Organic Farming in Hungary 2005

Annamária Kovács, Ferenc Frühwald

1 Agriculture in Hungary

The potential agricultural area of Hungary is 9.3 million hectares, while the total agriculturally utilised area is around 5.8 million hectares. Hungary is still an agricultural country. In 2001, this sector employed 6.2% of the labour force and produced 4.3% of the gross domestic product (GDP) (FVM, 2003).

2 History and Development of Organic Agriculture in Hungary

Organic agriculture in Hungary started in the 1980s. In 1983, the Biokultura-Klub was founded in Budapest. Two years later, the export organisation "Natura WG" was established. At that time, inspections were carried out by the Dutch inspection body SKAL ("SEC" before 1992). Export possibilities and contacts with the organic sector outside of Hungary encouraged the first state farms to convert to organic agriculture as soon as Hungarian trade companies were founded, with the aim of establishing a Hungarian market for organic products. However, the lack of demand for these products hindered the further development of the domestic market.

In December 1987, the Biokultúra Association (Biokultúra Egyesület) was officially registered as an association for organic agriculture, the environment and health. In the first years of Biokultúra’s existence, the development of organic agriculture was slow due to the weak domestic market. In 1992, Biokultúra members managed approximately 3,300 hectares organically (see table below). In 1993, this amount decreased as a result of privatisation measures and the collapse of former state farms which had converted to organic agriculture.

The export-oriented organic sector was dominated by big farms, and small farms found it difficult to find markets for their products. Apart from certified organic production, a number of home gardeners were growing organic products for self-sufficiency.

After 1995, the number of farms and proportion of organic land increased rapidly due to the improved export potential, and also to the fact that Biokultúra was accredited through the IFOAM Accreditation Programme. This caused Western inspection bodies to increase their activities in Hungary, and Hungary was included on the Third Countries List under EU Regulation 2092/91.

3 Development of Organic Agriculture in Hungary in Figures

Table 1: Development of Organic Farming in Hungary: Number of Organic Farms and Agricultural Area (inspected by Biokultúra/Biokontroll)

(Source: Biokontroll 2000 and 2004, Biokontroll Hungaria / Roszík et al. 2005)

In 2004, slightly more than two percent of total agricultural area was organically managed. The organically managed area has been increasing by 12 to 20% annually. Between 2003 and 2004 the number of operators grew by 22,9; the organic land by 13.1 % (Biokontroll Hungaria / Roszík et al. 2005).

Organic farming is practised in all regions. Most organic farms are situated in the North and South Alföld regions, as well as in the north of Hungary. Most of Hungary’s organic land is located in the sub regions of Komárom and Baranya. The average farm size in Hungary is 23.56 ha (KSH, 2000).

4 Organic Agriculture Organisations in Hungary

Biokultúra Alliance

As early as 1983 the Biokultúra Klub, the first organic agriculture organisation in Central Eastern Europe (CEE), was founded in Budapest. Its members consisted mainly of weekend gardeners, environmentalists and people interested in natural healing methods or who simply wanted to follow a different way of life. All were looking for a kind of agriculture that could produce foods without using strong, hazardous chemicals. Biokultúra became a full member of IFOAM (the International Federation of Organic Agriculture Movements) in January 1987, and was IFOAM’s first member from the CEE region. Nowadays the Biokultúra Alliance has the largest number of members (ca. 1400). It is an umbrella organisation with 7 regional and 4 functional Biokultura Associations. The main goal of the Biokultúra Alliance is the representation of organic farmer’s interests.

Sárközy Péter Foundation for Organic Culture (Sárközy Péter Alapítvány a Biokultúráért)

The foundation was established in June 2001 in memory of one of the founders of Biokultúra. The aims of the Sárközy Péter Foundation for Organic Culture are:

• To collect and maintain the work of Péter Sárközy
• Promotion of organic agriculture
• Dissemination of Publications and organisation of Conferences
• In October 2002 the foundation stated to set up farmers’ markets.

Association of Hungarian Organic Farmers (MÖSZ)

The Association was founded in 2001. It represents the interests of organic farmers, supplies professional information and promotes the organic farming approach. The organisation has a farmers' cooperative (production and trade) in Hortobágy (region of Hungary).

Biokontroll Hungary Company in the Public Interests (Biokontroll Hungária Közhasznú Társaság)

Since 1996 Biokontroll Hungary has been the acknowledged inspection and certifying body in Hungary.

