Price waves

As soon as the harvest of maize has begun, farmers realised that their earlier hopes had been unfounded, as only HUF 18,000 per tonne was offered for their produce. MVH has prepared for intervention, as average net price per tonne was down to less than HUF 27,000 by October. The EU is prepared to use intervention for 700,000 tonnes of produce in the 2008/2009 season. At present, 1 million tonnes of warehousing capacity is available in Hungary for intervention. Global prices are down compared to 2007. Fodder manufacturers are not interested in maize at the moment. According to information from the Association of Swine Breeders, the price of pork is not going to drop in spite of cheaper fodder. In the bakery industry, the price of flour accounts for only less than 35 percent of total costs. The bakeries operated by retail chains are the other major problem for independent bakeries, as these have a much more substantial influence on prices than their 15 percent market share would justify. The process of bakeries being forced out of business has accelerated this year. According to KSH data, average consumer price in the bakery sector has risen by 8.4 percent within a year. On the other hand, the price of electricity – the most widely used form of energy in bakeries – has gone up by 40 percent, with the price of gas also rising by over 10 percent. There has been stagnation in the Central European grain market for weeks. There is not much chance of the EU remedying the problem of three million tonnes of maize which remains unsold in Hungary. This would mean that the revenues of HUF 200,000 per hectare generated by farmers including subsidies would hardly cover their costs. Furthermore, agriculture is certain to be hit hard by the credit crisis starting in October.