Challenges of the Hungarian agriculture and European Union accession

Jozsef Molnar Szent Istvan University

The role of agriculture

Agriculture is still a significant sector trough:

rural development maintaining of rural population environment protection utilisation of natural resources sustaining of cultivated landscape preserve of traditional culture and rural values

GDP % Export %Employment

%

1989 13,7 22,8 17,4

1995 5,9 22,0 8,0

2002 3,3 6,8 5,5Source: Hungarian Central Statistical Office

Economic importance of agriculture

Potential of agriculture

Elements of production possibilities:

• abundant and high quality soil

• good climatic conditions

• skilled and “cheap” labour

• high level education and research

• good experiences and traditions

20012001

1 000 ha1 000 ha in %in %

Arable land 4 516,1 48,5

Garden 97,7 1,1

Orchar 97,5 1,0

Vine yard 92,9 1,0

Grassland 1 061,2 11,4

Agricultural areaAgricultural area 5 865,45 865,4 63,063,0

Forest 1 771,7 19,0

Reed 60,3 0,6

Fish pond 32,2 0,3

Productive land Productive land areaarea

7 729,67 729,6 83,183,1

Unucultivated area 1 573,8 16,9

TotalTotal 9 303,49 303,4 100,0100,0Source: Hungarian Central Statistical Office

Land area by land use category

Effect of EU accession

The long term effect of EU accession basicly depends on two factors:• the current circumstances which determine our future possibilities

• conditions of the Accession Traitee (quotas, subsidy framework) and the continuing changes in the CAP

Current circumstances

• Radical decrease in production

• Unfavorable production structure

• Shifting labour market

• Fundamental change of ownership and farm structure

• Changing market environment

Decrease of agricultural production

50

60

70

80

90

100

110

1991 1993 1995 1997 1999 2001

Total Agricultural production

Crop production

Animal husbandry

Unfavorable production structure• The ratio of crop production to livestock

has changed• In the crop production, too high rate of

cereals.• Too low level of value-added

Denomination 2001 2002 2003

Cereals % 73,5 70,4 68,7

Industrial plants % 10,9 13,8 14,9

Sugar-beet % 1,6 1,3 1,3

Potato % 0,9 0,8 0,8

Vegetables % 2,1 2,5 2,5

Change of livestock volume

1986-89 1995 1999 2003

Catle (total) 1950 928 857 714

Pigs (total) 8178 5032 5335 4658

Sheep (total) 2165 977 934 1281

Checkem and foul 55093 31458 25890 34758

Change of agricultural employment

Employees in agriculture

Of wich, those employed in cooperatives

1000

1989 837 610

1992 460 176

1995 295 66

1997 288 60

2001 239 29

Change of ownership

  1990 2003

State 34 10

Cooperative 31 3

Private 35 83

1990 2003

State 32 10

Cooperative 61 8

Private 7 82

The privatisation which has took place in the nineties, has concerned about 75 % of land area (5,7 million ha). As a result of diverse privatisation methods, about 2,5 million private entities have became landed proprietors. The average land size is 3,2 ha.

Change of land use

The present tendency:

- land property is dividing (inheritance),

- land use is more and more concentrated (lease system).

Land can only be owned by private entity and only by Hungarian citizen. Firms, cooporations and foreigners can’t become land proprietors.

The determinant form of land use is lease. At present, 63,5 % of arable land classed among lease system.

BUT REMEMBER!

Number of registered private farms.

Year Number of farmsAverage land

size

2000 958 000 2,8 ha

2003 765 000 3,3 ha

Number of enterprices

YearNumber of economic

associationsAverage land size

2000 5 392 000 711 ha

2003 6 891 000 503 ha

Farm structure

Country

Farms made to size

Average plant size

(ha)

< 5 ha

5-50 ha

50-100 ha

>100 ha

< 5 ha5-50 ha

50-100 ha

>100 ha

Numerical ratio % Land proprtion

Hungary 89,9 9,3 0,8 22,5 46,7 30,8 6,7

Austria 36,4 59,1 3,0 1,5 5,2 32,5 11,6 25,1 17,0

Denmark 3,5 66,1 19,9 10,7 0,2 9,1 30,6 39,0 45,8

Germany 24,9 58,4 11,5 5,2 1,7 12,3 21,8 44,3 36,3

France 29,1 40,6 18,4 11,9 1,3 6,6 31,1 45,6 42,0

Portugal 78,8 18,8 1,0 1,4 13,8 29,6 7,4 52,7 9,3

EU-15 57,6 33,5 5,5 3,5 5,2 31,0 20,3 43,5 18,4

Landsize and land use structure compared with some EU members

SummaryComplex situation with clear tendencies:• ownership de-concentration• use centralization• social problems• unfavorable starting conditions

– low level of production– weak competitiveness– unformed farm structure– low profitability and technical level– weak interest articulation

• Unfavorable accession positions– low quotas– discriminations of subsidies (25%)– changing CAP (moving target…)

The stipulations figured in Accession Traitee and the uncertainty of CAP reform damage the external conditions:

- the hungarian farmers are disappointed about quota, basic and especially subsidisation rate (25%),

- there is an internal contradiction of Accession Traitee and CAP reform ( 3 different theorial construction type concerning direct subsidisation),

- after mathematical models, the growth of direct subsidisation doesn’t cover the cost increment.

The EU accession will surely select among farmers, there will be winner and loser. It would be better to have more winner than loser.