____________________________________________________ This document has been made available in electronic format by the International Co-operative Alliance ICA _________________________________________________________ ******************************* RURAL CO-OPERATIVES ******************************* Source : Tadeusz Kowalak : Co-operatives in Eastern & Central Europe, Poland, Studies & Reports, Twenty-first in the series; ICA, Geneva, 1993, 58pp., price 12CHF Of Poland's 38 million inhabitants, about 46% live in rural areas and 27% earn their living from work in agriculture. In the period after the Second World War individual farmers never owned less than 75% of the total arable land. This land was owned by between 3.2 (1948) and 2.8 (1990) million private farms, with an average size of about 5 hectares each. This was the reason why, unlike other post-Communist countries, there are many types of co-operatives operating in rural areas of Poland. The great majority of them were, and still are, service-orientated rather than production-orientated. Peasant self-aid supply and marketing co-operatives With the official name of Communal Co-operatives of Peasant Self-Aid, these were imposed by the Communist Party between 1945 and 1947 to take over the political control of agricultural supply and marketing co-operatives and rural consumer co-operatives. The above two types of co-operatives were merged to form an immense, monopolistic organization, linking the private farms with the centrally-planned economy. Its main functions were: to supply private farms with agricultural inputs; to market the agricultural products of private farms; to process some agricultural products for mainly local needs; to produce some consumer and production goods; to supply the rural population with consumer commodities and services, as well as productive services; to run catering businesses.The Peasant Self-Aid supply and marketing co-operatives created an important economic infrastructure in rural areas, using for this purpose some of the means accumulated in the process of their economic activity. They replaced the State in performing several social functions. In 1988, 1,912 Peasant `Self-Aid' co-operatives had a membership of over 3.5 million and employed 468 thousand persons, of whom about 170 thousand were in retail trade and catering, 68 thousand in the production of goods and services, 17 thousand in the purchasing of agricultural products and 64 thousand in administration. To perform their economic functions they possessed 71,500 shops, 5,500 restaurants, cafes etc., 36,000 purchasing facilities, 2,100 bakeries, 1,090 butchers' shops, 59 mineral water factories, 226 animal fodder production plants, and 14,300 servicing facilities. To perform their social functions they ran 340 sports grounds, 2,456 kindergartens, 4,300 rural clubs, and 1,400 libraries. Primary co-operatives enjoyed a monopolistic position in rural retail trade, catering and services (the State secto~ of economy was absent and the private sector covered not more than 2% of the retail turnover). Peasant Self-Aid co-operatives possessed the monopoly of purchasing the majority of agricultural products from private farms. Their share in the total purchase of agricultural products amounted to 58%. At the end of 1988, an average communal co-operative of Peasant Self-Aid had 1,941 members, each of whom owned a one thousand zloty co-operative share. Such a co-operative employed 256 persons and normally covered the area of one commune (in Poland at that time there were about 2,500 communes): it ran 39 shops; 22 facilities for the purchase of agricultural products; eight service shops; three industrial plants, mainly bakeries, slaughter houses and mineral water production units; and three cultural units, be it peasants' clubs, libraries, kindergartens or artistic ensembles. With the introduction of economic reform in 1990 the position of Peasant Self-Aid co-operatives started to diminish dramatically. As previously mentioned, there are no statistical data available from any source, including the Main Statistical Office, which would cover even the basic information about the state of any co-operative branch as a whole. The data presented below are based on a questionnaire sent in April 1992 by the Agricultural Trade Business Chamber of Peasant Self-Aid Co-operatives (see 2.4) to over 1,600 primary co-operatives, of which 370 answered. The analysis of data received indicates that, at the end of 1991, the average Peasant Self-Aid co-operative had 731 members, which equals 40% of the average membership in 1987 and 75.8% of that in 1990. It employed 118 persons, in comparison with 256 in 1987: a decrease of 54%. At the end of 1991 an average co-operative ran 26 retail outlets, three purchasing facilities, two processing plants, two catering units and two servicing shops which, compared with 1987, means a reduction of the number of retail outlets, industrial plants and catering units by one third, of purchasing facilities by 87%, and of servicing shops by 75%. The above statistical estimate hides a great diversity of developments in individual primary co-operatives. Of six co-operatives in the branch which I visited at the end of May 1992 only one noted an increase in membership. One of them reduced its retail trade to virtually zero; others reported this as their most profitable activity; all of them were developing processing; all reduced both supply of agricultural inputs and marketing of agricultural products to 10 - 20% of their volume in 1987. It may be stated with certainty that the monopolistic position of these co-operatives within the rural market belongs to the past. They have to fight for survival. It is estimated that at the end of June 1992 about 2,000 Peasant Self-Aid primary co-operatives were in operation, which exceeds the number existing in 1987. The main reason for this increase was the division of some co-operatives which