The international competitiveness of Hungarian agriculture: past performance and future projections

The international competitiveness of Hungarian agriculture is assessed by estimating domestic resource cost (DRC) ratios for the pre-accession period using data for the years 2000 to 2002. The estimations indicate that Hungary was less internationally competitive in arable production, compared to the mid-1990s, due to the appreciation of the Hungarian forint, static domestic demand and improved harvests in neighbouring countries. While dairy production remained uncompetitive, pork and poultry production by corporate farms became internationally competitive due to lower feed costs and better access to EU markets. The future international competitiveness of Hungarian agriculture is assessed for the years 2007 and 2013 under three scenarios: baseline (no accession), accession with historical rates of productivity growth and accession with dynamic improvements in productivity. Predicted price changes were generated by a computable general equilibrium (CGE) model, based on the most recent version of the GTAP database, which was applied to quantify the implications of the 2004 EU accession. The analysis indicates that accession will negatively impact on the international competitiveness of Hungarian agriculture by increasing land and labour prices. To maintain competitiveness in the arable sector, Hungary will need to achieve dynamic improvements in productivity to offset the effect of higher factor costs. The dairy sector, under all scenarios is likely to remain uncompetitive.