition of 10 new member countries expanding a trading block
that now houses more than 450 million consumers. EU enlargement is also
to bring opportunities to organic food producers.
Entry into the EU has given organic growers in Central & Eastern Europe
(CEE) access to the EUR 11 billion Western European market. Many farmers
in CEE countries seem to have been preparing for EU accession with
organic farmland in the three largest accession countries - Poland,
Hungary and the Czech Republic increasing by 150% between 1999 and 2003.
There are about 514,000 hectares of organic farmland in the new member
countries. The Czech Republic has the largest amount of organic farmland
in the region with 235,136 hectares, comprising 5% of all farmland in
the country. This is higher than the EU15 average of 3.5%.
Some of the increase in organic farmland in CEE has been export-driven
with substantial volume of organic cereals, grains, herbs, spices, and
vegetables exported to Western European countries. Polish producers have
been successfully exporting organic vegetables, fruits and berries for a
number of years. There are also a number of contractual arrangements in
place between Western European companies and organic farmers in CEE
countries to grow certified organic crops.
The single market has given organic producers in accession countries
unfettered access to Western European countries. The absence of trade
barriers enables organic products to be sold in the west without import
tariffs. Producers in new member countries can also set up trading
offices in the West so they have more control over marketing &
distribution. Consumers in Western Europe are to benefit from a wider
selection of organic products at lower prices. EU regulations are to
ensure that there is some uniformity in organic standards.
Trade of organic products between
Western Europe
and CEE countries however will not be unilateral. The majority of
organic foods produced in the accession countries are primary products
and there is a lack of organic food processing activity. Recognising
this, organic food companies in Western Europe are targeting CEE
markets. Some German firms have already made inroads into the Czech and
Hungarian markets and they are expected to expand their market presence
now that trade barriers have been removed.
Like conventional food manufacturers before them, some organic food
companies will be setting up manufacturing plants in CEE countries. The
German company Hipp has been the pioneer in this respect, setting up
production facilities in a number of Central European countries. Its
foresight has been responsible for Hipp to become the largest organic
baby food producer in the world, competing strongly with conventional
baby food giants like Heinz, Nestle and Numeco in Europe.
Most organic food companies in the west will however undertake a low
risk market entry route and seek importers and wholesalers. Slowing
market growth rates and overcapacity in some sectors of the Western
European organic food industry will allow excess capacity to be
alleviated to the east. Other companies will expand to Eastern Europe
for business growth.
EU enlargement is to bring threats as well as opportunities.
Agricultural reform will occur as CEE farms face great pressure from the
large, more efficient farms of the west. This will be most observed in
Poland, the largest EU accession country, and home of some of the most
fertile plains in Europe. The agricultural sector in Poland employs 28%
of the workforce. Agricultural reform is to cause large intensive farms
to emerge and thousands of small farmers could quit the profession
bringing rise to high unemployment.
Finding it difficult to compete with the modern agricultural sector of
the west, many farmers in CEE countries are expected to quit farming
altogether. Others will modernise their farms and start producing on a
large-scale. CE farmers should consider organic farming as a third
option that allows them to maintain their small holdings and continue to
produce agricultural crops on a small-scale.
Posted: May 3rd 2004
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