Hungary Newsflash Week 35
Rising land prices, corn production losses, input cost struggles and victorious watermelons - The week in Hungarian agriculture
Corn production may suffer heavy losses this year
Even though crop prices are now 40-60% higher than a year ago, farmers are still facing heavy losses in corn production. Several factors are at play. Firstly, input costs are steeply rising. Russian gas used as fuel in grain drying is now substantially more expensive.
Another factor is that due to the unfavorable weather conditions in the spring, the vegetation period of corn started later, in turn delaying the harvest by 2-3 weeks. This means that more drying was required, exacerbating the effects of higher fuel prices.
Lastly, the damage caused by the hot, dry period in the summer resulted in further pressure. Due to this stress, corn cultures have suffered losses equaling 20-30% of the harvest yield.
Stakeholders expect that the cost increases caused by these difficulties will continue to travel down the value chain into food industry production, and consumers will eventually feel them as well.
Land prices skyrocketing
In Hungary, the rise in the prices of agricultural land continues to rise with virtually no limit. Today, the average price of a hectare of land is 2.5 times higher than it was in 2009.
Farmland prices are rising steadily; according to recent data for the 2009-2019 period by the Central Statistical Office, the price of a hectare of arable land has more than tripled.
While in 2009 the average price paid for a hectare of arable farmland was €1.400 (?) , in 2019 it was more than €4.300 . Similar rates can be expected for grassland and orchards.
In the case of vineyards and forests, the price increase follows a similar trend, but not at the same rate as for arable land/farmland. In 2009, €2.800would have bought you a hectare of grapevines, in 2019, this price had risen to €6.600 . In the case of forests, the figure went from €1.060 to €2.150 in a decade. However, in the latter two cases, the land prices have actually been decreasing for years; following a peak in 2018, the price increase trend started to turn around.
Land rents have increased almost in line with farmland prices, with a 2.5 to 3-fold increase for all types of cultivation. Thus, in 2019, the average rent per hectare of arable land was €172, compared to €75 in 2009. It is interesting to note that the price increase for forest land has not been completely equalized: according to the HCSO, there were bigger jumps in price levels in 2009 and 2015, with no significant changes in the intervening periods.
Egg production threatened by Polish imports
Producers in the egg industry are reporting an incoming flood of Polish eggs on the domestic market in Hungary, shaping market prices. The secretary of the domestic alliance of the sector, Györgyi Molnár, told the agriculture news portal Agrárszektor that international trade and the pandemic both influenced egg production in Europe, leading to a state of massive overproduction.
According to Ms. Molnár, last year’s high level of demand in China, as well as favorably high European egg prices incentivized an increase of egg production in Europe. These factors led producers in France, Germany and Poland to overestimate market demand, leading to a substantial surplus of eggs in the common market. In Hungary, egg prices have been stagnant since Easter, partially due to the rising share of import.
Cost increases might slow down agricultural developments
While produce and feed prices are steadily rising, putting considerable strain on animal husbandry and the food industry, the increasing prices of construction materials might exacerbate Hungary’s problems in the agricultural sector. The increased prices associated with building and infrastructure construction might not only slow down investments into development, but could also drive up the prices of agricultural machinery, reports the portal Agrárszektor. A high-level agricultural analyst at OTP Bank furthermore stated to the news portal that EU and governmental grant schemes might also cause waves of price increases, as prices of agricultural machinery seem to increase with the availability of public funds.
While the widespread reopening after the pandemic measures also brought with it an increase in product prices due to an increase in consumer demand, the additional costs associated with construction and building materials are rising at a steeper rate. Put together with the weather damages in field crop production, these combined increases in the costs of production and business development will continue to present obstacles for farmers who are looking to invest and expand.
Hungarian Watermelons Going Strong
This summer, the institution Agriculture Marketing Center has again launched its annual watermelon popularization and awareness raising campaign. Tamás Tarpataki, Deputy State Secretary for Agricultural Market Affairs, emphasized at a press conference during the campaign’s launch event that Hungary is the fourth-largest watermelon producer in Europe after Spain, Greece and Italy.
The Deputy State Secretary also stated that this summer, around 2200 Hungarian farmers grew watermelons over an area of 3700 hectares.
Hungarian watermelon production has had a good season this year. While input costs also increased in the past period, Hungarian producers will probably be able to supply the domestic market until the end of September. There have also been changes in the production of watermelons. Whereas previously Hungarian consumers preferred large watermelons, in the past couple of years Hungarians started searching for smaller, sweeter, higher-quality seedless melons and farmers started to transition into the production of these breeds. Stakeholders now believe that the most important issue is to get the message out to consumers, convincing them to look for quality Hungarian products.