Hungary: The Cost of Putting Food on the Table
Food prices are on the rise – What are the trends that dominate the Hungarian market today?
Food consumption in Hungary
On average, food expenses make up 23% of the disposable income spending in Hungarian households, a figure that has been mostly stable since 2005. Its relative proportion to other expenses has decreased however, with the dramatic increase of household expenses that go to costs like energy and rent. On average, plant-based and animal-based food make up 60% and 40% of the Hungarian food consumption, with fruits and vegetables taking up 30.3%, milk 24% and flour and rice 13.8% of the diet. Since the 2000s, there has been a trend in which the consumption of meat, eggs, fats and processed sugar has been steadily decreasing.
In terms of the food industry, Hungary is primarily a raw material producing country, with the two major pillars of the domestic agro-food economy being plant cultivation and animal husbandry, producing commodities like wheat, maize, rice, sunflower and other seeds, animal meat, milk, fruits and vegetables. Many of the higher value added foods are imported into the country, along with fruits and vegetables from competing Southern member states with warmer climates. This, put together with the relative small size of the domestic economy within the vast expanse of the European common market leads to the tendency that the Hungarian food market is very sensitive to food price changes in the common market. (More info on the history of the Hungarian food industry in our article over here.)
The factors that drive the increase in food prices
In the spring of 2020, food prices started increasing in the domestic market, which is due to multiple interconnected factors.
One, there has been a trend of steady food inflation in the EU since the last quarter of 2019. This has been catalyzed by the pandemic and the lockdowns in March and April, with food price spikes. Although in certain segments (e.g. poultry meat) this led to an oversupply on the common market due to a loss of certain sales channels (i.e. foodservice), price decreases, the disruptions in production and supply chains contributed to food price increases across many member states of the EU, Hungary included.
Two, the astonishing inflation curve of the Hungarian Forint directly led to a price increase in imported goods, including processed food. Three, the ongoing animal pandemics continue to affect the meat industry and the price of meat (See our articles on African Swine Fever and Avian influenza). In this regard, the price of pork considerably increased while the price of poultry meat was more turbulent because of dumping in retail chains. While certain foods like meat, milk, fruits and vegetables were relatively cheaper in places in April, according to the National Chamber of Agriculture (NAK) this was due to the massive import of foreign products, a practice NAK actively campaigned against with lobbying for administrative punishments for the underrepresentation of Hungarian products in grocery chains. Overall, food prices have been steadily climbing since the beginning of the year.
Four, due to the spectacularly terrible weather conditions agriculture faced this spring, plant cultivation took massive hits. While among perishable crops, notably rapeseed and wheat took blows due to what turned out to be the worst drought in thirteen years and a historical water-stressed period, (See our article on drought here) in the case of permanent crops, fruit orchards were hit harder than in any of the previous seasons (More in our article on frost damages here).
Recent figures
According to the Hungarian Central Statistical Office, the rate of inflation in Hungary between January and May was around 3.5%. Not surprisingly, agricultural product prices, primarily for fruits, vegetables and meat increased. In March, the consumer price increase in food compared to the previous year was 7.6%, while in April and May, food prices were 8.7% and 8.4% higher than a year before, respectively. These increases are the highest of all price changes in the domestic market, mean consumer price levels only increased by 2.2% in May in aggregate figures.
The price of cold cut luncheon meats went up by a staggering 22%. Pork prices increased by 20.7%, and the price of seasonal vegetables, fruits, potato by 19.1%, sugar by 15% and salami, sausages and ham by 12.6%. Meanwhile, the price of tobacco increased by 11.1% and the average price of tobacco products and alcoholic beverages by 6.7%.
According to the latest vegetable, fruit and wine market analysis by the Research Institute of Agricultural Economics (NAIK AKI), the price of tomato increased by 18%, with the start of the strawberry season, the price of (imported Greek) strawberries introduced in January has been 7% higher until the start of the domestic strawberry season. Domestic strawberry entered the market two weeks earlier than usual this year, but it has been competing with the cheaper, Greek produce since the start of the season. Over the past few years, the import of strawberry increased by 20%, and its net export balance is currently negative with the majority of the import arriving before the beginning of the domestic strawberry harvest. However, in the past years, exports increased by 624%, with the primary export markets being Germany, Ukraine and Romania.
The most staggering price increase is expected to happen in the fruit sector this summer. According to the National Chamber of Agriculture (NAK), instead of the usual 800-900 thousand tons, this year’s aggregate domestic fruit yield is expected to be around 500 thousand tons. Certain fruits, e.g. apricot, peach, cherry and sour cherry may see a price increase of up to 30-40% this season, mainly caused by this year’s extreme weather circumstances.
Sources
High demand for processed fruit and vegetables due to COVID-19. CBI, Ministry of Foreign Affairs, April 15, 2020.
European Food Inflation data, Trading Economics
Bene et al: A magyarországi élelmiszeripar helyzete és jövőképe. Research Institute of Agricultural Economics, 2016. (Hungarian language)
Isépy et al: Agrárpiaci jelentések, zöldség, gyümölcs, bor. Research Institute of Agricultural Economics, XXIV/5., 2020. (Hungarian language)
Dénes Csurgó: KSH: A járvány miatt drágulhattak az élelmiszerek márciusban. Index.hu, April 8, 2020. (Hungarian language)
Elszálltak az élelmiszerárak áprilisban. Azenpenzem.hu, May 8, 2020. (Hungarian language)
Májusban 2,2%-kal nőttek az árak. Hungarian Central Statistical Office, June 9, 2020. (Hungarian language)
Photo credit: "Multigrain bread extraordinaire" by Sarah Cady, via Flickr.