Hungary: Surprises around the increase of grain prices

Annual price rise of grain surprisingly moderate in Hungary

Data from the Institute of Agricultural Economics (AKI) shows that in the third week of February, the average producer price of milling wheat in Hungary was €292.61 per ton (excluding VAT and transport costs), which is a 7% increase compared to the price of the same period in 2022.

Meanwhile, feed wheat was traded at €277.24 per ton, 2% higher than last year's price. Feed corn was sold for €269.08 per ton, which is 3% more expensive than a year ago, in the third week of January. In the third week of February, the producer price of corn was €252.92 per ton, which is 3% higher than the price of the same period last year. The findings were published by Agrárszektor.hu.

We have previously reported on the effect of the influx of Ukrainian grain on the market in Hungary and the government’s move to respond with strict quality control measures.

National tree nurseries as well as firewood and construction material facilities to be established by government

The news portal Hvg.hu reported this week that a new proposal has been put forward by the government of Hungary on the amendment of construction laws in order to establish two new, governmentally-operated services: A national system of firewood and construction material sites, as well as a national chain of tree nurseries.

The Hungarian abbreviation “TÜZÉP” is an acronym, referring to a type of company that specializes in firewood, timber and generally organic construction materials. The new legislation would establish a nationally owned chain of these facilities, together with nationally owned tree nurseries.

Previously, there have been reports in the press about possible shortages of nursery products. The President of the Hungarian Association of Ornamental Horticulturists, László Orlóci, has called for the establishment of state-run nurseries.

In essence, the government plans to create a nursery school network to supply raw materials for state investments and public greening. The draft law aims to ensure supply security by establishing tree nurseries. It however does not specify the source of the plant materials, reports Hvg.hu. Private individuals would not be able to purchase from these facilities. Hvg.hu summarizes that the idea behind the national tree nurseries is to prevent the last-minute purchase of plant materials through hastily announced public procurement tenders for state and municipal investments, which often result in the purchase of foreign goods due to tight deadlines.

Allegedly, the government has identified and possibly acquired one of the largest enterprises, the Alsótekeresi Tree Nursery. However, one of the owners of the company denied the information to Hvg.hu.

Hvg.hu also adds that the Hungarian government appears to be sincere in their support of the distribution of domestically bred plants through the National Biodiversity and Gene Conservation Center, which has received over 12 billion forints in funding. However, the news portal adds, this commitment is questioned by the fact that a few years ago, the Elvira Estate gene bank, which dealt with horticultural propagation materials and farmed 400 hectares of land and 40 hectares of orchards, was almost destroyed to make way for an industrial park. The government even considered relocating the National Agricultural Research and Innovation Center's research station in Érd, but after public opposition, they looked for another location.

Organic farmland doubled in Hungary in the 2010s

The size of organically farmed land in Hungary has doubled between 2012 and 2019, according to Oszkár Ökrös, Deputy State Secretary for International Relations at the Ministry of Agriculture, who spoke at the BIOFACH Trade Fair for Organic Food.

Although the organic area has slightly decreased between 2020 and 2021, 5.91% of all agricultural land is still used in organic cultivation. The deputy state secretary further added that thanks to a new organic support program launched in 2021, it is expected that approximately one thousand new organic producers and an expansion of around 40 thousand hectares of organic land can be expected from 2022 onwards.

Mr. Ökrös added that the national action plan for Hungarian organic farming places a strong emphasis on coordinating support tools systematically and increasing domestic demand and supply. The deputy state secretary also held bilateral talks with Kristina Zeltner, the project director at the Nuremberg Exhibition Center, to improve the visibility and positioning of Hungarian companies and innovations. Ökrös proposed the creation of a geographical territorial award that would not focus on product categories, but would give smaller countries a chance to win.

In 2021, we reported on Hungary’s placement within the top 10 most dynamically developing organic producer countries.

Investments declined by 6.3% in the end of 2022

In Q4 2022, investment volume decreased by 6.3% due to decreasing activity in budget, households, and businesses. However, significant industrial investments, primarily in electric machinery and vehicle manufacturing, grew by 12.7%, reports Trademagazin.hu.

The processing industry, which accounts for 30% of national investments, grew by 12.7%. Investments in agriculture, forestry, and fishing decreased by 8.1% in the quarter, which was due to the high base and outstanding performance in the first half of the year, as well as the reduced development spending of larger companies engaged in animal husbandry and plant cultivation. However, the expected and increasingly critical labor shortage in agriculture may generate significant investment demand for precision farming, while the increasingly dry and unpredictable weather conditions may require significant investment in irrigation development. Agricultural development can also be stimulated by unprecedented grant and rural development support.

