Hungary Newsflash Week 46

Hungarian stakeholders divided over Green Deal

Stakeholders in Hungary are divided over the EU’s Green Deal package, the news portal Infostart reports based on their interviews with key people on their channel Info Radio.

State Secretary Zsolt Feldman of the Ministry of Agriculture expressed that while the importance of biological diversity is undeniable, Hungary does not have the necessary instruments to implement an increase of the share of organic production to 25%. The State Secretary also commented that while “the area used in ecological farming doubled,” this happened fundamentally based on subsidy policies and that an increase to 25% does not have either the subsidy instruments nor the necessary market, throughout Europe.

Dr. Dóra Drexler of the Hungarian Research Institute of Organic Agriculture (ÖMKi) commented that while the target figures are not feasible in the case of Hungary, it would be economically viable to transition into organic production as soon as possible, because the market for organic products is dynamically growing. Director Drexler also remarked that in Hungary, where the share of organic agriculture in the agricultural area is around 5-5.5%, an increase to even 15% would be an ambitious target. While yields in traditional agriculture involving fertilizers and plant protection chemicals can be 10-15% higher than in organic agriculture, she added, the sheer volume of wheat and corn harvests for example aren’t the only important factors, especially since Hungary has an annual agricultural output that could feed 25 million people.

Katalin Rodics of Greenpeace Hungary thinks however that Hungary has the necessary level of innovation and the right environmental conditions to implement the EU directive. Ms. Rodics added that 80% of Hungary’s agricultural land area would be fit for chemical-free organic production and commented that today four to five hundred individually tested chemical products are in use in agriculture, however, it is impossible to research how these affect each other and how much various chemical agents catalyze the effects of others.

Poultry import soars, export dwindles

Based on the latest report on domestic meat sectors by the Research Institute of Agricultural Economics, analyzing meat commerce figures for the January-August period in 2020 by the Central Statistical Office, the Hungarian poultry meat export in the first half of the year decreased by 12% to 129 thousand metric tons. Meanwhile, the import figure increased by 6.7% to 50 thousand tons. The majority of the poultry meat import comes from Poland, Romania and Austria. (Here is an overview of the poultry sector in Poland.)

Within the poultry category, the export of chicken meat increased to 84 thousand tons (+4%), however, the export of turkey meat decreased to 18 thousand tons (-23%). The largest target markets were Romania, Austria, Bulgaria, Slovakia, Ukraine, Germany, France, Czech Republic, Switzerland and the UK.

The breakdown of the poultry import shows that the influx of chicken meat increased to 36 thousand tons (+16%), and the import of turkey meat decreased to 4 thousand tons (-9%). The largest contributors to the Hungarian poultry import were Poland, Romania, Austria, Slovakia, Germany and the Netherlands.

Poultry: COVID-19 and other problems

The Hungarian Poultry Product Council published a situation assessment of the difficulties of the Hungarian poultry sector.

According to the industrial alliance, the combined effects of the COVID-19 pandemic, Avian Influenza and high cereal prices all affected the Hungarian poultry sector severely this year. The Avian Influenza outbreak alone caused damages worth €84.4 million. Meanwhile, high cereal prices led to higher input costs for domestic producers. And because of the coronavirus disease pandemic, the serious disruptions that the tourism & HORECA sectors suffered, as well as a -25% drop in demand in the food market, all traveled up as shockwaves through the supply chains, affecting the poultry sector. The alliance maintains that what is needed is a real-time online sectoral database as well as the stabilization of soaring cereal prices which inflate animal feed costs.

Food consumption and recession: Macroeconomic figures

A recent analysis by Takarékbank, published by the news portal Agrárszektor studied the relationship between food consumption and economic recession.

Based on consumption figures between 1996 and 2006, a period of economic expansion, and then 2009 and 2011, the years of the global financial crisis, it is clear that in good years, the proportion of food in total consumption steadily decreases (-10% by 2006), however, in periods of crisis, this trend turns around. Between 2006-2009, food consumption in absolute numbers increased by 4-8%, and starting with 2012, it reached an annual 2-10%. These figures are also affected by inflation, which increased between 2006-209 and slowed down between 2009-2011.