Hungary Eco Guarantee Ltd. (Hungária Öko Garancia Kft.)

In 2002 the Ministry of Agriculture and Rural Development approved the inspection and certifying body Hungária Öko Garancia.

Hungarian Environmental Partnership Foundation (Ökotárs Alapítvány)

The foundation Ökotárs Alapítvány gives grants and technical support to environmental organisations. It helps to organise farming organisations with information and organising courses, events and finances the administrative costs of organic organisations.

Ministry of Agriculture and Regional Development, Hungarian Collective Agricultural Marketing Centre Company in the Public Interests (FVM AMC Kht.)

The public authority AMC assists the marketing of Hungarian organic products with publications, market research, organisation of events, participation on international exhibitions and markets.

5 Land Use and Animal Husbandry

Land use and production structure in organic farming is similar to that in Hungarian agriculture in general. Hungary has a high share of organic arable land and of organic grassland. A detailed breakdown of the organic land is available from Biokontroll Hungaria / Roszík et al. 2005. The major part of the organic area is used for arable cropping (50%), followed by pastures and meadows (46 %) and permanent crops (3 %).

Figure 1: Utilisation of organic land areas in 2004.

Source: Biokontroll 2005

Recently, the share of organic land has increased compared to organic grassland. This means that there has been an intensification of land use.

Table 2: Land use in organic farming 2001 – 2003 (inspected by Biokultúra/Biokontroll)

Source: Biokontroll 2002, 2003, 2004

The main crops grown organically are wheat, spelt, barley, sunflower and oilseeds.

Figure 2: Distribution of organic land areas in terms of crops grown in 2004

Source: Biokontroll 2005

Compared to crop production animal husbandry is not so important in organic farming. The importance of animal husbandry increased, however, sharply in 2002, and the number of farms with animal husbandry doubled; the number of livestock units increased by 40% (8,387 livestock units and 72 organic livestock farms in 2001; 11,210 livestock units and 137 organic livestock farms in 2003).

Table 3: Number of animal units according to animal species in 2001, 2002 and 2003

Source: Biokontroll 2002, 2003, 2004

Cattle farming and sheep production are the most significant types of organic animal husbandry. Organic poultry, however, has decreased in importance.
In addition, there were also 177 Hungarian bee keepers in 2003, managing a total of 114,466 bee colonies organically (2003).

6 Training for Organic Producers

Biokultúra organised the first seminars (of 25 and 70 hours) on organic agriculture. The tradition of these events has stood the test of time. Events are still organized today, which afford organic farmers the opportunity to receive training and further education. These events are not recognised or sponsored by the state. The seminars focus on business planning, optimum crop rotation and effective administration.

Training courses for organic farmers have been sponsored by the state since 1996. The National Agri-environmental Programme made organic farmers' participation in training a condition for direct payments. The organisations which were responsible for training were selected via an application process in 2002 and via invitation in 2003. The agricultural chamber, Szent István University and the Biokultúra Association have organised courses. Since accession to the EU, participation in training has ceased to be a condition for direct payment and the financing of the events has become uncertain.

The number of organic agriculture-related subjects is increasing in high schools and colleges, as well as in universities, and pupils and students are afforded the opportunity to focus on organic agriculture as part of their education.

The most well-known higher education institutions are the Department of Organic Agriculture at the Szent István University of Gödöllõ and the Department of Ecological and Sustainable Production Systems at Corvinus University in Budapest.

7 Research

Besides the specialities of organic farming at agricultural and horticultural universities, the characteristics of the organic market also became a focal research topic. The focus moved away from the business sphere and the common market and towards the organic market at the beginning of 2000. The market research institute GFK Hungária and the Agrármarketing Centre (AMC) carried out larger scale research in 2002.
In the summer of 2005 the Marketing Institut an der Szent István Universitat Gödöllő carried out a major survey on consumers of Organic food.

8 Advisory Service

Hungary's advisory system for organic farming is still in its developmental stages. In 2004, 29 organic farming advisors were registered on the Ministry of Agriculture and Regional Development (FVM)'s list of advisors. Following the new approach, this number is to be expanded. The Ministry plans to finance the advisory service, providing organic farmers with access to a general and a specific advisory service. The advisory service is to be a condition of direct payment.

