Hungary Newsflash, Week 8, 2022

Shifting trends and a new subsidy in Hungary's pig sector, the successes of the cattle and sheep sectors, a labor price crisis in the making, and the reasons for the decline of rapeseed farming - The week in Hungarian agriculture

Tractor driver driving a tractor in the field. Also, the sun is setting in the background.
With the latest minimum wage increase and the general income tax break for young employees, tensions are rising in the labor market. This will further complicate the fact that the agriculture industry has been struggling with labor shortages for years.

Pig sector and pork – Changing export figures and prices

The Central Statistical Office has recently published the latest data on the changes in Hungary’s foreign trade in pork.

Between January and November 2021, Hungary’s export of live pigs dropped by 9% to 30 thousand tons. The country’s most prominent trade partners in this were the Netherlands, Romania and Austria. The import of live pigs also decreased by 3%.

Within the same period, the volume of imported pork increased by 7% to 129 thousand tons, two-thirds of which came from Germany, Spain and Poland.

In the past year, the price value of domestic pork also increased. In January, 2022, the price of pork was €1.31 per kilogram in split warm carcass weight, while the processor price of cut pork (shoulder, loin, thigh) went down by 4%.

Stakeholders in the sector expect a considerable increase in the consumer prices of pork in the spring. While the retail price of pork (bone-out) was €2.32 in week 5, 2021, in the fifth week of 2022 it was €2.37. This rise is due to the increase of input costs in the pig sector, which producers will start to integrate into their pricing.

While the pig sector is hurting all through Europe, Hungarian producers are struggling with pandemic-related market difficulties on the one hand and the problems caused by African Swine Fever on the other. Hungary’s pig sector makes up for one-third of the country’s meat industry.

€11.2 million one-time support to the pig sector

Minister for Agriculture István Nagy has announced on Monday that due to the drastic increase in energy and feed prices in the sector, the government created a new support package with a one-time grant scheme. Farmers will be able to apply for grant amounts worth €60 per sow and the scheme will be worth €11.2 million in total.

In the announcement, Minister Nagy has called attention to various policy measures from the past year that the government believes aid the pig sector. These include subsidies for facility effectiveness raising investments, the increase of budget for animal welfare subsidies, loan interest subsidies and the government’s crisis insurance system.

Cattle and sheep sectors going strong

Trade statistics from last year show that Hungary’s live cattle export had increased by 20% between January 2020 and January 2021, with the main partners being Austria, Turkey, Croatia, Kosovo and Italy. Import figures did not change substantially. Most of Hungary’s cattle import still comes from the Netherlands, Germany, Latvia and Romania.

Gross export figures for beef decreased by 9%, however, the total value of the export increased by 5%, while the import decreased in volume by 19% and increased in value by 3%.

Sheep farmers are enjoying high lamb and mutton prices on the European market, which had been driven up by Brexit and the consequent shortage of lamb and mutton in the common market.

European Muslims as well as Arabic and/or majority Muslim countries with increasing demand in the European neighborhood are creating new market opportunities for Hungarian sheep farmers. Market assessments project that the upswing of the mutton and lamb trade will continue for years – Although feed prices, if for a lesser extent than in the poultry and pig sectors, are increasing in the sheep sector as well.

Rapeseed field in Hungary. Sunshine, blue skies, yellow flowers.
Beeld: ©Dénes Kozma
Rapeseed field near Budapest, Hungary. While between 2015 and 2018, rapeseed cultivation increased by 50%, it has been declining since and the current figures show that the trend is not likely to turn around in 2022 either.

Labor price crisis on the horizon

Hungarian agricultural sectors have been struggling with labor shortages for years. While worker unions and pressure groups complain about rampant inflation, employers complain that in the previous decade, the price of labor as an input cost has risen in the agriculture industry disproportionately to added value.

These issues might soon come to the surface as the minimum wage increased to €547.1 in 2022 and the government has recently introduced a blanket income tax break for young employees under 25.

According to a recent report by the news portal Hello Vidék, wages will not increase equally in the economy and less educated workers will receive less, projecting wage increases between 4% and 19%.

Moreover, unreported employment will probably increase and there will be employers who report full-time employees as part-time.

The same time, problems started to come to a head as employers started differentiating in wage raises between age groups. It seems that the government’s global “young employee tax break” program did not yield the expected results since many under-25 employees face tensions at their workplace and received considerably lower raises which employers believe are compensated by the tax break.

As the economic issues of the post-pandemic era continue, Hungary is now preparing for general parliamentary elections in April.

Rapeseed production in rapid decline in Hungary

Rapeseed farming was the hyped trend of the 2010s decade in Hungary and between 2015 and 2018, the total land used in its cultivation rose every year, from 220.5 thousand hectares to 330.5 thousand hectares – A 50% rise within four years.

Then, after 2018, rapeseed farming went into a steady decline and by 2021, the land area used in rapeseed cultivation had shrunk to 261.2 thousand hectares. 2018 was also a record year in total yield, with one million metric tons of rapeseed produced in Hungary, and by 2021, this had also declined to 772 thousand tons.

In the second half of the last decade, rapeseed farming continuously faced weather-related challenges. However, cultivating rapeseed can also be a gamble economically. Stakeholders expected 2020 to be the turning point for rapeseed farming in Hungary as the EU switched to the E10 automotive fuel blend standard, which was supposed to boost bioethanol production significantly.

However, unexpectedly, the pandemic happened and rapeseed farming took a massive blow as global fuel prices plummeted by 40% in a few months while first the health crisis and then the economic crisis unfolded.

Unlike maize which is a versatile crop that can be used for almost anything, rapeseed has a much lower utility and due to a lack of alternative industrial uses, its prices were dragged down by the sinking global prices of fuel.

According to the latest data by the Central Statistical Office, while the land area further shrank by 16% in 2021, the total yield of rapeseed farming in Hungary dropped by 18% in total. This makes it questionable whether rapeseed farmers can turn the situation around in 2022 and the cultivation of this crop is likely to continue to decline.