1. Jozsef Popp Director Research Institute for Agricultural Economics Budapest „Vision of long-term agricultural and rural development in the EU” May 25-26, 2006, Prague „Long-term scenarios of development from the Hungarian point of view”

2. Outline  Agriculture’s place in the Hungarian Economy  Cereal production and consumption in Hungary  Development of livestock number in Hungary  Structural adjustment in the Hungarian agriculture  Concluding comments

3. Agriculture’s place in the Hungarian Economy Agriculture’s place in the Hungarian Economy 19901995200020032004 Share of agriculture in the GDP (%) 12,55,93,72,93,2 Share of agriculture in employment (%) 17,028,96,95,55,3 Share of agriculture in total investments (%) 8,72,92,76,2*4,3* Household income spent on food (%) 37,028,429,22726,7 Share of agricultural and food products in total exports (%) 24,922,78,06,56,0 Net foreign trades of agricultural and food products (billion HUF) 104,1246,6350,4303,1243,1 Source: Central Statistical Office, Hungary 2005 *Since 2002 together with agricultural investments of households *Since 2002 together with agricultural investments of households

4. Agricultural and food trade (1990-2005) Agricultural and food trade (1990-2005) Source: Research Institute for Agricultural Economics Budapest, 2006

5. Planned expenditure in Hungary for agriculture and rural development (2004-2006) Expenditure Million EUR Million HUF Allocation, % EU (EMOGA + FIFG) Direct payments (Guarantee) 1279,2 326 196 58,2 Rural Development (Guarantee) 602,3 153 587 27,4 Rural Development (Guidance+FIFG) 317,2 80 889 14,4 Total Total2198,7 560 671 100,0 National Direct payments (Guarantee) 1330,0 339 155 83,8 Rural Development (Guarantee) 150,6 38 400 9,5 Rural Development (Guidance) 105,6 26 931 6,7 Total Total1586,2 404 486 100,0 Total (EU + national) Total (EU + national) Direct payments (Guarantee) 2609,2 665 351 68,9 Rural Development (Guarantee) 752,9 191 987 19,9 Rural Development (Guidance) 422,8 107 819 11,2 Total Total3784,9 965 157 100,0 Source: Research Institute for Agricultural Economics Budapest, 2006 Source: Research Institute for Agricultural Economics Budapest, 2006

6. Planned expenditure in Hungary for agriculture and rural development (2007-2013) Source: European Commission, 2006

7. Country Reference yield t/ha20042005200620072008200920102011-2013 CzechRepublic4,20145,7159,0172,2185,5212,0238,5265265 Hungary4,73149,5161,0174,3208,6238,4268,2298298 Poland3,00104,0113,4122,9132,3151,2170,1189189 Slovakia4,06140,8153,6166,4179,2204,8230,4256256 EU-104,00**138,6151,2163,8176,4201,6226,8252252 EU-154,77300,5300,5300,5300,5300,5300,5300,5300,5 EU-10/EU-15,%83,846,150,354,558,767,175,583,883,8 Area Payments granted for the EU-10 Source: DG AGRI, Country Reports *CNDP: from the national budget **Author’s estimate [SAPS + CNDP*]/ha (in EUR/ha) EUR/ha

8. Production of major cereals in Hungary (1990-2005, with projections to 2010) Source: Hungarian Central Statistical Office and results of modelling work at the Research Institute for Agricultural Economics Budapest (Based on the assumption that the SPS is introduced in 2007)

9. Consumption and exports of wheat in Hungary (1990-2004) Source: Hungarian Central Statistical Office

10. Consumption and exports of maize in Hungary (1990-2004) Source: Hungarian Central Statistical Office

11. Development of pig numbers in Hungary (1990-2005, with projections to 2010) Source: Hungarian Central Statistical Office and results of modelling work at the Research Institute for Agricultural Economics Budapest (Based on the assumption that the SPS is introduced in 2007)

12. Development of broiler production in Hungary (1990-2005, with projections to 2010) Source: Hungarian Central Statistical Office and results of modelling work at the Research Institute for Agricultural Economics Budapest (Based on the assumption that the SPS is introduced in 2007)

13. Development of intervention stocks in Hungary (April, 2006 and 2010) Source: Hungarian Central Statistical Office and results of modelling work at the Research Institute for Agricultural Economics Budapest A: Baseline (SPS from 2007) from 2007) B: Intervention price -10% from 2008 -10% from 2008 C: No intervention from 2008 from 2008 6 455

14. Cost of shipping cereals by different transport modes from Hungary to EU destinations/exits (2005) Source: Research Institute for Agricultural Economics Budapest, 2006 Source: Research Institute for Agricultural Economics Budapest, 2006

15. Source: Hungarian Central Statistical Office and results of modelling work at the Research Institute for Agricultural Economics (Based on the assumption that the SPS is introduced in 2007) Implementation of SPS in Hungary: planned EU expenditure in Hungary (2010) Regionalised flat-rate SPS Regionalised flat-rate SPS Coupled support:option Crop-specific payment (non optional) Farm-specific top up (historical model) National reserve Entitlements for new entrants 78,5 % 0,3 % 17,7% 16,8 % 0,9 % 3,5 %

16. esults of modelling work at the Research Institute for Agricultural Economics Budapest Source: Results of modelling work at the Research Institute for Agricultural Economics Budapest Production structure of arable land in Hungary (2004) Implementation of the SPS in Hungary: projected production structure of eligible arable land (2010)* *No intervention

17. New models of agricultural production Re-positioning agriculture in the knowledge economy Old CAP New CAP KNOWLEDGE FULCRUM Environment Food Safety Food Quality Nutrition Disease and Welfare Price Competitiveness ? Biotechnology ? WTO free trade: EU-high tech research programme

18. Conclusions Progress towards the market: reforms yet to come  Decoupling is only partial  Set aside and milk quotas are still constraining those sectors  The days of market intervention are numbered (under unchanged conditions, 14 million tonnes of cereal stocks could be accumulated in Hungary by 2010) 14 million tonnes of cereal stocks could be accumulated in Hungary by 2010)  Budget pressures are tightening  Market pressures and opportunities Transition:  Important to have policies to facilitate adjustment of EU agricultural sector – competitiveness will be key  Key aspect is the re-skilling of labour (e.g. training for more market oriented producers)  Set a realistic timetable for long-term objective so that the necessary structural adjustment can be accomplished without unnecessary structural adjustment can be accomplished without unnecessary disruption disruption