Hungary is experiencing difficulties with the growth of agricultural production

Hungary’s agricultural sector is undergoing structural changes that include consolidation but is still struggling to grow its grain and oilseed production as drought and a heatwave significantly lowered crop totals for 2024.

While farmland area has not changed significantly since 2020, the number of agricultural operations has decreased by 19% due to consolidation, according to a report from the Foreign Agricultural Service (FAS) of the US Department of Agriculture. The percentage of field and horticultural growers increased by 10% from 2020 to account for 73% of agricultural operations.

Small farmers have left the business, resulting in consolidation. The average farm size has increased in all subsectors of production, the FAS said, with the average size exceeding 28 hectares in 2023, which is twice as large as in 2010.

“Over the past years, farmers and ranchers faced several unprecedented difficulties,” the FAS said. “They were hit by high energy prices, soaring inflation, a grain market crisis, and consecutive years of drought.”

Overall, agriculture accounts for 55% of the country’s land use, according to the USDA, which is remarkable among EU member states. Arable crops represent 82%, or 4.2 million hectares, and pastures 16%, or 800,000 hectares, of Hungary’s farmland. Main crops include wheat, corn and oilseeds, primarily sunflower and rapeseed. It also produces planting seeds, horticultural products and significant amounts of pigs and poultry.

Still, the nation is struggling to grow crop production. A heatwave and drought in the summer of 2024 contributed to a 11% drop in crop production, according to the Hungarian Central Statistical Office. The value of agricultural products dropped 8% in 2024 to $11.3 billion, the office said in its first release on the sector’s annual performance.

Structural changes, crop production

As of June 1, 2023, there were 196,000 agricultural operations in the country, a decline of 19% from the same period in 2020. The decline has accelerated over the past decade, the FAS said, with an overall decrease of 101,000 holdings since 2013.

The area sown to grains increased to 60% in 2023, with industrial crops representing 23% and fodder crops accounting for 8.3%, the FAS said. The grain area steadily has increased in recent years and exceeded 2.5 million hectares in 2023, the FAS said.

Winter wheat increased by 9.5% year over year to more than 1 million hectares while winter barley increased by 28% to 412,000 hectares.

“As a result of consecutive drought years and insecurities in production, farmers lost trust in corn,” the FAS said. “Therefore, corn area dropped significantly to 771,000 hectares in 2023 (from 1.06 million hectares in 2021).”

Sunflower continues to be an important industrial crop, but the area sown to rapeseed has decreased since 2021, the FAS said, as a ban on neonicotinoids makes production more difficult and costly.

“Additionally, rapeseed is more nutrient demanding and less drought tolerant than other winter crops such as wheat or barley,” the FAS said.

The Hungarian government is supporting investment in irrigation systems to mitigate yield fluctuation due to weather conditions. In 2023, about 5% of the agricultural area was irrigable, of which 153,000 hectares were irrigated.

Meteorologists compared 2024 to the driest and hottest year ever recorded for Hungary in 2022. The nation experienced an extreme heatwave, coupled with a drought, that damaged more than 75,000 hectares of cropland.

In 2024, drought contributed to a 16% drop in overall cereal production, according to the statistical office. Barley was down by 29% while corn dropped 19% and wheat decreased by 9.8%.

Damage to cornfields alone was estimated at $682.3 million, with yields dropping from the yearly average of 8 to 9 tonnes to under 5 tonnes.

Total corn production in 2024 is estimated at 5.27 million tonnes, while wheat is expected to reach 5.34 million tonnes, according to the country’s statistical office. Barley production is estimated at 1.58 million tonnes while sunflower is estimated at 1.8 million tonnes, a drop of 13% from the previous year.

Hungary is a key exporter in the region, with the value of agricultural and food products increasing by 2.5% in 2024 to €13.732 billion ($15.8 billion), according to a report from the Agricultural Economics Institute (AKI). The export value of cereals increased by €74.1 million, to €1.782 billion, while volume increased by nearly 28%.

A total of 7.3 million tonnes of grain was exported, according to the AKI report, including 3.9 million tonnes of wheat, 2.3 million tonnes of corn and 1 million tonnes of barley. Wheat volumes increased 29% while corn totals were up 63%.

Due to an increase in exports of sunflower seeds and rapeseed, the export value of oilseeds increased by €58.9 million to €671.4 million. The export volume of rapeseed increased by 21% while sunflower exports increased by 151,800 tonnes to 359,400 tonnes.

In 2024, 87% of the country’s agricultural trade was conducted with EU countries. Top trading partners include Germany, Italy, Romania, Austria and Poland, with those five countries accounting for 52.5% of total agricultural exports last year.

Flour production, usage

Hungarians’ appetite for fresh bread is increasing, according to the statistical office. In 2024, fresh bread consumption totaled 330,000 tonnes, an increase of 0.6% from the previous year.

The nation has about 50 mills with a total capacity of 6,949 tonnes per day (wheat equivalent), according to the European Flour Milling Association. In 2023, net sales were more modest than the previous year, despite higher flour prices, said Zoltan Lakatos, president of the milling chapter of the Hungarian Grain and Seed Association.

On average, the milling industry processes 1.2 million tonnes of wheat, but in 2023 it didn’t reach 1 million tonnes. Domestic flour consumption dropped due to inflation and exports were drastically reduced, Lakatos said. At the same time, flour imports increased. He estimated profits of the milling industry, in proportion to sales turnover, at about 2%.

Cheap imports of Ukrainian flour in 2022 hurt the industry as did government measures to make the export of cereals subject to an export license, he said.

GoodMills Magyarország Malomipari Kft is one of Hungary’s largest millers, processing 320,000 tonnes of grain per year in its four mills. The company is 99.9% owned by GoodMills Group GmbH, headquartered in Vienna, Austria, which is the largest milling enterprise in Central and Eastern Europe.

Gyermelyi Zrt., Hungary’s market-leading pasta producer, in February 2023 opened a new mill with a capacity of 300 tonnes of soft wheat per day. With its two prior mills, the company now has a grinding capacity of up to 800 tonnes per day.

The three plants mill 165,000 tonnes of wheat per year, which can supply 30% to 32% industry flour, depending on the quality of the soft wheat. Mill #2 provides durum semolina for the company’s own Vita Pasta durum product. Other products include fine flour, bread flour, half white bread flour, pastry flour, semolina and wheat germ. They are distributed in bulk, sacks and retail sizes.

Tags: Hungary, agricultural sector