The economic impacts of the 2013 reform on the Hungarian agriculture

Abstract

The impacts of agricultural policies are decisive on the agricultural sector, especially in the case of the European Union's (EU) Common Agricultural Policy (CAP). The 2013 CAP reform introduced several new measures. In budgetary terms, basic payment and greening were the most significant ones. Besides, coupled supports, young farmer and small farmers scheme should be mentioned. To reveal the changes caused by these measures, the time horizon of the study is 2013-2017. Since the subsidies represent a significant part of the income generated in the agricultural sector, the basic hypothesis of the study is that the production units concerned (individual farms, private enterprises) gave economically rational answers. In practice, this means trying to fully adapt to the changes to maximize support. Based on the analysed datasets (Hungarian Central Statistical Office and Hungarian State Treasury), it became evident that farmers responded rationally: splitting up farms against capping, moving towards the lowest resistance to comply with greening, plus associating them with the extra support of coupled payments. Generational renewal is a key issue; however, the present form of young farmers scheme needs to be refined to be more effective. Small farmers scheme is a good opportunity for farmers with less than 5.5 ha and most of the concerned farmers chose well. However, there are about 6,000 farms that are too small for the standard system, while 772 farms that are too large for the small farmers scheme.

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“…However, average land sizes show a remarkably sharper decrease. This process was driven by two policy changes, the maximum capping introduced over 176,000 EUR/farm (physical farm size is 1,200 ha) and the land use limit (basically 1,200 ha) of the actual land law, resulting in splitting up the large farms in order to not lose some part of the basic payment, and to comply with the land law statutory requirement [20].…”