Overall, investment volume increased by 1% in 2022, while a 5-6% decline is expected this year.

Chicken meat now more and more expensive

Poultry meat prices have been steadily rising in Europe for years, including in Hungary, where chicken meat is one of the most popular meat products. The price increase has been significant, with processed chicken breast fillet sales prices jumping by 51.3% to approximately €5.93/kg. According to data from the European Commission, the average price of whole chicken in the European Union was €257 per 100 kilograms in the first six weeks of 2023, a 16.5% increase compared to the previous year. In Hungary, the price increased by 58.9% to approximately €2.85/kg.

The Institute of Agricultural Economics (AKI) reports that in 2022, Hungary saw a 12.7% decrease in the amount of live-weight poultry slaughtered, compared to the previous year, with 635 thousand tons being produced. The breakdown includes 459 thousand tons of broiler chicken (-5.2%) and 83 thousand tons of turkey (-12.6%). Meanwhile, according to Hungary’s Central Statistical Office, the country's export of poultry meat decreased by 18.1% to 195 thousand tons, while the value of exports increased by 18.0% to approximately €677 million from January to November 2022 compared to the same period in the previous year. On the other hand, the volume of imported poultry meat increased by 25.1% to 78,000 tons, while the value of imports rose by 64.5% to approximately €189 million during the same period. According to the AKI’s data, the live-weight producer price for broiler chickens increased by 50.8% to approximately €1.45/kg, and for turkeys by 48.5% to approximately €1.94/kg in the first six weeks of 2023 compared to the same period in 2022.

Avian influenza continues to cause serious disruptions in the sector, with producers having to close down farms or cull thousands of animals each week.

Previously, we reported on how the price caps on food items, to be lifted in April, (which includes chicken breast and rump/carcass) affected the economy according to experts.

Fruit prices expected to skyrocket this year

Pénzcentrum.hu reports that experts are now predicting a significant rise in fruit prices in Hungary. The upcoming spring frost could have an impact on permanent fruit crops and ultimately on fruit prices. However, some stakeholders point out that while statistics indicate that Hungary has the highest fruit price increase in the EU, it is important to differentiate between the prices of domestically grown and imported fruits since the discrepancy can lead to statistical distortions.

Ferenc Takács, Vice President of FruitVeb, highlighted that severe cold snaps might be expected while some fruit trees are already beginning to bloom, leading to the dangerous spring frost damage. Mr. Takács remains optimistic and hopes that the spring will pass without significant damage. Cold snaps in the spring can be especially disastrous for fruit cultivation, as was the case in 2021 in Hungary.

"Apricot may already be in bloom, maybe pear and sour cherry, which are already budding at this time," said Mr. Takács. "The winter was mild with lots of sunshine, so it certainly helped these fruit trees, and so far, we cannot speak of frost damage. Of course, the weather may still change in the coming weeks, but I am optimistic: maybe we will get through this spring without serious damage, because it is worth knowing that spring frost is much more dangerous than winter frost. At minus two to three degrees, there can already be trouble, but I hope that this will not happen."

Furthermore, Mr. Takács stated that although Hungary is showing the highest increase in fruit prices in the EU, some fruits are cheaper in Hungary than elsewhere. The vice president emphasized the need to distinguish between domestically grown and imported fruits when analyzing prices, as this would provide a more accurate and unbiased view. For instance, due to rising costs caused by the energy crisis and also due to the drought last year, apple prices are still not high enough for producers to realize significant profits.

Dairy producer prices rising

The news portal Magyar Mezőgazdaság reports that according to the latest data from AKI, the average price of raw milk in Hungary increased by 1% in January compared to December, reaching €0.64 per kilogram, despite a slight decrease in protein and fat content and a 1% increase in the base price. However, the export price of raw milk decreased by 15% compared to the previous month and was 19% lower than the average producer price.

Over the past year, the national average producer price of raw milk in Hungary increased by 73%, surpassing the EU average. The import value of dairy products increased by 35%, while the export value increased by 62% between 2021 and 2022. The average price of Hungarian Trappist cheese and butter also increased significantly compared to similar products from Poland, Germany, and New Zealand.