9 Standards and Certification

Before 1996, inspection and certification was carried out by the Biokultúra Association (Biokultúra Egyesület) and some foreign organisations (e.g. SKAL). The Biokultúra standards were developed in 1987, and are based on the IFOAM standards and the standards of the British Soil Association. In 1996, Biokontroll Hungaria Kht. was officially accredited, and started to carry out inspections.

The accreditation of Biokontroll Hungária as a private inspection body pursuant to EU Regulation 2092/91 by the Hungarian government gave this body an advantage over foreign inspection bodies. Approx. 90% of the Hungarian organic producers and processors are inspected by Biokontroll Hungária. Biokontroll Hungária's certification code is: HU-ÖKO-01.

In 2000, SKAL ceased operations in Hungary. In 2002, the Ministry of Agriculture and Rural Development approved a competitor inspection organisation, Hungarian Eco Guarantee Ltd. (Hungária Ökogarancia Kft.). Hungarian Eco Guarantee's certification code is: HU-ÖKO-02.

10 State Regulation of Organic Farming

Hungary has been on the EU Third Countries List since 1996, since the Hungarian inspection system's conformity to EU Regulation 2092/91.The domestic organic farming regulation (140/1990) was put in place in 1999. It did not bring a significant change to organic farming. This regulation highlighted the question of labelling. Since 1999, the terms "bio" and "eco"may only be used for products originating from organic farms which have been legally inspected.

11 State Support

The government's first step in supporting organic farming was support for conversion in 1997. The support covered certain costs during conversion and was reimbursed based on an itemised cost statement. Some expenses may be paid in full, including membership fees, analysis and consultation costs. In 1999, the government decided to introduce the National Agri-environmental Programme (NAKP). It brought a positive change to the support mechanism, which has become area-based and its figures have become better calculable than the previous mechanism, which was based on cost statements. It was available for both in-conversion and converted areas.

Table 4: Structure of the support system for organic farming in Hungary

*Approved: farmers contained in a list of organic farmers
**Registered: farmers contained in register of farmers in a particular country
Source: Prazan et al. 2004, p. 28-30

Table 5: Amount of annual per hectare contributions in organic farming in Hungary in 2004, Euro/ha

*without greenhouse
Source: Biokontroll, 2004

Since Hungary's accession to the EU, a new direct payment system has been in force. The annual per hectare contributions were increased. Table 5 shows annual per hectare contributions as applicable from 2004 onwards. However, the basis of the new support system – the advice network and the institutional conditions – yet needs to be developed.

12 Marketing

12.1 Organic Exports

12.2 Processing

12.3 Marketing Channels

12.4 Consumer Awareness and Consumer Trends

12.1 Organic Exports

As the first eastern European country, Hungary has been on the EU Third Countries List since 1995. This has allowed Hungary to export organic products freely to the EU. Since accession to the EU on 1 May 2004, Hungary has been able to export duty-free to all EU-countries, as well as to import from them. Hungary is on the Swiss Country List. This allows Hungary to freely export organic products to Switzerland.

About 90% of organic products are exported. Historically, the first target market for Hungarian products was Holland. In the period from 1986 to 1990, Dutch traders started to import Hungarian organic goods to Holland and trade them to Germany, Great Britain and Scandinavia.

Since 1990, the ranking of the export countries has changed. In 2003, the 4 most important countries were Germany, Austria, Switzerland and the Netherlands.

Figure 3: Target country ranking in terms of number of export licences granted by Biokontroll Hungaria Kht

Source: Biokontroll 2004

90% of Hungarian organic products are exported. The most significant export products are cereals and oil crops. The overall export volume in 2001 was estimated at 35 million Euros (AMC, 2003).

Figure 4: Export of some important, certified vegetable products

Source: Biokontroll 2004

The number of organic farmers who take charge of their organic exports themselves is very low (approx. 3.5%). 35% of organic farmers export via integrator companies and most produce is exported via wholesalers (Kürthy 2001 in AMC 2003).

12.2 Processing

In the mid-1990s, Hipp Organic Baby Food was the only product marketed all over the country and via all distribution channels. The immaturity of domestic processing industries has also hindered the development of marketing structures for organic products on the domestic market.

The most important obstacles to the development of the processing industries can be identified as follows:

• 90% of Hungarian organic products are exported as raw materials.
• Approx. 80% of the domestic market product portfolio is made up of imported products from Germany, Austria and the Netherlands.
• Lack of technology and of capital needed for technological acquisitions.