The study shows that while consumption traditionally decreases in an economic crisis, the comparative weight of food consumption actually increases. Inflation also inflates the price of food, which also contributes to the increasing absolute numbers in aggregate food consumption value.

The study shows an important pattern in the food market. This year, food products were a major part of the spring shopping spree following the advent of the pandemic crisis, and food inflation accelerated in 2020 as well. You can read more about the effects on retail commerce in our Week 45 Newsflash here, and we reported on the effects on the economy as a whole as well as the trends in the agroeconomy and food inflation in our Week 43 Newsflash here. 

The role of Hungarian food production in global supply chains

A new analysis by Takarékbank published by the news portal Agrárszerktor shows that the Hungarian food sectors have become more integrated into global supply chains over the last decade, which is one reason why the agroeconomy was more severely hit by the 2020 COVID-19 pandemic than the 2003-2007 SARS outbreak.

According to the analysis, compared to a 2008 base value, the total Hungarian agricultural international commerce increased by 40% by 2018. While the import of plant products increased by 80%, the export of food products doubled in the last decade, showing that food domestic production capacity expansions primarily supported the country’s food export. These changes correlate positively with the increase in Hungary’s integration into the global economy.

This can be measured by changes in Hungary’s KOF Globalization Index. In the past fifty years, the value of this index doubled, with a steep climb occurring after the end of socialism in 1990. By 2016, the value of the index reached 84.98 out of 100 points, making Hungary the 14^th most globalized economy by the end of the 2010s decade. The analysis concludes that for a country like Hungary, (which is small in size but has a large potential in agro sectors), focusing on foreign markets is key for economic development. To a degree, this global integration can explain why shocks in the international markets can affect the Hungarian agroeconomy to a larger extent now.

Food prices continue to rise

According to the latest statistical data by the Central Statistical Office, Hungary’s mean annual consumer price increase slowed from the September figure of 3.4% to 3% by October. The main reason behind this is probably the slowing price increase of food products, alcoholic beverages and tobacco products as well as the price decrease of automotive fuel. Analysts previously projected a 3.1% figure.

On the month-to-month scale, average consumer prices increased by 0.2% between September and October and core inflation decreased from 4% to 3.8%. On a year-to-year timescale October 2020 food prices were 6.5% higher than those in October 2019, compared to September’s 7.3% year-to-year price increase. However, the breakdown of the aggregate figure shows that the price increase of fresh vegetables accelerated by 5.9 points to 7.2% while that of fresh fruits decelerated by 9.6 points to 31.4%. The price increase of pork meat rests at 6% and the price increase of bread also decelerated to 7.7% from the 8.1% September figure.

Apples in a tight spot

Due to the COVID-19 pandemic, demand for apples increased significantly throughout Europe. However, Hungarian apple producers are in a tight spot: Spring frosts have devastated apple orchards in the spring, causing substantive damages in the harvest. According to the latest figures, harvest yields have been halved because of weather extremities throughout the country. Due to these factors, the price of apples have doubled this year, reaching as high as €0.98-€1.27/kg.

Hungary produces apples over around 27 thousand hectares of farmland. A structural weakness lies in a general lack of modernization. Most apple orchards were planted before the end of socialism, lacking modernized infrastructure to mitigate weather risks.

Hungarian innovation in hydroponics

A Hungarian company, Green Drops developed a new hydroponic system called Green Drops Hydroponics, which offers a new solution to growing fresh vegetables without soil, with low input and in a small space, reports the news portal Hello Vidék. According to manager Gréta Rácz, the system has a 90-liter water tank, and is fully customizable. At full capacity, it operates as a 35-story hydroponics tower, housing 350 plants on one square meter, and only requires growth medium-enriched water.

According to Ms. Rácz, hydroponics require 90% less water than conventional horticulture and can be a good answer to the problems caused by weather extremities.

Photo credit:

"Apples" by Ylanite www.pexels.com/@nietjuh via Pixabay

"Supermarket" by Tumisu via Pixabay