Hungary: With rising food inflation, price caps are on the table again

Price caps on the table again

Minister for Economy Márton Nagy has posted on Facebook on Monday about potentially reintroducing the price caps on food in Hungary. The economy minister implied that the government would intervene for the “protection of families,” if needed. Telex.hu commented that Mr. Nagy has already talked about a potential reintroduction of the controversial measure in 2023 and last year as well. The price caps were introduced in 2022, then extended multiple times until the measure was repealed in 2023. On Tuesday, the Ministry of Economy confirmed that the minister was talking about the price caps on food, not the also previously introduced and then terminated price caps on automotive fuel.

Christmas shopping spree didn’t happen – Retail industry had a rough December

With the usual Christmas shopping rush nowhere to be seen, stores in Hungary had a rough holiday period in 2024. Based on the latest data by the Central Statistical Office (KSH), in December, retail sales were up by 0.4% (raw data) or 0.1% (adjusted) compared to the previous December. Compared to November, sales dropped by 1.2%. Out of the last four months of the year, retail sales declined in two, September and December, with a 1.4% drop in September.

According to KSH data, grocery store sales increased by 1.2% y-o-y, and non-food retail sales grew by 0.5% y-o-y in December. However, fuel retail sales dropped by 6.9% y-o-y, due to what the statistical office describes as a significant base effect, with volumes adjusted for calendar effects.

444.hu reported on the recent figures, commenting that the base effect only partially explains the negative trend since in December 2023, fuel sale increases were 3.8% y-o-y. So comparing the 2022 and 2024 figures (filtering out the outlier figures of 2023 to mitigate the base effect), fuel sales decreased by 3.4% compared to 2022 as well.

Looking at the longer term, the portal writes, retail sales grew by 2.6% throughout 2024, which is a “rather anemic recovery after 2023”. That year, store sales fell by 7.9% due to extremely high inflation. This means that by the end of last year, retail sales were only at 94.5% of the level at the end of 2022, the portal concludes.

Shopping tourism to Romania becoming a viable business

Világgazdaság.hu has reported that a new company focusing on shopping bus tours to Romania will start operations in March. Previously, shopping tourism mainly targeted Austria, however, with the January 1 accession of Romania and Bulgaria to the Schengen zone, organized shopping trips, as a business which takes shoppers through the eastern border, became a viable possibility.

The new travel company will start with minibuses taking shoppers from Debrecen and Nyíregyháza (cities in East Hungary) to Romania.

Shopping in Austria is not a new phenomenon in Hungary – Recently, Telex.hu reported on one of the organized shopping tourism routes maintained by the Austrian Parndorf Designer Outlet.

We have reported in January on Hungary’s rising food inflation.

The case of corn

Agrérszektor.hu has recently interviewed industrial stakeholders on the future of corn farming in Hungary. Since corn is still one of the two leading arable crops (alongside wheat), the introduction of new crops and the future prospects of corn are equally important questions.

János Sólyom, a seed product manager at Corteva Agriscience, discussed how drought conditions do not necessarily increase interest in hybrids with an FAO number below 400, as higher heat sums and more sunshine hours in recent years have allowed longer-growing hybrids to mature. Mr. Sólyom emphasized that simply planting corn with higher seed density does not guarantee higher yields.

The optimal planting density depends on various factors, such as soil conditions, irrigation, and fertilizer use. Consequently, the recommended planting density for a given hybrid varies by region. Additionally, farmers' moods and willingness to plant corn vary by region, with higher yields and greater enthusiasm in less drought-affected areas.

Csaba Nagy, the marketing communications manager at KWS, emphasized the importance of risk assessment in corn farming. Mr. Nagy said that early-maturing varieties, with FAO numbers between 300 and 399, have dominated Hungarian corn production for many years.

The recent variable weather conditions have also pushed farmers towards these hybrids. Mr. Nagy stressed that farmers should consider their specific production conditions when selecting hybrids, also highlighting the challenges posed in recent years by the changed climate, the COVID-19 pandemic, and rising energy prices, which necessitate careful decision-making. Irrigation is crucial for maximizing the high yield potential of corn hybrids, but irrigation levels in Hungary remain low.

The seed company RAGT also commented to the portal. Following the severe 2022 drought and the significant rise in gas prices during the COVID-19 pandemic period, farmers understandably shifted towards crops with a shorter growing season. One reason for this is to reduce drying costs, and another crucial factor is to ensure that corn development reaches a later phase by the time summer droughts occur.

Fertilizer sales up, machinery sales down

Agrárágazat.hu reports, based on the latest market analysis by the Research Institute for Agriculture Economics (AKI) that in Q4, 2024, fertilizer sales increased significantly, but agricultural machinery sales declined. Between October and December, fertilizer sales grew by 34% year-on-year. The most sold product was calcium ammonium nitrate (70%), with demand increasing by 41% compared to last year. Superphosphate was the least sought after, with a decline of 15% in sales. Compared to the end of last year, sales prices were 3-22% lower (except for calcium ammonium nitrate and NPK 15-15-15).

Farmers purchased 27% less plant protection products based on data from October to December. The biggest decline was in the purchase of agricultural machinery, influenced by the lack of EU subsidies and the expiration of state and bank programs, the portal writes.