At the end of the 1990s, the significance of domestic processing of organic products in Hungary increased dramatically. The reduction in export opportunities and the increasing interest from consumers contributed towards the trend. The number of processing plants increased by more than 12 times between 1998 and 2003, and the portfolio of domestically produced products has also expanded. Several segments of the consumer market are being targetted. Organic products seem to be shedding their alternative image. Product innovation is moving in the direction of satisfying the demands of ordinary people. More and more traditional foods are being manufactured to organic standards. Even some convenience goods are on offer as organic products. Nowadays, domestic goods from every product category are being sold on the domestic market.

Figure 5: Numbers of processors of organic produce in Hungary

Source: Biokontroll, 2004

Besides the companies who manufacture products mainly for alternative dietary habits, a number of large conventional companies have also developed an organic line (e.g. Pick AG., Naszálytej AG.).

On-site processing however, is of little significance. Only approx. 2-2.5% of organic farmers process their own milk, meat or fruit and vegetables, and 6% of businesses produce their own wine (KSH, 2000).

12.3 Marketing Channels

The marketing structure of organic products has gained a new profile over the last 5 years. In 1999, 20 health stores were the biggest actors in the marketing of organic products in Budapest. They offered mostly dried products, of which an approx. 80-90% share was imported. Fresh produce was distributed almost exclusively via direct marketing channels. The capital's weekly market offered the largest biofresh selection (in Marczibányi Square).

The organic sector has also been influenced by the restructuring of the conventional food retail trade. In 2000, hypermarkets and supermarkets attained a 32% share of total food sales, the discount supermarket chains a 13% share. The large-scale retailers have also been increasing in importance in terms of the marketing of organic products. Most organic food products with a 50-60% share are marketed via the conventional food retail trade (in hypermarkets and supermarkets). The approx. 300 organic and health food stores attain a 35-40% share. Direct sales via organic box subscriptions, farm shops and weekly markets only have a share of between 1 and 5% (ZMP, 2004). Markets selling fresh organic produce are opening up in increasing numbers of towns (e.g. Budapest-Újpest, Szeged, Debrecen, Esztergom, Gyõr, Kecskemét).

12.4 Consumer Awareness and Consumer Trends

According to calculations, the niche market of organic product consumers was estimated to make up 1.7% of the adult population in 1994, and the frequent consumers to make up 0.5-0.6%. The potential consumers were estimated to make up 5-6% (Lehota et al., 1999). According to AMC study estimates, the market was five times as large in 2001 as in 1998, which translates into a turnover of 4 million Euros and 40 cents worth of organic food consumption per capita (AMC, 2003).

The success of organic agriculture depends mainly on the acceptance of its products by the public, the consumers. In all Central Eastern European countries, consumer survey results show that purchases are motivated far more by personal health reasons than by environmental concerns.

A survey carried out on a representative sample of 1000 consumers (Kürthy, 1997) shows that the consumer base is not expanding due to the high price of products, lack of proper information and insufficient marketing channels. the survey also highlights the problem that consumers do not know the criteria by which organic products can be identified. Only 11.7% of the consumers questioned could precisely define the terms 'organic farming' and 'organic product', while 60.1% could not. 22% of the consumers questioned said they only eat organic products that they have grown themselves, but only 6.1% of them follow the principles of organic farming. 11.2% of those questioned trust the guarantee of the manufacturer and 6.8% trust the oral guarantee of the producer and only 5.9% considered official guarantee important. The survey revealed that it is mostly people living in the capital and the middle-aged who pay attention to the official guarantee, and as the level of education and income increases, so does the number of people who prefer the official trade mark.

Research carried out by the AMC commission in October 2002 (questioning 1,235 consumers in an omnibus research) shows that 3.0% of those questioned are aware of, and consume, organic food, 2.6% are aware of, and given the choice buy, organic food and 12.7% are aware of, and sometimes buy, organic food (AMC, 2003).

The scale of values of the frequent, casual and non-consumers was compared in a survey in 1994 on a representative sample of 713 consumers. The analysis showed that there are differences in the scale of values and risk perception. The consumers of organic products connected the values with inner harmony and the risk factors with health. The motivations for refusal were found to be high price (75.9%), unfavourable taste (51.6%), lack of trust (34.6%), insufficient quality (28.7%) and presentation imperfections (26.3%) (Lehota et al., 1999).

