November 11, 2003
Review of Hungary's Poultry and Products in 2003
Production - General
Production of broilers were kept low by depressed domestic prices in the first half of 2003; a side effect of saturated pork market.
By the middle of 2003 market demands for broilers and parts started to grow, but both the output and exports were 20-25 % lower than a year ago. Feed prices will increase considerably in the winter of 2003/2004, this is why broiler production is to drop in 2004.
Feed prices will increase considerably in the winter of 2003/2004 due to low harvest. Low animal numbers (swine and poultry) and high feed stocks, however forced feed mills, so far, to maintain lower compound feed price rise than the soaring feed grain prices.
Both the hog and poultry sectors will be negatively affected by the further increase of domestic feed grain prices (though most input prices are now considerably lower than EU prices). Animal breeders associations have lobbied at GOH for ban on feed grain and formula feed exports.
Poultry farmers and processors receive several kinds of production and marketing support from the government. These range from direct payments for quality bonuses, intervention purchase payments, partial write-off of interest on investment loans, and interest reimbursements for operating loans.
Two factors that equally affect broiler and turkey farms are government subsidies in the future EU membership (from May 2004), and feed prices after a drought hit crop season.
Poultry farms may expect GOH/EU subsidies for only animal welfare investments, animal health fees and for the incineration of dead animal. Some farms may receive income supplement from EU guarantee funds, but the overall production support for poultry farms, as a EU member, will be lower than the actual support level. Export subsidies on poultry in the EU, at the same time, will be available for more kinds of poultry products at a higher level than the actual Hungarian system (WTO commitments) permits.
Some subsidies (such as export subsidies, meat storage, some breeding programs, etc.) are only paid as the result of a competitive bidding process open for all EU member states. Hungarian farmers are as yet inexperienced at writing tenders and, in many instances, are short of collateral and credit needed for performance bonds.
Consumption of chicken reached a peak in 2001. Food safety concerns, fueled by imported Belgian chicken fed by adulterated Asian feed, reduced consumption at the beginning of 2002.
Consumer demand has come back since than, but other negative factors remain including a rebound in the consumption of beef and pork and a strong national currency.
Under the pressure of poultry producers the GOH launched temporary export support programs for whole chicken two times in 2003. The first program was released for 2,500 MT whole chicken (fresh, chilled, frozen alike) with a budget of HUF 250 million (USD 1.1 million) in February. The support was HUF 100/kg (USD 0.4/kg) for exports to any country excluding the EU and CEFTA countries or HUF 50/kg (USD 0.2/kg) if the destination is a CEFTA country.
The second round of export support was issued in July for 1,500 MT whole frozen broilers, with a budget of HUF 150 million (USD 660,000). The subsidy on a kilogram product was the same as above. The most important buyers of Hungarian chicken are EU countries this is why the export support measures had limited affect on the poultry exports.
Export subsidies on poultry in the EU, will be available for more kinds of poultry products at a higher level than the actual Hungarian export subsidies.
Export of broilers was bearish due to strong national currency and heavy competition (brazil, Thailand) in 2003. Sales of chicken meat between January-July 2003 were only 72.5 percent of the volume of the same period of 2002. The market of boneless parts suffered of the least decline, while breast and thigh with bones exports decreased most (66.2 and 36.2 percent respectively).
Hungary tried to expand its poultry sales to Russia, once a major destination for the country's poultry products, but due to marketing and financing shortcomings this market is not considered a factor at this time.
Poultry meat imports come mainly from EU countries. Imported products are either cheap meat cuts for further processing (poultry Verona sausage, frankfurters etc.) or edible organs such as chicken liver. Imports of breasts or thighs are small and occur only during brief periods of short supply. Poultry meat (incl. Edible offals) imports between January - July, 2003 was 23 percent lower than a year ago.
The United States is maintaining its leading position as a supplier of poultry genetics to Hungary.
Most Favored Nation (MFN) tariffs mean the general tariff level. Based on free trade agreements with the EU, EFTA, Turkey, Israel, Bulgaria, Czech Republic, Estonia, Latvia, Poland, Romania, Slovakia, and Slovenia (the latter eight countries will be referred to later as "CEFTA") the tariff schedule may contain preferential tariffs or preferential (country specific) TRQs).
As of May, 2004 Hungary is going to take over the EU outside tariff system. The number of potential export products from the United States to Hungary where EU membership brings a higher tariff is surprisingly limited. These products are beef, poultry meat, barley, and rice, some beef preparations, margarine and apple juice concentrate. Hungary imports these commodities regularly, including in some years from the United States. With the exception of rice, Hungary is also often a net exporter of these commodities.
The basic tariffs for live chicken (breeders) will be reduced (from 22-37.4 % to about 7-20 %) but the actual TRQ (with a 0% in-quota duty) will be terminated in 2004. U.S. poultry genetics are well established on the Hungarian market and, barring additional EU animal health barriers, sales should stay strong.
Edible offal (hog and cattle) including poultry liver will meet lower tariffs (from 39% to 6.4%) but purchases very much depend on domestic demands and future EU technical import restrictions.