Poland's Office of Competition and Consumer Protection (UOKiK) works actively for the protection of the farmers involved in grain production.
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In his latest decision, the President of UOKiK has imposed a penalty of over PLN 300,000 on PolishAgri - the leader in grain exports in western Poland, which demanded from farmers all contracted supplies, even if they were unable to do so for reasons beyond their control.
"We have been carefully observing the situation of grain producers for a long time. The latest decision concerns PolishAgri, the company which in the contracts burdened farmers with excessive risk related to the implementation of the subject of the contract. Previously, a similar decision was taken in relation to Cefetra Polska," says the President of UOKiK, Tomasz Chróstny
"We are aware of the difficult situation on the grain market, among others related to war and weather conditions, therefore I have initiated further explanatory proceedings in which we will investigate whether large companies buying grain are not taking advantage of the situation to take actions which are unfavourable to suppliers."
PolishAgri buys wholesale various types of grain, including wheat, rye, triticale, malting barley, mainly from individual farmers who run their farms on a small scale. The parties operate under a pre-drafted model contract, and an individual supplier has no influence over its content.
The conducted proceedings have demonstrated the company’s unfair use of its contractual advantage over farmers, burdening them with excessive risk related to contract performance.
The entrepreneur requests that the suppliers deliver their contracted supplies despite circumstances beyond their control, particularly force majeure, preventing the delivery of the agreed quantities of grain. These circumstances can be climatic conditions, natural forces or disasters.
When suppliers are unable to sell the contracted products from their own farm, they are required to pay a penalty or buy the grain themselves on the free market or bear the costs of a substitute purchase made by PolishAgri.
In some cases, the losses resulting from force majeure exceeded even 50 per cent of the average annual agricultural production on the supplier's farm. This practice had been in use since 2018 at least.
"Agricultural activity is particularly dependent on weather conditions. Drought, excessive rainfall or flooding can cause crop losses that cannot be either predicted or prevented. Therefore, entities entering into contracts with farmers should take it into account in their contracts," says the President of UOKiK, Tomasz Chróstny.
"Demanding that all the contracted goods be delivered, even if farmers cannot do so for reasons beyond their control, constitutes unfair use of contractual advantage by the largest grain buyers. For these reasons I imposed on PolishAgri a penalty in the amount of over PLN 300,000."
The decision is not final and may be appealed to the court. This is not the only decision concerning the largest Polish companies operating on the grain market. In May 2022, the President of UOKiK imposed a penalty of over PLN 2 million on Cefetra Polska which also required all contracted supplies from farmers, even when circumstances beyond their control occurred.
2022 is a very difficult year for farmers. The weather conditions hampered plant growth and may have a negative effect on yields. This year, farmers experienced, inter alia, spring frosts, prolonged drought, as well as heavy rains with hail.
The increasing costs of the factors of production, utilities and credits, as well as the ongoing war in Ukraine may also have an unfavourable impact on the grain market.
"The situation on the grain market may lead to forcing farmers to sell on unfavourable terms and other unfair practices on the part of larger trade partners. Hence our further actions aimed at checking the rules of cooperation between farmers and significant entities operating on the grain purchasing market," says the President of UOKiK, Tomasz Chróstny.
"We want, among others, to examine the method of determining settlements between entities, obligations of the parties to the contract taking into account the distribution of risks, the burden of contractual penalties or provisions regarding force majeure, which we have questioned in the case of Cefetra Polska and PolishAgri."
The activities of seven grain buyers will be examined: Cargill Poland, ADM Direct Polska, Bunge Polska, Polskie MÅ‚yny, Viterra Polska (formerly Glencore Polska), Louis Dreyfus Company Polska, Procam Polska
Further actions due to signals from farmers cannot be ruled out. If it is confirmed that the practices under consideration may constitute unfair use of contractual advantage, the President of UOKiK may bring charges against specific entities. Entrepreneurs may then face a penalty of up to 3% of their annual turnover.