Commission Report 2002 (Hungary)

• Progress since the last Regular Report
• Overall assessment
• Conclusion

Chapter 7: Agriculture

Progress since the last Regular Report

Since the last Regular Report, Hungary has made limited progress in the area of agriculture, both with aligning legislation and with strengthening administrative capacity.

Agriculture in Hungary accounted for 4.3% of gross value added in 2000 compared with 4.9% in 1999. Employment in agriculture has declined considerably over recent years, and now accounts for 6.1% of total employment .

In 2001, cereal production was substantially higher than in 2000, owing to a larger area under production and far higher yields. In the dairy sector, milk production increased slightly, mainly due to higher average yield per cow. Beef and veal production continued their decreasing trend, as did pigmeat production. Poultry production strongly increased.

In 2001, overall agricultural trade between Hungary and the EC increased significantly, largely due to the `` double-zero agreement ''. EC imports of agricultural products originating in Hungary increased by 12 % to EUR 1,327 million. EC exports to Hungary increased by 17 % to EUR 709 million. The trade balance in favour of Hungary amounted to EUR 618 million compared to EUR 538 million in 2000. EC imports from Hungary were dominated by oil seeds, vegetables and preparations of vegetables, fruit or nuts. Meat, residues from food industries and fruit and nuts were the main export goods from the EC.

Hungary has taken further steps to develop its agricultural policy. Some decisions have been taken on the future management of the common agricultural policy measures. Hungary also introduced various types of measures to promote family farming activities.

In 2001 agricultural support in Hungary increased from HUF 138 billion (EUR 538 million) to 191 billion (EUR 744 million), including HUF 50.4 billion (EUR 196 million) for rural development. The same figure will apply in 2002. In 2002, export refunds were substantially reduced (from 13 to three sectors), and a new set of agri-environment measures was created. Market access support amounted to HUF 38 billion (EUR 148 million) in 2001, and HUF 41 billion (EUR 160 million) are budgeted for 2002. Production aid support amounted to HUF 67 billion (EUR 261 million) in 2001, and the same amount is budgeted for 2002.

Area-based subsidies are provided in the arable crop sector, without size limit for rice and hemp for fibre, and within specified farm size limits for all other arable crops. Export subsidies can be granted in the grain sector, although they have been reduced since January 2002. A subsidy is also paid to milk producers who deliver raw milk fulfilling the EC quality and hygiene requirements. Also tobacco growers receive subsidies in the form of a quality premium.

Horizontal issues

Since last year`s Regular Report, Hungary has made some progress on implementing measures related to the European Agricultural Guidance and Guarantee Fund (EAGGF). In January 2002 the Agricultural Intervention Centre (AIK), with a current staff of 165, was formally designated as the paying agency for the EAGGF Guarantee Section. In August 2002 it was decided that AIK would be merged from July 2003 with the SAPARD Agency into a single agricultural agency for all EAGGF funds.

The only progress that can be reported on the setting up of the Integrated Administration and Control System (IACS) is a Government decision defining the immediate tasks to be accomplished, together with a feasibility study on IACS implementation, in July 2002.

Regarding trade mechanisms, Hungary has established a working group of all the Hungarian authorities involved in customs clearance and international trade.

As regards quality policy, a system similar to the EC system for protection of designations of origin, geographical indications and certificates of specific character, which had been in place since 1998, was implemented in practice in 2001 and 2002 when the first five product names were registered.

Since Hungary`s legislation on organic farming is already aligned to the acquis, no new developments are to be reported on this sector.

Preparations for Hungary`s participation in the Farm Accountancy Data Network (FADN) continued. Hungary decided to set the minimum threshold for FADN farms at two economic size units.

Common Market Organisations Since last year`s Regular Report, Hungary has made limited progress on implementing measures related to the European Agricultural Guidance and Guarantee Fund (EAGGF) (see above).

The Research and Information Institute for Agricultural Economics has been appointed as the authority responsible for the price monitoring and reporting system.

The Agricultural Market Regulation Act came into force in November 2001. It establishes national measures for the balanced development of the market for agricultural produce and cost-effective agricultural production. It provides the legal basis for secondary legislation passed between December 2001 and August 2002 establishing several national support schemes.

No progress can be reported on arable crops.

In October 2001, the Ministry of Agriculture and Regional Development adopted a decree introducing a transitional sugar market regime from July 2002. This regime defines the marketing year, includes quotas for sugar and isoglucose, specifies the conditions for quota allocation and use, and prescribes the conclusion of an inter-professional agreement. In January 2002, the sugar beet delivery rights were allocated by the Sugar Product Council. According to the new legislation, a maximum of 400 000 tonnes of sugar and 130 000 tonnes of isoglucose produced in Hungary may be sold on the domestic market by the undertakings to which a quota has been allocated. AIK is in charge of quota management.

