Hungary Newsflash, Week 24, 2022

Price cap policies extended again, the rising prices of agricultural products, the fallout of the "tax on extra profits," and increasing export figures of farming products - the week in Hungarian agriculture

Beeld: ©Kateryna Hliznitsova
Hungary's agricultural figures continued to increase in the first quarter of 2022.

The government further extends the price cap measure

Prime Minister Viktor Orbán has posted on Thursday afternoon in social media about the government’s decision to further extend the time frame of the various price cap measures that the government put into place between the fall of 2021 and the spring of 2022.

The measure that puts a price cap on seven basic food items will be extended until October 1, 2022. The government’s loan moratorium and interest rate cap will be extended until December 31, and the price cap on fuel will also be extended until October 1.

Producer prices of agricultural products increased further in April

According to new data by the Central Statistical Office (KSH), in April, agricultural producer prices increased by a mean 45.7% y-o-y, with the rate of increase accelerating by 8.3 percentage points compared to March.

Crops and horticultural products saw a 49.3% rise in prices since April, 2021. The prices of live animals and animal products increased by a mean 36.9% in one year.

The purchase price of cereals and industrial crops increased by 64.9% and 68.5 % y-o-y, respectively. The acceleration in price increase for cereals was 6.4 percentage points compared to March, but for industrial crops and oilseeds it reached 13.3 and 14.6 percentage points, respectively.

The price of wheat rose by a staggering 62.9% y-o-y, only surpassed by maize with a price increase of 66.8%.

The average price increase of oilseeds was driven up by an 88.7% rise in rapeseed prices, while the annual rise in sunflower seed prices was less steep at 65.3%, an increase of 10.4 percentage points since March.

The purchase price of potatoes increased by 32% y-o-y. Vegetable prices rose by 23.7%, while fruit prices decreased by 8.2% on average.

The purchase price of live animals increased by an average of 38.6%, of which the price increase figure for pigs for slaughter was 40.5%, for poultry it was 39.3%, chickens 42.3%, ducks 54.8%, turkeys 26.3%, geese 27.0%, beef 46%.

The prices of animal products increased by an average of 33.6% y-o-y, of which the purchase price of milk was 28.3%, while the price of eggs was 21.5% higher than in April last year. In total, consumers had to pay 88.1% more for animal products than in April, 2021.

A woman shopping in a grocery store
Beeld: ©Jeremy Smith
A new analysis by the research institute GKI Gazdaságkutató concludes that companies will have no choice but to increase prices further, passing on the burden of the government's "tax on extra profits" to consumers.

“Tax on extra profits” will be ultimately paid by consumers, states market research institute

The economy and market research institute GKI Gazdaságkutató has analyzed the situation of the sectors that have recently been targeted by the government extra corporate tax policy, referred to as the “tax on extra profits,” and has found it doubtful that the “extra taxes would not be passed on to consumers,” as was stated by the government, reports

According to the research institute, out of the sectors in question, the highest profit was realized by the banking sector (€1.4 billion), the energy industry (MOL corporation: €1.4 billion, biofuel producers: €150 million), and the grocery trade sector (€728 million).These sectors will see their corporate taxes increase by €627 million, €753 million, and €151 million, making the ratio of taxes compared to the profit 50%, 58% and 18% in the three industries, respectively.

The increased tax burdens will weigh heavy on the other targeted sectors as well. The share of corporate taxes compared to the total income will be 63% for the insurance sector, 40% at small retail chains, and 71% for the bioenergy business. Furthermore, these companies will face other difficulties in the form of increasing costs due to the increasing prices of energy and raw materials, the weakening Hungarian Forint, etc.

GKI finds it highly improbable that the companies of these sectors would not pass their increased tax burdens onto the consumers with price increases. The research institute calculates a 1.6 percentage point increase of the consumer price index solely due to the government’s “tax on extra profit” measure.

Hungary’s agriculture export continues to increase

The export of agricultural and food industry products contributes considerably to Hungary’s positive export balance, stated the Ministry of Agriculture to the press agency MTI.

According to the press release, in the past twelve years, agricultural exports increased considerably, by 134.8%, while the net export balance of agricultural products rose by 104.5%.

In the first quarter of 2022, Hungary’s agricultural export reached €3.05 billion, with imports amounting to €2.069 billion, and the net balance of the export resting at €982 million. According to the ministry, this led to a 1% increase of Hungary’s net export balance and to the reduction of the country’s budget deficit.

The ministry further added that the increase of the value of agricultural exports was mainly driven by the trade of vegetable/plant oils, beverages, alcoholic spirits, vinegar, oilseed crops and rapeseed. The categories in which export declined were maize, other plant products and live animals (cattle) compared to March 2021. The products that were behind the increase of export between January and March this year, have been oilseeds, cereals and meats, while the import of live animals, tobacco and processed tobacco replacement products have decreased y-o-y.

The press release also highlighted that Hungary’s main export targets are Germany, Italy, Romania, Austria and Poland, while the main import partners are Germany, Poland, the Netherlands, Slovakia and Austria.