Hungary: CAP National Strategic Plan, food inflation, price caps

Hungary’s CAP National Strategic Plan approved

€8 billion will be on its way to Hungary as the European Commission has accepted the National Strategic Plan under the EU’s new Common Agricultural Policy, reports Hungary Around The Clock.

€2 billion is earmarked for climate goals and environmental protection, €186 million will be dedicated to support young farmers. 38% of the rural development budget will be dedicated to agri-development, 8% to organic farming, 5% to the protection of Natura 2000 sites.

On Wednesday, at a governmental press conference, Gergely Gulyás, minister in charge of the Prime Minister’s Office has commented that with the new EU subsidy cycle, the agriculture industry will receive “greater support than before.”

Minister for Agriculture István Nagy has called the acceptance of the NSP “a historic opportunity.” Minister Nagy has also commented that the European Commission has found sustainability more important than ever before, while Hungary also put an emphasis on food security and rural development, which is why the government aimed to strike a balance between environmental and competitiveness goals [in the NSP]. Minister Nagy also commented that the EU funds, combined with a high level of contribution from the national budget, will together provide a “greater support to rural development, farmers and food processors than ever before.”

Hungary prepares for 25% inflation

Márton Nagy, Minister for Economic Development in the government, gave an interview at the radio channel InfoRádió on Monday, November 7. Among other things, the minister mentioned that the government believes that the prices of natural gas and electricity have stabilized and that Hungary’s gas consumption has decreased by 20-30% but electricity usage remained at the same level.

Mr. Nagy also mentioned that Hungary’s economic growth is expected to be around 4% in Q3, and the annual growth rate will be around 4.5%. Inflation will likely reach 25% by the end of the year. The minister also added that consumer price caps will remain in place for the time being but they will eventually have to be phased out.

On Wednesday, November 9, new figures were published by the Central Statistical Office which showed that inflation has reached 21.1% in October. Food inflation has reached 40%. Some food products saw staggering y-o-y price increases, like eggs (87.9%), bread (81.4%), dairy in general (75.4%), pastas (58.6%), margarine (58%), pastries (54.7%). The y-o-y price increase of household energy costs was 64.4%.

More price caps

On November 9, Wednesday , the government of Hungary has decided to introduce price caps for two further food items, eggs and potatoes. So far the other products with governmentally controlled prices include automotive fuel (for privately owned cars only), firewood, household energy bills (up to 210 kWh/month), sugar, wheat flour, sunflower oil, UHT cow’s milk, pork (hock/thigh), chicken (breast, back/carcass).

The prices of the two newly included products will be frozen at their respective levels on September 30, 2022. According to Minister Gergely Gulyás, the price of eggs and potatoes will decrease by 25%, and 10%, respectively. The government also expects the new price caps to decrease inflation by 0.1% to 0.2%.

We have previously reported on how a leading agricultural economist sees the effects of the price caps on inflation.

National Trade Association surprised by new price caps

The government’s decision of adding two product categories, potatoes and eggs, to the price cap regime was rapidly realized within its day of announcement, with the publishing of a late night edition of the Hungarian Gazette. (Governmental decree 451/2022 (XI. 9.)). The new regulation entered into force Thursday morning.

The Hungarian Trade Association (OKSZ) has published an announcement in which they asked for customers’ patience because “it is impossible to prepare [for the implementation of the regulation] by the morning,” since “by the time the new regulation was introduced, most stores were already closed.” The alliance was of the opinion Wednesday late night that many small store owners would only be informed of the new regulation Thursday morning – When it would have already entered into force. OKSZ highlighted that changing prices requires more administration than just replacing price tags on shelves.

Milk shortages reported

The news portal Agrárszektor.hu and daily Blikk reported that consumers are facing a shortage of 2.8% UHT cow’s milk in groceries throughout the country. This type of milk is one of the products under the government’s price cap regime, and so the increased demand is a part of consumers’ strategy to save on their groceries, Tesco Hungary told Blikk. The grocery supermarket chain also commented that due to this increased demand, they are in contact with multiple suppliers to keep their stores stocked, however, temporary shortages might still occur.

Avian Influenza reappears

Last week, the National Food Chain Safety Office (NÉBIH) has confirmed the presence of highly pathogenic Avian influenza at two goose farms in Bács-Kiskun County, Central Hungary. The termination of the affected livestock has since been completed. The 3-km-radius observation areas have been set up.

This week, on Monday, November 7, the news reported of two new confirmed cases, at two other goose farms, this time in Csongrád-Csanád County, in Southeastern Hungary. The termination of the livestock populations at both farms, 8300 and 2200 heads of geese, respectively, has been completed. Laboratory testing by NÉBIH confirmed that the animals have been infected by the highly pathogenic H5N1 strain. 

Because of the changing Avian influenza situation in the country, NÉBIH has introduced a new laboratory testing protocol in which samples brought in to the laboratory have to be analyzed with PCR testing within the same day if the samples arrives before 10 am.