Hungary Newsflash Week 47

Floriculture affected by COVID-19

The chrysanthemum farming business in Hungary faced serious difficulties and suffered considerable damages due to the pandemic this year. (We recently reported about the sector, see that Newsflash here.)

Stakeholders report that they faced various issues this season, all directly or indirectly caused by the COVID-19 pandemic. One of these was that in the spring, there were unprecedented shocks in the supply of plant propagation materials. Hungarian chrysanthemum farmers import most of these from the Netherlands, and due to labor shortages in the Dutch sector caused by pandemic lockdowns, there was disruption in the plant propagation material export to Hungary.

Another issue was that there were labor shortages in Hungary as well. While due to the economic effects of the crisis, there was a larger-than-average labor supply in the July planting season of chrysanthemum, not many workers can stand the hot greenhouse conditions at flower farms.

Finally, during the All Saints’ Day peak season of the chrysanthemum trade, due to domestic pandemic regulations on mass shopping in Slovakia and the Czech Republic, farmers in these countries were left with a considerable supply of unsold produce, which they exported to Western Hungary, driving down the domestic price of chrysanthemum in the Hungarian market from €0.61 to €0.33 per flower.

Producer prices continue to rise

Based on the latest figures on agro producer prices from September by the Central Statistical Office (KSH), the drastic price increase of fruits slowed down after August, but the price increase of cereals, vegetables and animal feed accelerated further.

Aggregate mean producer prices throughout the agricultural sectors in September 2020 were 6.6% higher than a year ago. On average, the mean price increase somewhat slowed down from the August figure of 6.7%.

Since last year, the purchase price of cereals and horticultural products increased by 9.6% and 13.9%, respectively. The price increase of vegetables went from 10.5% in August to 12.8% in September. While the price increase trend of these products held in September, fruit price increases slowed from 46.3% to 41.1% in the same period.

Meanwhile, the price of potato decreased by 14.3%, and the purchase price of live animals has been 6.8% lower in August than a year before, and the decrease reached 8.7% by September, the fifth month in a row where average prices have been lower than the last year.

Free agro mentoring program for entrepreneurs to be launched

The Foundation for Small Enterprise Economic Development (SEED) is starting a new mentoring program for entrepreneurs in the agricultural sectors, announced the National Chamber of Agriculture (NAK). The mentoring program will provide free-of-charge coaching for SMEs to overview their business structure and discover potential areas of development. The program will pair mentors with SME owners with whom they can share valuable experience on market challenges, management alternatives, as well as real-life applications and effective tools.

The program will target specific groups in the agro SME sector: Women business leaders, young (under 35) entrepreneurs, family businesses undergoing generational change, and SMEs gravely affected by the pandemic.

Agro finances: The sector is stable

While certain sectors are severely affected by COVID-19, the pandemic has not disrupted agro and food industries this year as much as environmental factors did. Financial sector stakeholders report that agro businesses currently tend to use current asset financing constructions, however, there is growing demand for investment loans as well and as the agroeconomy adapts, modernization might accelerate in the coming period.

As a part of the economic recovery policy measures introduced over the pandemic months, the Central Bank of Hungary (MNB) introduced a €2.57 billion low-interest SME subsidy scheme, out of which, €276.8 million has so far been used by agro businesses. There is also an increased interest in the Agro Széchenyi Card instrument. (More info on this financial construct can be found here).

HORECA: Relief measure introduced

Aside from the general restrictive measures announced last week containing provisions for the aiding of the tourism & HORECA industries (more on this can be found in an overview by Telex here), last weekend the government introduced a new policy, temporarily reducing the VAT of home food deliveries for restaurants and catering companies from 27% to 5%.

Stakeholders in the sector welcomed the new policy, however, the news portal HVG reports that the reduction in these companies’ social contribution duty should be widened in order for the businesses to stay afloat. Many workers are employed through HR companies, which means that as they are not technically employees of catering businesses, their social contributions cannot be cut back. Furthermore, many workers have minimum wage contracts, relying heavily on tips for their monthly income – Which means that there will be hard months ahead for many with the closures in the sector.