" Nobody wants to listen to me," he complained at the time. Szepesi, a farmer with 100 milk cows, had decided earlier to comply with EU standards. He took out a loan and bought a state-of-the-art milking installation. One year later, he said, the price farmers were paid for their milk decreased from EUR 35 cents to EUR 20 cents a liter, and he was no longer able to pay his loan back. "There are many farmers like me and some of them are so desperate that they decide to take their own lives."

Szepesi is painfully aware that Hungary's accession to the EU means the end of business for hundreds of thousands of small farmers.

‘‘For the next one or two years it will be total chaos,” agrees Dzsingisz Gábor, Dutch agricultural attaché in Budapest.

EU accession a gloomy prospect for many
But more horror stories for small farmers are about to follow. It is estimated there are more than 800,000 small farmers in Hungary - most out of business soon after Hungary's EU membership. These small farmers were given back their previously nationalized land at the beginning of the 90s under the conservative Antal government, when the state wanted to redress the injustice of forced collectivization under Communism. But most of these small landowners today lead a marginal existence.

Imre Szepesi aired his gripes outside Hungary’s Agricultural Ministry last summer

Many of them own no more then one or two hectares of land, often divided in several small plots on different sides of a village. They rarely produce for the market, and typically the farmers have some kind of job or pension. As an extra source of income, they raise one or two pigs, some chickens or a cow and grow maize or potatoes. Only occasionally they might sell something if the price is attractive. But as soon as too many start doing that, prices tumble down again.

Even those farmers who have somewhat bigger ventures and try to make a living off their land, like Szepesi, have little capital to invest and are hardly competitive. With no market regulation and serious overproduction in sectors like cattle breeding, poultry, milk production, vegetables or fruit, the prices they get for produce are forced down, while the cost of higher hygienic and safety standards push costs up.

On the other end of the spectrum are the 10,000-20,000 large farms of 500 hectares and more. These represent some 50 percent of all land in Hungary, and mainly produce bulk products like maize, wheat and sunflowers. They are the core of the Hungarian agriculture sector, and responsible for the fact Hungary is the only one of the 10 new EU members with an agricultural surplus to the tune of EUR 1 billion to EUR 1.5 billion a year. While these farms will certainly have a difficult time adjusting to the open European market, they do stand a fair chance. After all, 50 percent of their agricultural export already goes to EU countries.

Dzsingisz Gábor, Dutch agricultural attaché

And what is more is that these big farms, most of them former socialist cooperatives privatized in the early 90s, are an organized group.

" A strong representation is vital for the survival within the EU," says Miklós Csikai, president of the Hungarian Chamber of Agriculture. Csikai is director of árpád, a huge farm in Szentes, southern Hungary, that employs 950 people and specializes in horticultural products and the breeding of geese and turkey. He is also a professor of horticulture at Budapest University, and well connected to the politics of agriculture.

Agricultural round-table
The Hungarian political scene is now considering setting up an agricultural round-table to tackle the problems EU membership will bring. But not only are politicians bickering and squabbling over the issue, the fact is they are too late.
" If 10 years ago they would have developed and implemented a common and consistent agricultural policy, I am sure that Hungary would by now belong to the top five agricultural producers of Europe," says Gábor, the Dutch agricultural attaché in Budapest, who is a Hungarian-born former state secretary of agriculture in the Netherlands.

Instead they were utterly divided. The conservatives Fidesz, MDF and the Smallholders Party always favored small farmers as opposed to “communist” cooperatives. The socialists and liberals in turn supported big and modern agricultural enterprise and shunned the small landowners.

Every four years policy direction changed and more often than not, nothing happened. Hundreds of billions of forints in subsidies were spent on crisis management (drought, floods) and electoral grandstanding, but no serious reforms to prepare the sector for EU membership were ever implemented.

A few years ago Fidesz started talking about so-called family farms as the best solution. "A fiction from beginning to end," according to Gábor. It was never clear what exactly was meant by it. ‘‘Is a family-owned farm of 50 hectares, which in EU perspective is hardly competitive, better then a profitable farm of 1,000 hectares owned and worked on by one man?’’ Gábor asks. For sure in Holland, one of the most successful agricultural countries in Europe, most farms are family owned. But these are big, capital intensive enterprises which have grown over the years and have always been part of huge networks of modern production and sales cooperatives which, in Hungary, does not exist.

Of course it might have been worthwhile to try and create a layer of middle-sized farms, argues Gábor. That, however, would have meant persuading small farmers to start to work together. Another re-division of landownership, which would have put small plots together, would have been absolutely essential as well. But Fidesz failed to come up with any of the necessary legislation and when the current government came into power in 2002, focus shifted back to big farms once again.

It is now too late, and harsh market conditions will do the dirty job. Financial support will be scarce, especially for small farmers, according to Gábor. From Jan. 1, Hungary had to abolish its own system of agricultural subsidies and introduce the EU income support system. But the organization to register and pay out the new subsidies has not even been completely set up – even now just several months before the May 1 accession date. Because of this lack of organization and foresight, Hungary decided for the introduction of a so-called simplified system. The problem is that this system has not been implemented and tested anywhere else, and it is bound to bring extra problems.

Not an appealing proposition
What's more, EU support - 25 percent of what the farmers of current EU members receive - comes in at EUR 65 (17,000 forint) per hectare of land. As the average smallholder owns 2.5 hectares, that is a mere EUR 150 a year. Farmers without land (pigs, poultry) get no support at all. On top of that, the actual pay-out will only take place after all applications have been processed and approved, probably in the beginning of next year. So farmers will have to take out credits to bridge the gap. With current interest levels, that is not a very appealing proposition.

EU support for Hungarian farmers will be 25 percent of that of current member states

A HUF 100 billion credit facility that the Hungarian Ministry of Agriculture promised for this purpose will, according to Gábor, probably turn out to be too little, too late. The ministry, for example, still must pay subsidies from last year that were not budgeted, so part of that money is already spent. Gábor also fails to see how the government can live up to its promise to top up the EU’s 25 percent with another 30 percent – at least another HUF 100 billion.

" There is not even a filler in this year’s budget to provide for it," comments Gábor. With the current budgetary problems he doesn't see that kind of money forthcoming next year either.

In recent statements in the press, the government accused critics of exaggerating the problems. Minister of Agriculture Imre Németh insisted that financial support for farmers will be forthcoming this spring and that the 30 percent top-up subsidies will be allocated for 2005. At the same time he acknowledges that "it may become difficult for small landowners, but they don't have to give up in huge numbers. The average size of farms of 2,5 hectares is indeed too small. We try to persuade the small owners to work together in cooperatives."

Gábor thinks that the next two years will be chaotic, with many small farmers being forced out of business. In two years time there may be only 100,000 farms left in Hungary to produce for the market, and maybe another 100,000 or 150,000 backyard farmers, he says. It will be a painful process and it may lead to social unrest and protests, although there has been little of that until now because small farmers are unorganized.

Only afterward can Hungarian agriculture grow again. Meanwhile, Hungarian consumers might benefit because they will get a wider range of choice and better quality products for less money.