Disease Is Driving Hungarian Farming towards Bankruptcy

The foot-and-mouth disease is being dealt with vigorously, but domestic livestock farmers are facing a serious commercial crisis. The virus is having an effect even in areas that are not infected, while the legal framework for compensating affected producers is still lacking, Világgazdaság reports.

We are confident that foot-and-mouth disease (FMD), which is currently not an epidemic but a series of cases, can be contained at this level, said Máté Koncz, president of the National Association of Agricultural Cooperatives and Producers, in a background discussion. However, if it does become an epidemic, it will pose a truly unmanageable problem. The question is whether the virus will enter the wild animal population or not, he added. The website of the National Food Chain Safety Office states that, as of May 7, 2,490 wild meat samples have been tested for the virus, and all have been negative.

As Mr. Koncz put it, everyone is currently preoccupied with managing the epidemic, while the entire Hungarian livestock sector is in crisis, and in many cases, heading towards bankruptcy. The fundamental reason for this is that the export markets have closed, for which those who imposed the restrictions cannot be blamed, as everyone is cautious in such situations and is protecting their own markets.

Regulations are not necessarily required to exclude Hungarian products; often, meat from Hungary is simply not purchased, with the excuse that it is not bought from them either.

In principle, regionalization works within the European Union, meaning that if the European Commission approves the epidemic management measures of a Member State—which it has done—products from outside the affected areas cannot be banned. However, the question now is not what is possible, but how much our customers trust us.

The problem is even more serious for countries outside the EU, as there is no regionalization there, while the pig and cattle sectors also have significant markets in third countries.

Due to the closures, more than 100,000 pigs have accumulated in the restricted areas, causing huge additional costs for producers due to overstocking.

Furthermore, pigs weighing up to 180 kilograms are now feared to literally not fit in the farms.

Pig farmers have suffered losses even though none of their herds were infected with FMD, and many of the pig farms subject to restrictions are geographically very far from the outbreaks among cattle farms, Mr. Koncz pointed out. This situation was exacerbated by the profit margin freeze that not only affects consumer prices, but also prevents producer prices, which were already low at the beginning of the year, from “settling into place,” he said.

The Agriculture Minister also announced a scheme to “reduce” the excess animals accumulated on farms, whereby processors will purchase pigs from the affected areas at 60% of the market price, with the state making up the remaining 40%.

This program has already begun, which is a relief, but it creates uncertainty among producers as the legal conditions for the payment of state funds are not yet in place. Without the latter, it is risky to enter into such a scheme, but the pig farmers concerned simply have no other choice at present. Similarly, there is no legislation on the 100% compensation promised to farms affected by the foot-and-mouth disease that have undergone total culling.

Meanwhile, a decree has already been issued stating that farmers affected by FMD can receive financial support from the Wage Guarantee Fund for their employees working on the affected farms. However, support from the fund can only be claimed in the event of insolvency, which is then recorded as a debt of the company. If insolvency is declared, the company is automatically registered as a bad debtor by the creditor bank’s system – a disadvantage when applying for the promised preferential loans to help restart the business. In order for the promised compensation to cover debts owed to the Wage Guarantee Fund, a further amendment to the regulation would also be necessary. Despite the legal shortcomings, it is encouraging that a page relating to compensation claims is already available.

Via Világgazdaság, Featured photo via Pixabay