As regards specialised crops, in the fruit and vegetable sector, 18 producer organisations have received preliminary recognition. They benefit from public financial support of up to 20% of their marketable production.

In December 2001 the Commission adopted a decision by which fresh fruit and vegetables originating in Hungary can be imported without routine inspection of conformity to EC marketing standards by the Member States, provided that the products have been examined beforehand in Hungary. Hungary exports annually to the EC around 85 000 tonnes of fruit and vegetables, in particular peppers, cherries and plums.

In the wine sector, since January 2002 the rules on statistical survey, harvest, production and stock declarations have been applied in Hungary. Data on the general statistical survey of vineyards were published in July 2002. The National Institute for Wine Qualification (private storage, distillation, specific aids) and the National Institute for Agricultural Quality Control (production potential, vineyard restructuring) have been designated to carry out the official control of the specific measures under the wine CMO after accession.

Hungary also adopted the legislation needed to comply with the acquis in the spirits sector, in particular for ``Vilmos`, rum, whiskey and pálinka. From July 2002 the name pálinka may only be used for the designation of fruit or grape marc spirits, and the use of ethyl alcohol in its production is forbidden.

As regards animal products, no progress can be reported in the dairy sector.

Hungary has fully applied the SEUROP classification system for beef since January 2002. No further progress can be reported in the meat sector.

A Government decree on marketing standards for eggs entered into force in January 2002, in line with EC legislation.

Rural development and forestry In this area, very little progress can be reported since the previous Regular Report. Hungary has decided that from July 2003 AIK and the SAPARD Agency (see Section A.b. - Relations between the European Union and Hungary) will be merged into a single agricultural agency for all EAGGF-related measures. Hungary has stated that this merged organisation will become responsible for the implementation of EAGGF Guidance and Guarantee funded rural development measures and will also serve as the EAGGF Paying Agency. Since the Hungarian SAPARD Agency has not yet received provisional conferral of management, and therefore the implementation of the SAPARD programme has not yet begun, it is not possible to assess the state of administrative preparation for implementation of post-accession rural development programmes. The Hungarian Government has decided that the Ministry of Agriculture and Regional Development will be responsible for the preparation of the Agriculture and Rural Development Operational Programme.

In the forestry sector, the Hungarian legislation on classification of wood in the rough has been aligned to the acquis.

Veterinary and phytosanitary issues, including food safety Since last year`s Regular Report, further progress has been made in transposing and implementing the acquis in the veterinary sector, and certain administrative structures have been strengthened.

On the basis of the new framework legislation in the veterinary sector, which was adopted in 2001, 19 Government decrees for implementing veterinary rules have been adopted and entered into force. New legislation on the production, marketing and use of feeding stuffs was adopted in December 2001 and entered into force in June 2002. An implementing decree on import of feeding stuffs entered into force in August 2002.

In the field of animal welfare, transposition of the acquis on the protection of farm animals was completed in 2002.

The capacity of administrative structures was reinforced during the past year. The Department of Animal Health and Food Control of the Ministry of Agriculture and the field veterinary service are responsible for enforcing legislation on animal health, animal welfare and public health. Around 800 veterinarians work permanently at the County Animal Health and Food Control Stations and in the district veterinary offices The Department of Animal Health and Food Control is also responsible for the central management of the veterinary border inspection posts, where around 170 veterinarians are employed.

On public health and animal health, in 2002 legislation was adopted on animal health requirements of animal breeding and on animal diseases.

Work was undertaken to upgrade the nine border inspection posts that Hungary wishes to maintain after accession, to bring them up to the standard required by the acquis. Three of them have been completed and opened.

The Central Veterinary Institute has been appointed as the national reference laboratory for TSE.

Hungary has made progress in preparing the internal market control system. Preparations for setting up an animal identification system for bovines, sheep and swine have continued.

Since November 2001 Hungary carried out more than 40,000 prion tests on cattle aged over thirty months for BSE and no positive cases were found. It has already adopted most EC requirements in this area. At rendering plants, beef must be separated from other meat. Since 2001 specific risk material (SRM) rules are applied and fallen stock is burnt after rendering, although its use is not yet forbidden by law.

Hungary is also implementing a national plan for upgrading food establishments to meet EC requirements. All establishments that are supposed to be operational after accession have been inspected by the competent authority, and a plan to correct any deficiencies has been drawn up.

In the phytosanitary sector, despite the fact that most legislation is in line with the acquis, some further progress was made in the reporting period.

Although no progress is reported on plant health, in the pesticide sector a new decree in March 2002 fixed the maximum level of pesticide residues in and on plants and plant products.

