Expert shared when food prices will peak in Hungary

The removal of price caps may increase prices, and rising imports should also be taken into account. According to Dávid Hollósi, Managing Director of the Agricultural and Food Branch of MKB Bank and TakarékBank, prices are expected to peak around March. However, with a good strategy, the Hungarian food economy can withstand these challenges.

In agriculture and the food industry, the way prices develop on the energy market will also have a strong influence on cost levels, as diesel accounts for 70 percent of energy consumption in Hungarian agricultural production due to the dominant weight of arable crops. At the same time, world market prices are currently falling. According to Dávid Hollósi, Managing Director of the Agricultural and Food Branch of MKB Bank and TakarékBank, the same applies to the fertiliser market.

The increase in the price of pesticides, herbicides and fungicides is compensated by the fact that the price of crops at the current level of around HUF 100,000 (EUR 262.10) per tonne is double the level of previous years. So, for example, the price of wheat has doubled since the beginning of 2020, while the price of pesticides and other products has risen by around 20-40 percent over the same period.

In 2022, after many years, people saw the entire food supply chain increase in price by roughly the same amount. This includes farming sector, food industry and retail sector. Overall, the rise in shop prices almost fully reflected the commodity boom that started in 2021, said the expert to portfolio.hu.

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Real wages may catch up sooner or later with food prices

For a while, people will have to get used to the fact that buying food is a bigger financial burden than it used to be. However, the rise in real wages may catch up sooner or later, and in the longer term, the burden of food shopping will be reduced to previous levels.

“It is possible that the price of some products may fall somewhat due to market developments, but in general, we expect food prices to peak in March.”

In the expert’s opinion, the investments of the past years and the near future will be reflected in improved efficiency, in the availability of cheaper, high-quality food products made from Hungarian ingredients.

Under the current regulation, the price cap is in operation until 30 April. Both the Chamber of Commerce and interprofessional organisations are pushing for its phasing out. It is a realistic possibility in the spring, when inflationary pressures may be easing. Once the price caps are removed, the prices of the products in question are expected to rise, but they are about 50-60 percent higher compared to October 2021.

Differences in trade policy

Imported food does not arrive at such low prices only and exclusively because they are produced at a lower cost in the country of origin in the European Union. They have an efficiency advantage but there are also differences in trade policy. In such cases, producers choose not to reduce output in the event of oversupply, not to store the product, which has a cost, but rather to sell at or below price.

Hungary can avoid similar punches to those in times of pandemic and war if we have a long-term strategy. The country must define the role it wants to play in the European food market. “Hungary has excellent capabilities in the production of primary goods but the country needs to make our food economy more resilient”, concluded the expert.

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Source: portfolio.hu