Explaining Quality Differences at the Procurement Stage in the Polish Milk Sector

The challenge of implementing EU quality and safety standards for food production and trading is one of the driving forces behind the restructuring of the agrofood chains in Central and Eastern European Countries (CEEC). The progress made in the compliance process not only varies amongst sectors and countries, but also among particular chains due to differences in their internal structure and strategies, and features of their political and economic surroundings. We construct a models to identify determinants of the diffusion rate of standards in a food chain under pre-accession conditions. We argue that adoption decisions in the food chain are determined by farmers' and processors' economic considerations. Factors such as pricing behavior, compliance costs and market structure, all of which influence the adoption of standards, are identified and discussed in the paper. The findings are used to test an econometric model utilizing data on Polish milk processing firms in the period between 2000 and 2002. The results indicate that input and output prices have a significant influence on the diffusion rate of standards. The dominance of large-scale holdings in the relevant procurement market significantly increases, whereas high compliance costs decrease the diffusion. Small cooperatives were found to face significant problems in procuring high quality raw materials compared to their competitors. The material in the paper will be converted into a single sheet, as recommended in the conference instructions for preparing a poster presentation. Please find attached the rough layout of our poster presentation.