Investment and production in agriculture also became more expensive
2022. October 12.Not surprisingly, the events of early 2022 have had a big impact on product prices.
The pandemic already had a profound impact on the economy, but the price rises then were nowhere near the problems we are facing now.
On the global market, the war has caused a lot of problems, with both Russia and Ukraine being major exporters of cereals, wheat, maize and sunflowers respectively.
In this article, we explain in detail why prices have risen so much and what we can do to improve our economic situation.
Why and to what extent have prices risen?
Although prices have risen across Europe, the increase in Hungary has been much higher than the EU average.
In addition, it has not only affected production costs, but also the price of non-investment related inputs.
In addition to the fact that raw materials cost much more, we can also talk about inflation in the case of agricultural machinery.
In addition to having to spend more money to buy a machine, you also have to take into account the fact that replacement is far from certain.
This means that demand is greater than supply, which could lead to further price increases.
The war between Russia and Ukraine has caused a major disruption to the 2022 agricultural market.
Until last year, Russia and Ukraine were major exporters of cereals, maize, wheat, oilseeds and fertilisers.
In addition, the two countries produced agricultural machinery in a number of places that were not available this year.
In addition, there is the rise in energy prices, which was already noticeable last year, but which has now gone completely out of control.
All this has underpinned the rise in the cost of key agricultural products and materials, as almost all the statistics show.
Moreover, prices in Hungary have risen more than the average, with only Estonia and Lithuania showing a larger difference compared to previous data.
This is very worrying, as we used to be in the middle of the pack, but now we are in third place in terms of price increases.
Steep increase in production costs
There is almost no area of agriculture where change is not being felt.
Fertilisers and soil improvers have seen significant price increases, with prices up 116% on the previous year.
In addition, the price of energy and lubricants has increased by 61%.
What is more problematic is that the prices of cereals and oilseeds and fruit have risen by a similar amount, and the production of eggs has increased by 45%.
The latter does not even require large agricultural machinery as much as, for example, cereals.
According to the Central Statistical Office, farmers’ prices have risen by 40%, while the producer price of crop products is up 44% compared with the end of the previous year.
In addition, veterinary medicines and plant protection products have not become cheaper.
Runaway investment costs
Between the second quarter of 2021 and the same period in 2022, non-investment expenditure and the price of production increased in all European Member States.
Hungary ranks third in terms of the growth rate of the average price of output.
Lithuania and Estonia are just ahead of us, but we are closely followed by the more northerly regions with 43%.
It is worth adding that the EU average was 24%, so the increase in our country is almost twice as high as in Europe.
What are the consequences and what should be changed?
One of the most important is to reduce exports and try to produce the necessary raw materials and grains at home.
Of course, this is easier said than done, but as we are highly dependent on individual countries, there is little alternative.
Our country has plenty of good quality land that could produce the agricultural products that our population needs.
However, climate change is making it increasingly difficult to produce the necessary raw materials in lowland areas.
It is therefore important to address the issue of water and its conservation, as water scarcity will become an increasing problem.
In the future, it will be worth planting varieties that are better able to withstand heat and drought, as these will be an important element in our livelihoods.
However, a well thought-out and considered strategy would also allow us to farm much more optimally in the lowlands.
Overall, prices will continue to rise and there is no telling when they will reach a certain level.
Until then, however, we must do something to ensure that in the future there will be less of an impact on the economy if war or an epidemic breaks out somewhere.