covered an area exceeding the territory of one commune. About 40 primary Peasant Self-Aid co-operatives have either been liquidated or have entered the process of liquidation. Between two and three hundred co-operatives are facing bankruptcy. Their liquidation is imminent. The comparison between the end of 1991 and the end of 1990 proves that the erosion of the economic and social position of the co-operatives in question has not yet stopped. The decrease in members during this one year period amounted to 24.2%, that of employees to 22%. These conclusions can be justified if the basis of the above analysis (370 co-operatives out of almost 2,000) is reliable enough to suggest the possible situation of the whole branch. It is probable that those co-operatives which answered the questionnaire are in a better economic condition than those which did not. If so, the general picture may be still worse. The reasons for the above-described worsening of the economic and social position of primary Peasant Self-Aid co-operatives are: an economic crisis of catastrophic dimensions; the increasing poverty of the population, especially that in rural areas; lack of advisory services, as the higher-level co-operative organizations are wound up; unexpected and enormous increase in interest rates (in January 1990 44% monthly); competition from private enterprises, which enjoy privileged taxation; competition from imported Western commodities, especially foodstuffs; closing of Eastern markets resulting from the changes within the former Soviet Union and in the resultant new countries; and co-operative management bodies' lack of knowledge about rules governing the free market economy. The above also apply to other co-operative branches. Dairy co-operatives In 1988 there were 383 dairy co-operatives with 1.2 million members and 113 thousand employees. At 9.8 thousand milk assembly points, over 95% of all milk produced in Poland for market purposes by private, State and co-operative farms was purchased. It was then processed by 712 dairies to produce homogenized milk, cream, cheese, yoghurt, casein, powdered milk etc. Dairy co-operatives supply the retail trade with their products, run a few retail shops of their own and deliver dairy products to recognized foreign trading companies for export. Beside economic functions, dairy co-operatives have played an important role in improving the quality of cattle and of milk by providing producers with consultation services, carrying out research and organizing training courses and exhibitions. Such socio-educational activities have been subject to severe limitation in the last two years as a result of cost reduction methods. It is estimated that the numbers of co-operatives, and co-operative members, as well as the economic and technical infrastructure of dairy co-operatives, have not changed very much over the period in question. This is due to the fact that the division of big dairy co-operatives into several smaller ones does not seem to have good prospects because this would entail sizeable new investments which would be difficult to finance and which do not usually promise economic success. Generally speaking, from 1990 on, new investments in existing co-operatives have been postponed, with the exception of a few dairy co-operatives which set up joint ventures with foreign capital. Those dairy co-operatives which took investment credits in the 1980s, and did not manage to carry out the investments planned, got into serious financial difficulties. Because of the dramatic reduction in demand for dairy products on the home market (amounting to 50%), and the high interest rates which they had to meet, they could not pay adequate prices to their members. This resulted in vigourous and widespread protests by farmers. The nomination of the Plenipotentiary of the Minister of Agriculture for Dairy Co-operatives was one of the results of these protests. His task was to elaborate a policy which would save dairy co-operatives from bankruptcy and the Government from the social and political troubles which would be unavoidable in case of further reduction in demand for milk. The financial situation of the vast majority of dairy co-operatives is estimated to be bad or very bad. They have, however, maintained their monopoly regarding the purchase of milk produced by individual farms. The main problems facing dairy co-operatives are the scarcity of credit, the decrease in milk production, the shrinking of the home market for milk products and the tough competition from Western milk products, which are of better quality and greater diversity. The latter are also much more attractive, because of the quality of packaging. Horticultural and apicultural co-operatives There were 140 horticultural and apicultural co-operatives in 1988. They affiliated 372,600 individual owners of farms producing fruit, vegetables and honey. Some State and co-operative farms were members of these co-operatives, too. Their main function is to market fruit, vegetables and honey produced by their members, and to supply member farms with inputs and special services. They also render consulting services, and organize training courses for members and employees, as well as exhibitions. In 1988, horticultural co-operatives employed 55,500 persons, and owned and ran 6,500 shops, over 1,100 fruit and vegetable collection points and 210 processing plants. They made a significant contribution to the improvement of the quality of fruit, vegetables and honey produced by member farms. They had a very strong position on the home market (about 50% of the total turnover) and their specialized foreign trade enterprise had a virtual monopoly of the export of fruit, vegetables and honey. Unlike the multipurpose co-operatives of Peasant Self-Aid, horticultural co-operatives did not establish a national organisation to take over the advisory and other functions from the Central Union which, like all other national