Hungary: Compensation for farmers due to weather extremities

Climate change - Mercurial weather, hailstorms, spring frosts and devastating floods. An overview of governmental measures aimed at vulnerable farm holds in Hungary.

Storm is gathering over a wheat field

The Hungarian Ministry of Agriculture recently decided on a compensation payment scheme for elemental damages in the agricultural sector for 2019. 14 billion HUF will be paid for 6,855 recipients for ca. 300,000 hectares. 49% of the total sum is allocated for drought damage compensation, 21.5% for spring frost damage compensation, which mainly hit fruit growers. Mostly affected was Szabolcs-Szatmár-Bereg County North-eastern Hungary bordering Ukraine, with 86,965 hectares of cultivated land affected.

Background on the Hungarian system of damage compensation due to weather extremes

The Hungarian agricultural governance has climate change adaptation high on the agenda, incorporating digitalization & precision agriculture and post-damage financial instruments. While the transition to precision agricultural technology gained momentum in the past years, a hybrid damage compensation system has been supporting farmers for thirteen years in times of need, when winter frost, spring frost, autumn frost, floods, inland inundation, storms, heavy rainfall and hail damage crops.

In a country which is increasingly prone to the effects of climate change, notably floods, inland inundation as well as severe droughts, agriculture is a risky livelihood for the vast majority of small and medium farms. In order to mitigate income losses due to extreme weather events and keep fragile farm holds in business, the two-pillar “agricultural damage mitigation system” provides help. The system was reformed in 2011, with the ‘Act on the risk management of weather and other natural events concerning agricultural production’.

The following main criteria sets eligibility for compensation:

  • Certified yield loss at minimum damage threshold 30% and yield value loss at minimum 15% (calculated as: past five years, where the minimum and maximum yield producing 2 years are deducted and average is calculated from remaining 3 years)
  • Mandatory membership of a “risk-sharing community”, where an individual’s cultivated land area fulfils either:
    • 1 ha for plantations
    • 5 ha for open-air vegetable cultivation
    • 10 ha for other arable crops
    • 5 ha for plantation combined with open-air vegetable cultivation
    • 10 ha for categories combined all together
  • Smallholders whose plots do not reach the area requirements above are allowed to voluntarily join, provided they pledge 3 years continuous membership
  • Annual membership contribution calculated on territorial base: 3000 HUF per hectare for vegetables production and plantations, 1000 HUF per hectare for arable crops

Farmers can apply for damage compensation within 15 days after a damage event. November 30th is the last day in the year for submitting an application. The compensation payments for 2019 are due in the upcoming weeks. The Paying Agency (in Hungary the State Treasury) informs beneficiaries until March 31st the following year.

As for the ‘second pillar’, the state incites farmers to have additional private agricultural insurances. The domestic market of agricultural insurance is increasing and possibilities proliferates. The government aims to enhance farmers to opt for insurance schemes with a special 65% insurance fee compensation. As the future brings increasing number of unpredictable weather events, tailor-made private insurance schemes will play bigger role to provide the financial safety net for those who are already in business and last but not least for those are planning to set up their agribusiness.

Source: Ministry of Agriculture, State Treasury

Image credit: "Dry with impending wet" by Let Ideas Compete, via Flickr