Focus on Hungary
Dec. 15, 2014
Hungary is a country with a highly favorable climate for grain production. Years of political and structural change limited output, but now crop levels are rising.
The International Grains Council (IGC) puts Hungary’s 2014-15 total grain crop at 16.1 million tonnes, up from 13.6 million the year before. That includes 5 million tonnes of wheat predicted for 2014-15, compared to 5.1 million the year before. The 2014-15 maize crop is put at 9 million tonnes, up from 6.7 million the year before.
Barley production in 2014-15 is put at 1.3 million tonnes, up from 1.1 million.
The country is also estimated to have produced a 700,000-tonne rapeseed crop, up from 500,000 tonnes the year before.
Figures supplied by Hungary’s Grain and Feed Association show grain production at the highest level for five years. Based on statistics from Hungary’s Central Statistical Office and crop forecasts from the statistical office and the Hungarian Chamber of Agriculture, the association put the wheat crop at 5.235 million tonnes in 2014, up from 5.058 million the year before. It put barley at 1.279 million tonnes (1.062 million in 2013), oats at 132,000 tonnes (unchanged), maize at 9.059 million tonnes (6.725 million), sunflowers at 1.636 million (1.470 million) and rapeseed at 572,000 tonnes (524,000).
In a report on the country’s agriculture prepared by the E.U., it was noted that “Hungary benefits from many natural features which provide favorable conditions for agriculture: fertile plains, an advantageous climate and the availability of water. The quantity of flowing water per inhabitant is said to be the largest in the world.”
A study prepared by Anna Burger of the Institute of Economics of the Hungarian Academy of Sciences outlined how Hungarian agriculture has developed.
“Hungarian agriculture has gone through a long and difficult development since the First World War,” she said. “The semi-feudal agriculture of the Horthy era between the two World Wars was followed by a land distribution after the Second World War, which created an agricultural system dominated by smallholders.”
However, the small farms were soon collectivized, she continued. “Despite the forced collectivization, the large farms developed well and the living standard of the peasantry grew significantly.
“After the collapse of socialism in Hungary in 1990, political parties decided again to restructure agriculture. A new land distribution was carried out which created an agricultural system based on smallholdings. On the mostly too small, scattered holdings, the technical and technological levels, and the productivity are low.
“A small number of larger farms produce most of the marketed products. The only way out of this situation is farm concentration and the cooperation of smallholders.”
She also notes the suitability of Hungary’s landscape for agriculture.
“About 70% of the land area of the country is suitable for agricultural production, while one-third of the soils and the terrains are unfavorable for efficient farming,” she said. “A great part of the country is lowland.”
The E.U. produced its own short report on the development of Hungarian agriculture in May 2014 to mark10 years of the country’s E.U. membership.
“The balance of these10 years of E.U. membership is clearly positive for agriculture and the rural economy in the Hungary,” it said.
It also noted that the number of farms has fallen by a quarter in Hungary since 2003. “Farms in Hungary have grown by some 22% in economic size, with the value of production/holding showing 5.7% growth per year,” it said.
“From 2004 to 2012, Hungarian agricultural income grew almost six-fold (average 21.8% per year), compared to overall wages and salaries in the economy which increased by 39% (3.7% per year) and GDP per capita growth of 10% (1.1% year),” it said. “The ratio of agriculture to overall earnings dropped sharply during the (global economic) crisis in 2009.”
From 2005 to 2013, total spending in Hungary through the E.U. Common Agricultural Policy was €11.94 billion.
“Hungarian farmers received €7.4 billion in direct aids and market measures to support farm income and over €4.5 billion were spent modernizing agriculture, making it more sustainable and developing rural areas,” the E.U. said.
Milling sector consolidation
Figures supplied to World Grain by the Hungarian Grain and Feed Association show a continuing trend to consolidation. In 2010 there were 45 companies with 62 mills. This year the association counted 41 companies with 54 mills.
The industry is highly concentrated. According to research done by the association in 2014, the 10 market leaders in milling account for 82% of flour production and the biggest six have 73%.
At the same time nominal capacity has stagnated rather than decreased. From 2010’s figure of 7,542 tonnes every 24 hours, it fell only slightly to 7,321 tonnes every 24 hours in 2014. Production is 1.2 million tonnes of wheat flour per year and stagnating as the industry struggles with overcapacity. Even so, new mills have been constructed in recent years.
One bright spot is that flour exports are increasing. From 120,195 tonnes in 2010, the total rose to 181,645 tonnes in 2013. Prospects for 2014 are even better. Exports will approximate the level of pre-accession to the E.U.
Inside Hungary, flour consumption is decreasing. The association put consumption per individual at 81 kilograms in 2012.
Politicians and public opinion are highly anti-biotech.