The change in the marketing structure has contributed towards the expansion of the organic buyer sector. In the literature, the target groups of health food stores and specialist organic food stores are divided into three categories:

• Families with young children and a high income, who are primarily concerned with providing their children with healthy food.
• The young and educated high wage-earners who have often learnt about organic agriculture and organic products while abroad.
• The sick or elderly, who purchase organic products as part of a diet plan.

These consumer categories lay particular emphasis on aspects of safety and health. The health trend contributes to the increasing numbers of buyers. They mostly purchase a few additional organic products besides their usual product selection in conventional stores. For those who shop in hypermarkets and supermarkets, the choice of organic products is more strongly influenced by social factors (such as recognition, status). For them, friends' recommendations and opinions play a significant role (Horváth-Kovács, 2004).

According to research carried out in 2002 by GFK-Hungária on a representative sample of 1,000 consumers, an above-average proportion of women, those between 39-40 years old, graduates, those living in smaller towns and those with a higher income, have a positive approach to organic products (Élelmiszer 2002).

13 Challenges

Consumers are not very well informed. It is not clear who should be responsible and pay for informing the consumers. This situation contributes to the negative image of organic products. The majority of consumers are not prepared to pay extra for organic products, the beneficial features of which lack clarity and credibility. This situation facilitates the sale of cheap, semi-organic products.

Organic stores sell a large proportion of semi-organic products as well as various esoteric products. This mixed portfolio contributes to large segments of the consumer market holding back, and damages the image and the prospects of inspected and certified organic products. It is hoped that the work of ORA (Organic Retailers Association) will help to improve this situation.

A national organic label is lacking. Biokultúra Alliance's organic logo is used to distinguish organic products. However, it is not a standard Hungarian organic seal. The logo does not have to be indicated on all organic products, and the manufacturers incur additional costs to use it. The Biokultúra logo is only narrowly communicated and only a small segment of consumers is aware of it.

With Hungary's accession to the EU, the import of organic products from member states has been simplified. This has contributed to an increased proportion of imported organic products on the domestic market. The multinational chains, who are of increasing importance in the marketing of organic products, are unable to offer an adequate range of organic products from domestic sources. They therefore view the simplified import process as a good opportunity.

14 Literature

• AMC (2003): Az ökotermékekkel kapcsolatos fogyasztói szokások, értékesítési csatornák, Budapest
  
  
• Biokontroll Hungária Kht. / Roszík et al. (2000-2005): Report on the activity, Budapest;
  
  
• Élelmiszer (scientific review): 2002/4
  
  
• FVM (2003): A Magyar mezőgazdaság és élelmiszeripar számokban,
  
  
• Horváth, Á. – Kovács, A. (2004): A biotermékek értékesítési stratégiája a konvencionális kereskedelmi csatornákban, 9-th International Scientific Days of Agricultural Economics, 25-26 March, 2004
  
  
• KSH (2000): Biogazdálkodás Magyarországon, Budapest
  
  
• Kürthy, Gy. (1997): A bioélelmiszerek fogyasztása Magyarországon, University of Gödöllő, Ph. D Thesis
  
  
• Lehota et al. (1999): Az ökológiai mezőgazdálkodás termékeinek export és hazai piaci helyztete, Környezetbarát mezőgazdálkodás, MTA, Budapest
  
  
• Prazan et al. (2004): Further Development of Organic Farming Policy in Europe with Particular Emphasis on EU Enlargement, Prague.
  
  
• Richter, Toralf und Kovacs, Annamaria (2005) Strategies to support domestic organic markets in countries with emerging organic sectors. Paper presented at the conference: Researching Sustainable Systems - International Scientific Conference on Organic Agriculture, Adelaide, Australia, September 21-23, 2005.
  
  
• ZMP (2004)AiZ Mittel - und Osteuropa 2004, Bonn

15 Authors

Annamária Kovács, Szent István Egyetem, Marketing Intézet, Páter K. u. 1., HU-2100 Gödöllõ, Tel: +36 30 851 9049, E-Mail: amkovacs@vipmail.hu

Ferenc Frühwald, Ökoszervíz, Bécsi út 211, HU - 1032 Budapest Hungary, Tel: +361-387-8007 Fax: +361-387-8007