Hungary Newsflash 17, 2022

The rising prices in the dairy industry and the egg sectorn, a conundrum around Hungarian chicken breast production, new data on the current trends in the Hungarian land market and the environmental degradation process can endanger farming all over Hungary - The week in Hungarian agriculture

A man is browsing at the counter of a meat vendor at the Grand Market Hall in Budapest.
Beeld: ©Zoltán Szászi
The regulation that puts a price cap on basic food items affects the meat industry in Hungary - And the country might just run out of chicken breast as most producers will find export a more economically viable option than to supply the domestic market.

Is Hungary about to run out of chicken breast?

The president of the Poultry Product Council, Csorbai Attila, has recently stated at a conference that the rising input costs and uncertainty in the market due to the war in Ukraine are the greatest challenges that the poultry meat industry currently faces, reports the economic and business news portal Világgazdasá

According to Mr. Csorbai, feed, energy and other input costs have risen to an unmanageable level, and everyone in the product chain is trying to pass these into their transfer prices. At the end of the chain, consumers will feel the price increase more intensively once the price cap is removed.

However, Mr. Csorbai also added that should the price cap measure be extended much further, domestically produced chicken meat will “disappear” from groceries in Hungary, as price levels in foreign markets make exporting a much more profitable prospect.

“It is also a question of how European income conditions will change and where the current trends leading to vegan and vegetable-based eating and declining meat consumption are heading,” added Mr. Csorbai.

Avian influenza has also heavily affected the industry. According to the latest figures, the volume of production of chicken breast has dropped by 8-10% in Q1, 2022.

Dairy industry: Rising input costs drive price increases

High inflation and increasing input costs are now challenges that the dairy sector faces, stated Zoltán Harcz, director of the Dairy Product Council to the agriculture and rural affairs-themed news portal

According to Mr. Harcz, record high cereal prices are hurting the industry since feed makes up for more than half of the input costs of the dairy sector. The director has also added that this development, put together with the increase of milk prices in the surrounding countries, has been responsible for the more than 20% y-o-y increase in the producer price of raw cow’s milk.

Mr. Harcz also commented that the potential to increase efficiency has its logical limits at dairy farms, and the domestic industry has reached the point where farmers have to raise their prices, an increase which travels down the value chain all the way to the consumers.

The director also added that since Hungary’s share in the total milk and dairy production of the EU is around 1-1.5%, dairy prices in the country are very much dependent on the trends of the common market, and that a timely end to the war in Ukraine would bring much needed stability to the economy with much more predictable input price trajectories.

A steep rise in egg prices

According to the latest statistical data, the prices of eggs coming from caged hen farming have increased by 20% y-o-y by Week 15, 2022. The producer prices of eggs from straw-bed housing (deep litter) have increased by 25%.

Stakeholders believe that due to rising input costs, many egg farmers have been selling near or exactly at break-even price levels, and that if they cannot raise their prices, many producers will cease their operations.

According to Agrá, Avian influenza has negatively affected the volume of production in Hungary, which is in line with EU-level and global trends. These issues have also caused massive drops in productivity in France as well.

“There has been a slight reduction in the number of eggs available for sale in the European Union, but this does not mean that there is a problem with the supply. There is no shortage, the weight has just shifted to the demand side and that means that prices have gone up,” commented Dr. Györgyi Molnár, agriculture secretary of the Egg Alliance, the Hungarian industrial union of the egg sector.

According to recent data by the Institute of Agricultural Economics (AKI), the packing price of table eggs (M+L) from caged housing in Hungary was €0.091/piece in the first fifteen weeks of 2022, which is a 21.6% y-o-y increase. Similarly, the packing price of deep litter eggs (M+L) was €0.098/piece in the same period, which is a y-o-y increase of 25.4%.

Agricultural lands in Hungary
Farmland near Tagyon, Hungary. The current prices of farmland in Hungary put the country somewhere in the middle in the EU.

Land rent prices: On an EU level, Hungary is somewhere in the middle

According to the latest data by the Agrotax Kft., a company that specializes in the analysis of the land market, the changes in the prices of purchasing and of renting agricultural land put the country on a scale from the cheapest to the most expensive in Europe, firmly in the middle, reports Agrá

According to data by Eurostat, the average annual rent per hectare in Hungary was €173/ha in 2020. The cheapest land to rent was in Northern Hungary, with an average price of €125/ha, and the most expensive region was Southern Transdanubia, with average prices of €212.

However, Agrotax Kft. has more accurate data based on their ongoing multi-annual monitoring of the domestic land market.

According to the company, in 2021, the average market price of arable land per hectare in Hungary was €5.3 thousand, which is a 14% increase compared to the previous year. However, the average rent of arable land was €217.6/ha/year, a 9.2% increase from the price levels in 2020.

Last year, average prices were the highest in the Southern Great Plains (€239/ha/year). The cheapest region is still Northern Hungary (€185.6/ha/year). In the counties Hajdú-Bihar, Bács-Kiskun, Szabolcs-Szatmár-Bereg and Békés, annual rent prices have been consistently over €238 per hectare per year. The lowest price was paid in Zala county (€168/ha/year).

For comparison, in 2020, the average per hectare price of arable land in the Netherlands was €69,632. Within the territory of the EU, the lowest price for farmland was in Croatia (on average, €440/ha) and certain territories in the Netherlands are the second-most expensive areas to buy arable land in (between €100 and 110 thousand), but the most expensive place in the EU to buy arable land is the Canary Islands (€120.477/ha)

Erosion endangers agricultural lands in Hungary

The humus content of arable lands in Hungary is dropping at an alarming rate according to Dr. Endre Dobos, senior university lecturer and head of the Institute of Physical Geography and Environmental Sciences at the University of Miskolc, reports the news portal

According to the professor, while the ideal level for humus content in arable land is somewhere in the range of 5-6%, this figure has dropped to an average of 2-3% in farmlands in the country. In short, the level of organic content in the soil that farming depends on has halved.

Dr. Dobos has also added that this causes multiple issues, including a decrease in various functions in the soil, including its capacity to retain water and nutrients, a decrease of structural integrity and crucially, it also leads to a drop in biodiversity.

The professor also adds that this erosion process is tied to other issues. A loss of humus content can lead to a loss in retained water and nutrients, cascading into a runaway process in which soil fertility will drastically drop.

“This process is not linear. It is drastic. If we let this continue now, it will throw the soil back tens of thousands of years,” Dr. Dobos concluded.

Dr. Dobos also added that it is true that the state of soils in Hungary is still good but that actions should be taken in this area, including the halting of taking organic material out of the soil and of hay burning. Another issue is that modern tractors can weigh up to fifteen tons, and their presence on the landscape puts considerable physical pressure on the soil, increasing the erosion process.