According to the minister, the agricultural economy could accelerate further

amEfficiency and competitiveness – these two keywords are a guarantee that Hungarian agriculture will continue to be at the forefront of European agriculture – said the Minister of Agriculture at a professional conference on Thursday, where he also took stock of the sector’s achievements in recent years.
According to István Nagy, the key to the future in the agricultural world is development, investment, agricultural digitalization, agricultural modernization, special support for young farmers and successful generational change. As he explained, the Ministry of Agriculture (AM) is increasing efficiency and competitiveness in the Hungarian agriculture and food industry through comprehensive measures, parallel development and support of closely related sectors. In addition, they are constantly looking for new areas that can be linked to programs, in consultation with producers and professional organizations. This encourages farmers, producers, and agribusinesses to shift from raw material production to high-value, high value-added products, to develop and invest in this direction.

We have achieved significant results over the last nine years, the Agriculture Minister said. As he said, the productivity of Hungarian agriculture has improved significantly in the European Union as well and has started to catch up significantly with the agriculture of the old member states. Territorial productivity, gross value added per hectare at constant prices, increased by two-thirds between 2010 and 2018. This growth is the third-highest in the EU after Belgium and Denmark and is well above the EU-15, EU-13, and V4 countries.

At the same time, Hungarian agriculture still has significant reserves and the Hungarian food industry has a production potential that is 60 percent higher than it is today – the Minister of Agriculture pointed out. This is despite the fact that the productivity of domestic agriculture has grown spectacularly: gross value added at EUR 615 per hectare at 2010 prices, although higher than that of the new Member States, is well below the figure of EUR 1163 for the 15 old Member States. As a percentage of the results achieved: while in 2010 the gross value added per hectare of Hungarian agriculture reached 36pc of the old member states, in 2018 this proportion was already 53pc. Investment in technology upgrades is needed to further increase productivity, the ministry leader underlined.

Investments in the agricultural sector have also increased significantly in recent years. Hungarian farmers spent HUF 355 billion on development in 2018; at constant prices 11 percent more than in 2017. Total investment volume increased by 17 percent between 2013 and 2018. Investment growth picked up further in the first half of 2019, at 17.1 percent year-on-year at constant prices.

The volume of food industry investments continued to grow in 2017 and 2018, following the strong growth in 2016. In four of the last five years, the value of investments has increased at constant prices. Food businesses spent HUF 237.2 billion on developments in 2018, 7.3 percent more than in 2017 at constant prices. The sector’s investment momentum continued in the first half of 2019, with the volume of developments increasing by 7.8 percent.
Investment loans in agriculture in 2019. II. At the end of the quarter, it was 10.3 percent higher than a year ago. Within the Fixed Income Facility of the MNB’s Growth Credit Program, agriculture accounts for nearly 25 percent. The annual growth rate of food industry investment loans was 20 percent.
However, in order to reach the EU’s most advanced member countries with agriculture, it is essential to modernize the agricultural sector based on knowledge and technology and to continue investing in it, and to develop knowledge transfer systems – vocational training, research, and consultancy – stressed István Nagy. As he put it, the agrarian economy is on the verge of changing ages. The future is precision farming. Young farmers and start-up agribusinesses will be able to compete in the domestic and European markets for agricultural, food and global products if they incorporate state-of-the-art digital agriculture into their production practices.

The Digital Agenda of Hungary created within the framework of the Digital Welfare Program (DAS) is helping to change the era of the Hungarian agricultural economy – the head of the Ministry of Agriculture pointed out. Developed in Hungary for the first time in Europe, the strategy is based on increasing the profitability of agricultural production and the food industry by collecting, analyzing, publishing data, information from free databases, and automating and robotizing technological operations competitiveness – in line with the requirements of sustainability, environmental protection.

István Nagy pointed out that the digitalization of agriculture ensures long-term stability and predictability in food production. Planning management financing can help you make better management decisions based on more accurate data and more information. Precision farming significantly reduces production risks, thereby enabling higher income levels through digital agro-solutions. Within the DAS, a Digital Food Strategy is being prepared, coordinated by the AM.

Parallel to agricultural modernization, the current age structure of the host society calls for a change of generation. AM pays special attention to the development of the institutional system of agricultural and vocational education, higher education and adult education, which provides the necessary knowledge for precision agricultural production, to train the trainers, and to help a sufficient number of IT scientists, scientists, and scientists.