Legal harmonisation on seed and plant propagating material has been virtually completed. The National Institute of Agricultural Quality Control is responsible for the implementation of the EC rules in this field, and it was accredited by the International Seed Testing Association (ISTA) at the end of 2001. The Institute`s IT system and technical infrastructure have been improved.

Administrative structures for phytosanitary issues have been strengthened in parts. Two greenhouses, one for quarantine and one for virology, have been built. The Central Service for Plant Protection and Soil Conservation was established for performing national official tasks and for organising and co-ordinating the activities of the Services in the counties. Within this Service a Directorate for Registration was also established.

A decree was adopted in 2001, establishing compulsory registration, under the Central Service for Plant Protection and Soil Conservation, for producers and importers subject to phytosanitary control.

Hungary is developing ten phytosanitary border inspection posts (BIP) in line with EC requirements.

As regards food safety (see also Chapter 1 - Free movement of goods), some progress has been made, particularly regarding the upgrading plans of food establishments and the increase in measures to deal with BSE.

A Deputy State Secretary within the Ministry of Agriculture has been appointed to deal with food safety issues, including the establishment of a National Food Safety Office, which will become the counterpart of the European Food Safety Authority.

Overall assessment

In terms of preparations to apply the Common Agricultural Policy, considerable further efforts are needed. Market intervention systems in line with the acquis are not yet fully established, although similar systems exist in the milk and sugar sectors. Schemes have been introduced to facilitate access by family farmers to bank loans and the land market.

In the area of horizontal measures, even if the final decision on the future paying agency for EAGGF Guarantee market-related measures (AIK) has been taken, significant progress remains to be made in terms of defining the precise tasks of AIK, setting up appropriate organisation and procedures, and preparing it for accreditation. Hungary should define, too, whether AIK will also be the paying agency for EAGGF Guarantee rural development measures.

Concerning IACS, although the system for animal identification is relatively advanced, the establishment of a parcel identification system and the connection of the separate IACS databases need to be tackled urgently. Hungary has decided to build the blocks from existing aerial photographs. However, the process of digitalisation is so far little advanced. Only a small pilot project has been organised. A number of decisions remain to be taken in key areas for building the Land Parcel Identification System (LPIS). Very serious efforts are urgently needed in order for Hungary to be able to build up an operational IACS by accession. The necessary decisions must be taken immediately and the related funding put in place without delay if Hungary is to be in a position to administer and control efficiently the aid-schemes of the Common Agricultural Policy as of accession. If the required administration and control structures are not fully operational, or do not operate correctly upon accession, Hungary will be unable to fully benefit from the support systems under the Common Agricultural Policy, or will be required to reimburse EC funds already received.

In the fields of FADN, quality policy, organic farming and trade mechanisms, Hungary`s stage of preparation for accession is advanced.

Important decisions still need to be taken by Hungary on the administrative structures required for the implementation of Common Market Organisations, in particular concerning the distribution of tasks among the Ministry, its county offices and the AIK.

No decision has been taken up to now on the future role of the product councils that currently manage a number of significant tasks in Hungary`s agricultural policy. However, a decision on the body in charge of price monitoring and reporting has been taken, even if there is no legal obligation for operators to provide regular price data.

For arable crops a number of measures still need to be taken, such as the establishment of a register of warehouses suitable for intervention and determination of the future intervention centres. Unlike for other agricultural sectors, Hungary has not introduced a transitional market regime for arable crops.

As regards sugar, Hungary is well advanced as a result of the adoption of a transitional market organisation, although an inter-branch agreement remains to be concluded between representative professional organisations of the sugar beet growers and the sugar industry.

Significant steps have already been taken towards harmonisation in the fruit and vegetable sector, with rules and administrative procedures on recognition in place. Work on the introduction of rules for operational programmes and funds needs to be continued.

In the wine sector, some of the necessary administrative decisions have been taken, and Hungary has decided to establish the vineyard register in 2003, on the basis of the results of a general statistical survey conducted in 2001. It has also decided to designate in autumn 2002 the institutions that will be involved in the common market organisation for wine. The Hungarian Wine Codex is under preparation. Hungary`s administrative capacity in this field can be considered as sufficient.

Hungary has a voluntary quota system for milk since 1996, managed by the product council, accompanied by a system of buy-up prices. The sector is managed by the company Livestock Performance Testing Ltd, which is responsible for the quality testing of milk and milk products. About 85% of milk complies with EC standards. Hungary needs to decide which body will administer the quotas and control the producers upon accession.

