Fruit-vegetable sector: a need for restructuring

Retail chains arrived in Hungary by the turn of the millennium and they brought global retail with them. The proportion of fresh fruit has grown in sales, less canned and preserved fruit has been sold and frozen fruit sales have stagnated or moderately increased. Fruit growing in Hungary is about to go through an important restructuring process: apple is produced in the biggest volume but 70 percent of it is industrial quality only, which means that it can only be sold 75 percent cheaper than quality apple. Sour cherry prices show great fluctuation from year to year, one kilogram sells at HUF 50-250. Fruits are bought from growers through an obsolete, multi-stage system in which additional costs make Hungarian fruits uncompetitive. Béla Mártonffy, president of FruitVeb Hungary (Interprofessional Organisation for Fruit and Vegetable) added to the facts mentioned above that Hungary’s fruit growing is divided because restructuring started earlier in western Hungary. The president opines that the country still has not exploited its potential in fruit growing. Until 2004 an annual 2.9 million tons were grown but after Hungary’s accession to the European Union annual fruit production was swinging in the 2-2.6 million-ton zone. However, it is true that weather conditions in four of the last seven years were disastrous. With our EU-membership import started to grow significantly. Despite the hardships, the sector remained a net exporter. Certain markets were lost, though. The lack of technological development and the large share of the black market from sales are also considerable drawbacks. FruitVeb recommends to the government to revise the working of TÉSZ organisations (Growers’ Sales Organisation), for instance by making registration obligatory for vegetable and fruit traders and retailers. Béla Mártonffy’s view is that reducing the VAT on fruits and vegetables would be a milestone. The government’s policy is to support small and family farms but without a fair and well-working trading system these farms will never be strong – and reformed TÉSZ organisations could play a crucial role in making them competitive. If all these problems are solved, the next step can be reorganising the by now practically non-existent national processing industry. Because if regulations and the system of benefits are good, the majority of processing capacities will be owned by growers. TÉSZ organisations are in a difficult situation as they lack substantial working capital. If they cannot pay for the fruit-vegetable without delay, growers will keep selling their best produce on the promptly paying black market and TÉSZ organisations will only get lower quality fruits and vegetables. Hungarian consumers are highly price sensitive but at the same time they would also like to buy domestic produce. Retail chains made Hungarian growers realise how necessary it is to establish a complete and precise supply system. Formerly late payments stirred conflicts that have been resolved by now. These days the big extra profit of retailers generates debate: in the middle of August tomato was purchased from growers at HUF 50-70/kg and consumers paid HUF 250-300 in the shops. It would be important to make a produce calendar that could help in extending the yielding period of different varieties, as a result of which more Hungarian products would appear on the markets of neighbouring countries. In the future FruitVeb and the government will prepare sector-regulating decrees together. Some of the first ones will be concerning trade and retail, registration, yield forecast data providing, quality product description and a joint marketing fund. Szentes and its surroundings has been a traditional vegetable growing area for centuries. DélkerTÉSZ Cooperative was founded in 2002 with 230 members and their main goal is to guarantee a steady income and stable conditions for small and family farms in the region. By 2010 the organisation became the TÉSZ with the biggest sales revenue in the country: last year they sold fresh vegetable in the value of HUF 5 billion. This year they sold more in terms of volume but at 30 percent lower prices. President Ferenc Lédó told our magazine that this year there was a relative over-production and in parallel wit this demand kept declining. Working capital loan is available for DélkerTÉSZ and the organisation is able to pay members and suppliers in 21 days. In Hungary 60-65 percent of fruits and vegetables reach consumers via some kind of wholesale organisation. The same ratio in the biggest growing countries is 70-75 percent and Hungary’s target is 65-70 percent. Zoltán Házi, CEO of Budapest Wholesale Market Zrt. told Trade magazin that this summer consumption significantly dropped at the wholesale market in the hot periods, about 5-10 percent fewer trucks arrived. The CEO’s opinion is that TÉSZ organisations have a poor technical background and growers need to improve the packaging of fruits and vegetables. We also got to know that further developments are about to be realised at the Budapest Wholesale Market.