Hungary Newsflash Week 33
Agro startup incubation, international trade figures, subsidies and the effect of COVID-19 on popcorn - The last week in Hungarian agriculture
Due to summer vacations, the Hungary Newsflash will be published less frequently in August.
TechLab relaunch – NAK renews startup program
The Hungarian National Chamber of Agriculture (NAK) together with Budapest-based Design Terminal is launching its NAK TechLab Incubator program for the second time this fall, in order to continue fostering innovation by supporting new agro startups. The program’s main objective is to support innovative solutions and R&D and to connect new promising startups with potential partner companies. Participating owners will have access to business development courses, workshops as well as agroindustrial and corporate mentors, in order to help them kick-start their companies.
The program’s corporate partners include, among others, Auchain Retail Hungary, Axiál Kft, the Bonafarm Group, Corteva Agriscience, and Syngenta Hungary. The Research Institute of Agricultural Economics is offering research possibilities, and Vodafone Hungary is providing professional and developmental support for Narrowband IoT developments. Planet, the global earth observation provider founded by ex-NASA scientists is providing access to satellite earth observation for startup teams. The project also involves capital injection possibilities facilitated by its partners as Bonitás and Hiventures, two venture capital companies, are offering consultations to startup teams throughout the program. Aside from matured companies with clients and an established line of income, the program is also open to early phase startups.
Cereal & Vegetable Export Surge
Based on the latest May export figures by the Central Statistical Office (KSH), the Hungarian net export balance in plant-based products increased considerably during the pandemic months. While trade setbacks would be understandable, the numbers show that Hungary’s export in crops and horticultural products skyrocketed in the first five months of 2020, with a 44.9% increase compared to the 2019 figures. The main export commodities continue to be cereals.
According to news portal Agrárszektor, there are a few major factors behind this year’s export surge. First, the avian flu pandemic (more on it here) decreased domestic demand for cereals for animal feed, which made producers turn to the international markets to sell their harvested produce. While the veterinary crisis does not explain the increase of export entirely, according to KSH timescale datasets, there is a strong negative correlation between annual aggregate numbers in total animals slaughtered and total amount of cereal exported.
The second reason is the low exchange rate of the Hungarian Forint. The Forint plunge in 2020 may have helped national exports gain more foothold, which is also reflected in the shift in the vegetable market. While average vegetable export prices per kilogram peaked at around €1.4 in April-May, import prices sunk to around €0.6 in the same period, marking the greatest difference between export and import prices in five years. While the export prices were driven up primarily by two vegetables, tomato and cucumber, vegetable import was mostly dominated by cheap potato dumping. Potato is a practical, easily storable commodity, which merchants stocked up on after the pandemic shopping sprees in the spring. This explains the staggering 500% increase in potato import this year.
While this high cannot be maintained indefinitely, during the spring months at least, the Hungarian plant product export increased by 50%, although in aggregate numbers, the wins in the selling of higher added value vegetables were evened out by the lower income from the cheaper cereal export.
Shift in the trade of animal products
Aside from plant cultivation, animal husbandry is the other main pillar of the Hungarian agroeconomy. Plant product export soared in the spring, however, according to KSH statistical data, the composition of Hungarian international animal product trade shifted toward the export of meat and live animals and the import of live pigs.
The three main livestock sectors in Hungary are poultry, cattle and pigs. While the poultry sector took a major blow in the spring, the aggregate export figures of the three sectors in total increased by 2.8% compared to the means of the respective first five months of the years in the 2015-2019 period. While cattle export prices stayed at the same level as 2019, pig prices somewhat decreased, however, it has to be taken into account that last year’s pig prices were outstandingly high.
The pig sector shows the greatest change in the January-May period. While the import of live pigs increased by 18%, the import of pork meat decreased by 17%, with May marking the lowest monthly volume of imported pork in five years. This means that the market is adapting to the increased domestic slaughterhouse and processing facility capacity which has been boosted with infrastructural investments in the past years.
