Meat market woes
The past year could not be described as a success story for Hungary’s meat industry. Luckily, this has not left its mark on the taste of quality meat products.
Starters: foie gras tarts with onion jam or lecsó cream soup. Main course: pork sirloin cakes, Prague ham with polenta demi-glac and black forest ham filled with pâté. Dessert: chicken breast Gerbeaud with garlic and plum gravy and green apple ice cream with crispy rashers of bacon. This could be the menu of any restaurant. Instead, the dishes, made exclusively from Hungarian meat products, are served at the annual press conference of the Hungarian Meat Industry Federation (MHSz).
The event is always well attended thanks to the delicacies on offer and the goodbye-kit every participant receives. Though still generous, the basket this year felt somewhat lighter. As if it was reflecting the downward tendency present in the sector for years. This is the sixth time the press conference has been held. “In the past six years, my hair has grown greyer and I have got bigger but not an inch more optimistic,” said Tamás Éder, head of MHSz.
There is not much to be happy about. In 2011, continuing the trend of the past several years, the country’s hog stock dropped 4% to 3 million. Sow stock decreased by the same percentage, currently numbering 210,000. Pig killing in domestic slaughterhouses also slumped by 300,000: a more than 7% drop year-on-year to around 4.3 million. The share of imports has dropped too, but still accounts for more than 10%.
To serve the Hungarian market, Hungarian livestock should number 5-6 million swine at least. Now the difference is covered by imported pigs that, unlike their Magyar counterparts, are not raised on corn and other high-quality feed. The decline in the number of slaughters has caused many factories and meat processors to shut down. This may work well for some big companies but does not help the sector as a whole, resulting in a situation that is uncharacteristic for the rest of Hungarian agri-business: the sector imports raw materials and exports high-quality, high added-value products.
Buying pork at home or outside the borders may differ in quality, but not in price. The price of Hungarian livestock is pegged to the EU average. Farmers, however, have been unable to incorporate this into their retail prices, Éder said. Add to that last year’s feed price boom, a two-point increase in VAT plus a 30% rise in the cost of production in a year and you will see why the industry has not been growing. Retail prices have not followed this hike, even though many of us may feel they have. The result is slowdowns and shutdowns.
What has driven framers’ prices up, beyond the factors listed above, is the addition of new tax burdens to existing ones. To fight black market expansion, the Rural Development Ministry has set up a food safety supervising body. The body promises to crack down on illegal players who push many producers to the edge of bankruptcy. But in order to do that, it needs some additional contributions from market players.
The MHSz disagrees. It claims the sector has already paid enough to the central budget and another tax item will not likely solve the problems. Overall, meat producers are to pay the state an environmental fee, a food safety supervision fee, wages and 2% higher VAT, while a so-called disaster protection fee is also looming.
“These put meat at a disadvantage with other protein-source foods like cheese, which have 18% VAT on them,” Éder explained, who fears this will push more legal players to the grey or black market. “As it appears, there are miracles,” he said. “Otherwise, how could some companies offer smoked ham for HUF 695/kg,” he asked sarcastically. (The price of livestock is HUF 360-380/kg. Ideally, half of the pig can be processed.) “We would recommend that authorities review the operation of these companies, which is remarkable even at an international level, and share their experiences with us.”
For all the strain it puts on market players, enhanced supervision is needed. Last year alone, there were at least 100 severe food safety abuses. Many of these involved production in so-called kraals, places completely unfit for food production. With the food supervision initiative, the government expects to collect about HUF 6 billion this year, Lajos Bognár, deputy state secretary of the Rural Development Ministry told the Budapest Business Journal. To work efficiently, they would need to double this amount.
The ministry sees integration to be the way out. “Small farms could stay afloat with the help of integrator contracts while state subsidies would allow big ones to develop technology and machinery,” he said. Suppliers to large chains can also expect their situation to improve, he added. The modification of the act on suppliers has started, and will probably be concluded this year.
What about consumers? According to statistics of GfK Hungary, they still go for Hungarian products but due to high prices, they often end up buying the cheaper offerings. A hint for Easter ham buyers: don’t go under HUF 1,500/kg unless you want to have rapid-smoked ham injected with flavorings.
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