Developing a digital baseline map, upgrading the agro-meteorological measurement network, modernizing crop protection forecasting services, digitizing agricultural administration data, and linking existing databases are all planned steps that can help farmers make quick and good management decisions.

The goal of the government, the Ministry of Agriculture, is to fulfill our country’s environmental and climate protection commitments, but at the same time, we cannot ask for more from Hungarian farmers for less support. The drastic reduction of rural development funding for investment support is of particular concern. It is vital to strike a balance between environmental and climate protection goals and competitiveness, the Minister of Agriculture emphasized.

István Nagy also spoke about Hungary’s emphasis on the development of sectors that require higher added value and labor intensity – horticulture and animal husbandry. One of the most important policy tools to achieve this goal is to provide coupled support for EU production. Therefore, for the Common Agricultural Policy (CAP) after 2020, our priority negotiation target is the coupled support rate proposed by the European Commission: raising the 10 + 2pc rate. It should be possible for those Member States that currently provide 13 + 2pc to do so after 2020. During the negotiations in Brussels, the most important task of the government and the Ministry of Agriculture is to ensure that in our negotiations, the resources of the post-2020 CAP are not reduced due to increasing our competitiveness and increasing environmental and climate protection expectations.

In addition to subsidies, another key element in financing the agricultural economy is to stimulate the development of a preferential lending system tailored to the needs of the sector through our aid policy instruments. The latest program in the portfolio is the interest rate subsidy program for investment loans in agriculture, food, and forestry, launched at the end of September 2019, providing 80 percent interest subsidy on an investment loan portfolio of HUF 100 billion. This investment incentive scheme aims to bridge the transition between current and new CAP support schemes so that the current investment climate is maintained and further enhanced in agriculture.

The role of the Agricultural Business Credit Guarantee Fund (AVHGA), the Minister added, is to provide a comprehensive guarantee to micro, small and medium-sized enterprises operating in the agricultural sector or related to rural areas. AM provides guarantee subsidies of almost HUF 900 million a year to companies, thus facilitating the companies’ access to guarantees and loans. In co-operation with the foundation, they helped to raise approximately HUF 307 billion in 19 thousand transactions.

In October 2016, AVHGA and the European Investment Fund signed a cooperation agreement to stimulate the borrowing of small and medium-sized enterprises in Hungary – recalled István Nagy. Through the convention, AVHGA will receive a counter-guarantee from direct EU funds under the European Investment Fund (EIF) COSME Program, and will thus be able to provide an even broader guarantee for farmers’ loans to credit institutions. The European Investment Fund will extend a total of HUF 125 billion in loans for development and other lending purposes over a further three years, ie until 2022.

The leasing subsidy program for the leasing of new machinery and technological equipment, which was re-opened in April this year, is also aimed at stimulating investment, allowing farmers to apply for support by the end of 2019. The ministry expects to have 50 percent support on leasing contracts worth around $ 20-30 billion by the end of the year.

Due to the cyclical income production cycle of the agricultural economy, the predictable availability of working capital financing plays an important role in addition to financing investments. That is why the ministry supports the „extremely successful and popular” free use of the Agricultural Széchenyi Card (ASZK) Overdraft facility. The actual interest payable is currently at an extremely favorable 0.18pc pa, thanks to AM’s annual 4 percentage point subsidy. The ASZK overdraft facility provides interest-free and cost-free credit to pig farmers and wood-growing companies to deal with adverse market and weather conditions, thanks to a 100pc interest rate, surety fee, and cost support.

Thanks to the modernization of agriculture and the digitalization of agriculture, Hungary will be able to make better use of the potential of food production, the minister added. He pointed out that the digitalization of the food chain increases the competitiveness of the entire vertical. Highly processed, tastefully packaged, delicious, healthy and safe Hungarian food stands in the foreign markets, and export revenues significantly strengthen the national economy.

The Minister of Agriculture also highlighted the strategic importance of agriculture and the food industry in the European Union: providing 500 million people with safe food; while it maintains 44 million jobs with related industries (including food retail, input, services, other industries). In Hungary, farmers are entitled to more than HUF 400 billion of direct EU funding each year under the CAP. This amount is supplemented by EU and national co-financing of rural development support, national support and EU market support. Thus, Hungarian agriculture receives about HUF 600-700 billion in subsidies per year. In addition, the government will provide HUF 300 billion for the complex development of the food industry by 2020. Within the aid scheme, both direct payments and, in particular, the two most important area-based payments – SAPS and greening – are the most important, both in terms of their amount and the number of producers concerned and concern 172 thousand producers.