Hungarian flour, now cheaper in the Netherlands than in Hungary

The daily news portal Index reported last Sunday that one of their perceptive readers had found in the Netherlands what is rare now in Hungary: Flour for less than €0.5 per kilogram. The ironic part is that the flour the Hungarian living in the Netherlands found for €2/2-kilogram packages is from Hungary.

Even following the Hungarian government’s price capping measure, the average price of flour has been €0.57/kg in Hungary. The main reason for the price difference is the lower tax in the Netherlands. Hungary has the highest value-added tax in the European Union with 27% VAT on most products.

Flour prices have been frozen in Hungary at their price level from October, 2021. However, the time period on the price capping measure is soon to expire and within open market conditions, the prices of flour (as well as related bakery industry products down the supply chain), will drastically change.

The business portals Blokkk and TradeMagazin go into projecting a steep price incline following the expected end of the price cap regulation. Their overview articles conclude that the consumer price of bread alone rose by 28% y-o-y last month, and that of flour rose by 18%, even with the price cap. (Effectively, this is the price increase between March and October, 2021, as the October price level is the basis of the price cap.)

However, the producer prices of cereals increased by 44% in the first two months of this year, and the price index of milling industry products increased by a staggering 85% y-o-y.

Inflation in Hungary plays a role in these trends, as does the war in Ukraine. While food prices have already been increasing in the country, global market conditions that changed during the war will also affect the cost Hungarians will have to pay to put food on the table, a trend which is now worsened by the weak state of the Hungarian Forint.

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