co-operative unions, went into liquidation by order of the Law of 20th January, 1990. There is, therefore, no global statistical information about their situation in 1992. My talks with the managers of a few co-operatives of the type discussed indicate, however, that their economic situation has become critical. In some cases, where new processing facilities started before 1990 have not been completed, co-operatives, if not already declared bankrupt, are on the verge of bankruptcy. Between half and two thirds of their shops have been closed and partly taken over by private shopkeepers. Retail turnover has shrunk to about 33% of its 1989 level. ]embership has also decreased, not as critically, however, as in the case of the Peasant Self-Aid co-operatives. The main reasons for this decline are: lack of advisory services, high interest rates, reduction of demand by the home market, lack of market opportunities abroad and rather a low level of processing technology. Agricultural production co-operatives This kind of co-operative organization was not known in Poland until 1949, when they began to be imposed on farmers by the Communist Party and the State authorities. The idea of socialization of private agriculture through agricultural production co-operatives (APCs) collapsed in 1956. Nevertheless, in 1988 there were 2,089 APCs with over 190,000 members, who belonged to over 155,000 families. They cultivated 3.6% of the country's arable land. In 1990 there was a decrease in land cultivated by APCs to about 662,000 hectares, i.e. to 3.52% of arable land. The number of employees dropped to 155,500, the number of members to 146,000. Just over half of these co-operatives act only in the sphere of agricultural production. Most of the land they cultivate was assigned to them by the State; about 90% of members were formerly agricultural workers with no land of their own. A negligible part of the land is legally the property of co-operative members who were, in the past, compelled to give it up for co-operative use. The remaining APCs are specialized co-operatives which started to operate in 1975. They affiliate individual farmers, who remain private owners of their land and cultivate it individually, only producing a minority of products collectively. Since the liberalization of legal regulations in the mid-1970s, several economic activities, not necessarily connected with agriculture, have been performed by both types of APC. This made it possible to use most of the work time which could not otherwise be utilized for productive purposes, thus improving the co-operatives" profitability. In the period between the end of 1989 and the end of 1991 about 200 APCs went into liquidation. At the end of June, 1992 165 co-operatives lost their credit rating. So far, however, this seems to be connected less with the poor economic viability of this type of co-operative (which is suggested by some agricultural economists) than with the critical situation of Polish agriculture as such. Increasing levels of collaboration between co-operative members and management, with the aim of sustaining their co-operatives, was noted. The main reason seems to be the fear of losing jobs in case of liquidation. In spite of some pessimism among APC leadership (40% of existing APCs declared their economic situation as bad, and 30% think that bankruptcy is imminent) it seems that agricultural production co-operatives will not disappear from Polish agriculture in the foreseeable future. Agricultural circles' co-operatives The concept of Agricultural Circles' co-operatives derived from the idea of finding another way to "socialize" agriculture. The first step in this direction was the use of collectively-owned agricultural machinery to perform the most arduous tasks connected with land cultivation. This started with the introduction of agricultural machine stations, owned by agricultural circles (a traditional social organization of farmers living in one village) and financed from a special Agricultural Development Fund introduced in 1959. The main task of these co-operatives during the 1970s was to take over cultivation of the land turned over to the State by elderly farmers, who could no longer cultivate their farms, in exchange for a State pension. In 1988 there were 1,908 co-operatives of this type, employing 158,000 persons. Their membership, mainly agricultural circles,amounted to 30,757. The co-operatives rendered services such as ploughing, transportation, construction of buildings and the repair of agricultural and horticultural machinery to individual farms. They had 4,360 mechanization plants, 621 repair shops and plants producing building materials, some 1,570 workshops and 350 agricultural farms. The agricultural circles' co-operatives have proved to be the least stable branch of the co-operative movement. Between 1989 and 1992 about 400 of them entered into liquidation. In 1990 they cultivated about 54,000 hectares of arable land which, in comparison with 273,000 hectares in 1980, means a decrease of more than 80%. Mechanization services rendered to individual farms diminished by about 50%, mainly because of the abolition of State subsidies. Employment dropped from about 220,000 in 1980 to about 100,000 in 1991. According to research carried out in April 1992, based on a questionnaire sent to these co-operatives, 55% of them consider their situation as critical and 40% anticipate imminent liquidation. As agricultural circles' co-operatives are co-operatives of corporate bodies, there is a trend to divide the agricultural machinery which they own and to transfer it to individual agricultural circles: the members of the co-operative. Some cases of illegal distribution of this machinery among farmers were noted. It seems likely that this kind of co-operative will gradually disappear, its functions being taken over by the agricultural circles themselves, by private enterprise and by simple forms of co-operation.