“In Hungary there is both a deep-seated social distrust of biotech crops and the belief that Hungarian farmers profit from being a leading ‘GMO-free’ supplier of food and feed to European markets,” the USDA attaché said in a report on the sector.
“Hungary has constitutionally banned genetically engineered plants from its agricultural sector and has recently amended its Act on Biotechnology. In 2011, non-transparent enforcement of new seed testing rules resulted in the destruction of corn fields and large fines for seed companies. Some politicians continue to portray GMOs as a threat to Hungarian agriculture.”
A report prepared for Pannonia Ethanol put ethanol production in Hungary at 30 million liters in 2007, 150 million liters in 2008, 174 million liters in 2011, and about 350 to 400 million liters in 2013.
“While from 2000 to 2010 greenhouse gas (GHG) emissions from the transport sector stagnated in E.U.-27, they increased by about 25% in Hungary, and the transport sector accounted for 18% of total GHG emissions measured in Hungary in 2011,” the report said. “Based on the target set in the 2009/28/EC directive (RED) on the promotion of using energy from renewable sources, the share of energy from renewable sources in the transport sector has to reach 10% in Hungary
Pannonia Ethanol’s facility uses some 650,000 tonnes of maize a year, producing up to 280 million liters of ethanol and 160,000 tonnes of Dried Distillers Grains with Solubles (DDGS).
It also produces 40,000 tonnes of Wet DGS and 5,000 tonnes of corn oil.
“Corn-based bioethanol is able to reach a greater GHG savings potential in Hungary than the European average because of the very low – practically zero at the moment – land-use change effect (which is the consequence of the abundant cropland quantity) and one of the lowest nitrogenous fertilizer use in Europe. But the efficiency of feedstock supply is relatively low for the time being,” the report said.
“In the long term there is a potential to improve crop yields with a modest increase in fertilizer use. But with more effective machinery use and with greening the agriculture – which is an important policy goal of the E.U. – the GHG emissions per tonnes of feedstock values also could be lower in the future.”
Population: 9,919,128 (July 2014 est.)
Religions: Roman Catholic 37.2%, Calvinist 11.6%, Lutheran 2.2%, Greek Catholic 1.8%, other 1.9%, none 18.2%, unspecified 27.2% (2011 est.)
Location: Central Europe, northwest of Romania
Government: Parliamentary democracy. Chief of state: Janos Ader (since May 10, 2012); head government: Prime Minister Viktor Orban (since May 29, 2010).
Economy: Hungary has made the transition from a centrally planned to a market economy, with a per capita income nearly two-thirds that of the E.U.-28 average. In late 2008, Hungary’s impending inability to service its short-term debt – brought on by the global financial crisis – led Budapest to obtain an IMF/E.U./World Bank-arranged financial assistance package worth over $25 billion. The global economic downturn, declining exports, and low domestic consumption and fixed asset accumulation, dampened by government austerity measures, resulted in a severe economic contraction in 2009. In 2010, the new government implemented a number of changes including cutting business and personal income taxes, but imposed “crisis taxes” on financial institutions, energy and telecom companies, and retailers. The IMF/E.U. bail-out program lapsed at the end of the year and was replaced by Post Program Monitoring and Article IV Consultations on overall economic and fiscal processes. At the end of 2011, the government turned to the IMF and the E.U. to obtain financial backstop to support its efforts to refinance foreign currency debt and bond obligations in 2012 and beyond, but Budapest’s rejection of E.U. and IMF economic policy recommendations led to a breakdown in talks with the lenders in late 2012. Global demand for high yield has since helped Hungary to obtain funds on international markets. Hungary’s progress reducing its deficit to under 3% of GDP led the European Commission in 2013 to permit Hungary for the first time since joining the E.U. in 2004 to exit the Excessive Deficit Procedure.
GDP per capita: $19,800 (2013 est.) inflation: 1.9% (2013 est.); un employment: 10.5% (2013 est.).
Currency: Euro. .80 Euros equal 1 U.S. dollar (Nov. 21, 2014).
Exports: $92.98 billion (2013 est.): machinery and equipment 53.5%, other manufactures 31.2%, food products 8.7%, raw materials 3.4%, fuels and electricity 3.9% (2012).
Imports: $89.52 billion (2013 est.): machinery and equipment 45.4%, other manufactures 34.3%, fuels and electricity 12.6%, food products 5.3%, raw materials 2.5% (2012).
Major crops/agricultural products: Wheat, corn, sunflower seed, potatoes, sugar beets; pigs, cattle, poultry, dairy products.
Agriculture: 3.4% of GDP and 7.1% of the labor force.
Internet: Code: .hu; 3.145 million (2012) hosts and 6.176 million (2009) users.