Skyrocketing fruit prices
According to the latest market reports by the Research Institute of Agricultural Economics, fruit prices increased dramatically on the Hungarian market this summer. The mean fruit price increase is 141% The price increase of apple is 89%, lemon 45%, orange 43%, banana 12%. Compared to the figures of July 2019, the fruit with the largest increase in price is apricot (96-150%), followed by idared apple (141%), and peach (75-141%). The price of gooseberry, golden apple, plum and muskmelon doubled this year. The most expensive fruits are raspberry (€8.64/kg), gooseberry (€4-5.16/kg), and apricot (€2.9/kg). An interesting effect is the correlation between the price of apples and the price of tropical fruits - As a thumb rule, apple prices "drag" the price of banana, citruses and other tropical fruits along with them.
The main reason of the fruit price surge is the frost damages domestic plantations and orchards suffered throughout the spring (more on frost damages here and their effect on the food industry here). While fruit imports usually help manage prices, this year there isn’t enough fruit produce in Europe to make up for the lost domestic volume and keep the prices down.
In the case of apples, the harvest will commence later in the season, and last year’s harvest yields were lower both domestically and in the case of import, in the largest European producer country, Poland. The available produce in storage was further diminished by pandemic stocking sprees in the spring.
The muskmelon season started late and fewer plants were cultivated due to pandemic labor shortages. In the case of watermelon, the lower availability of supply on the European market provided domestic producers with an opportunity to export at a rate of €0.23-0.30/kg instead of the usual €0.15-0.16, which meant that domestic prices increased too.
According to analysts and stakeholders, due to decreased EU subsidy levels, greening, the price increase of labor, and unpredictable weather, fruit prices can be expected to stay higher in the long term.
€5.2 million for viticulture subsidies
At the opening of the traditional Balatonfüred Wine Weeks, Minister for Agriculture István Nagy announced a funding of €5.2 million for wine production subsidies. Another €13.9 million will be spent on wine marketing programs in order to raise the public awareness of quality wine production in Hungary.
Similar to apiculture, viticulture also has to compete with cheap, third country import products in Hungary and in the entire common market. According to President of the Hungarian Intellectual Property Office Gyula Pomázi, every fifth bottle of wine in Europe is counterfeit, causing the EU viticultural sector €2.3 billion in damages annually.
Hungary has twenty-two traditional wine regions, producing a wide range of quality wines using both internationally cultivated as well as uniquely Hungarian grape varieties. In order to help Hungarian wine gain a foothold, the Intellectual Property Office has ten categories of IP and trademark licensing for grape cultivation and wine production. Annually, around 150-180 new trademark applications are submitted by Hungarian wine makers.
Corn going strong
Out of the four main crops of Hungarian fields – Winter wheat, rapeseed, sunflower and maize – Hungary is especially strong in maize cultivation, and is one of the main corn exporters in Europe. Despite the hardships of the season, corn is looking promising this summer.
One of the difficulties producers had to face this year was the COVID-19 pandemic’s effect on international trade, threatening to hinder sowing seed imports. Another was the weather – Because of the cool weather in April and May, which is the start of the planting season of corn, works were delayed, and the end of the sowing was pushed from June to July. In the early summer, the rainy period also delayed planting as fields were too wet and muddy for combine harvesters to harvest green peas and make room for corn. Later, rains as often as hours after the sowing of corn flooded the fields, and in places only 40-50% of the seeds took root. However, since the summer was rainier than the average, water scarcity was not an issue.
Out of the total maize production of Hungary, sweet corn is cultivated over 33 thousand hectares on average. Another variety is popcorn, which is grown over an area of 5-6 thousand hectares. Hungarian farmers have been producing popcorn since the 1970s and in quality this variety competes with its Argentinian, French and American counterparts. Although the pandemic hit the supply chain dramatically (the main buyer of popcorn being the cinema industry), home entertainment somewhat transformed customer choices – After all, popcorn does not only go well with spring and summer blockbusters in movie theaters, it pairs nicely with Netflix binge marathons just as well.