Very serious efforts are still required in preparing for Hungary's post-accession rural development programmes. Hungary's decision to amalgamate the AIK and the SAPARD Agency should facilitate the implementation and management of future rural development measures. It is important that a clear definition of tasks within the new structure is ensured. However, given that Hungary has not yet received accreditation for its SAPARD Agency, its capacity to implement EC-funded rural development measures remains to be proven. Even with these two agencies (AIK and the SAPARD agency) amalgamated into a single body, which will facilitate the implementation and management of future rural development measures, very serious efforts will be required to achieve the necessary administrative capacity by the date of accession. The Ministry of Agriculture also needs to ensure that appropriate expertise to develop the Guidance and Guarantee funded rural development programmes is available and closely co-ordinated with all relevant services.

Hungary should also focus on the preparation of a rural development strategy for the period subsequent to accession. The existing agri-environment scheme should be developed. A National Forestry Programme, co-ordinated with the Rural Development Programme and a forest registry, remains to be completed.

Land reform is still an issue of major concern for Hungary`s agriculture. As a result of compensation and privatisation, the average size of agricultural properties is less than 3 hectares. Such fragmented land ownership creates an urgent need for consolidation, in particular among smaller farms. Incentives to farms should take into account their profitability in the longer term.

In the veterinary field, a Veterinary Act is in place, based on the introduction of the principle of regionalisation, separation of the tasks of official and private veterinarians, amendment of the animal passport rules, extension of the list of notifiable diseases. This Act needs to be implemented through a number of decrees, half of which have already been adopted by the Hungarian Government. In particular, legislation has to be aligned as regards the use of fallen stock and the rules on specific risk material (SRM).

Part of the decrees to implement the Act on feeding stuffs still remain to be adopted.

Hungary should ensure that the plans for the upgrading of its red meat establishments cover all existing deficiencies. Serious efforts are urgently needed to ensure that all remaining issues are duly addressed, and that the appropriate financing is secured to guarantee the implementation of the acquis by all establishments evaluated.

The whole national bovine herd has been identified individually (eartagged) and registered in the central database. An internal cattle ``passport` system registers movement and possible problems. However, some decisions still need to be taken in this respect and the current system must be brought into line with the relevant EC legislation.

Further efforts are needed to ensure that the seven remaining border inspection posts will be set up upon accession. In particular, for the Ferihegy Airport BIP it is unlikely at this stage that the plans for completion in 2002 will be respected.

In the phytosanitary sector, some progress has been made in transposing and implementing legislation, but this process is not yet complete. Further efforts are needed as regards the issuing of plant passports, registration of pesticides and control of pesticide residues. Also, the legislation on seed varieties needs to be further harmonised. Preparations of the administrative structures in this field have improved and should be continued.

As regards food safety, although progress in preventing BSE and in monitoring the upgrading of meat establishments is continuing, there are serious difficulties in setting up the National Food Safety Office. Clear rules among the Ministries involved, continuity in management and adequate resources are highly necessary for an effective start of the Office activities.

Conclusion

In its 1997 Opinion, the Commission concluded that further alignment to the acquis was still necessary, although significant progress had been made in adopting the measures mentioned in the Commission`s White Paper of 1995 on the Internal Market. The Commission added that particular efforts were needed on: implementation and enforcement of veterinary and phytosanitary requirements and upgrading of establishments to meet EC standards (an aspect of particular importance with regard to the inspection and control arrangements that protect the EU's external borders); strengthening of the administrative structures to ensure the necessary capacity to implement and enforce policy instruments of the Common Agricultural Policy; and further restructuring of the agri-food sector to improve its competitive capacity. The Commission further pointed out that, if such progress were accomplished, accession in the medium term should not be accompanied by significant problems in applying the common agricultural policy in an appropriate manner.

Since the Opinion, Hungary has made progress towards alignment with the EC agricultural acquis and, more recently, has progressed with developing the necessary administrative capacity to implement the acquis in this area. However, preparations have often been delayed due to a lack of decisions at all levels, in particular as regards the preparation for the management of the Common Agricultural Policy. Hungary`s legislation in this area is now largely in line with the acquis. Serious further efforts are, however, needed to increase its administrative capacity in this sector.

Negotiations on this chapter continue, although all negotiation issues in the veterinary and phytosanitary fields have been clarified. Hungary has been granted a transitional arrangement for public health in a number of high capacity red meat establishments (until 31 December 2006) and a transitional arrangement (until 31 December 2009) for construction elements covering existing laying-hen cages located in twenty-one establishments brought into service before 1 July 1999. Hungary is meeting the majority of commitments it has made in the accession negotiations in this field. However, delays have occurred in the transposition of some parts of the acquis in the veterinary sector (animal identification and registration system, TSE issues). These issues should now be urgently addressed.

In order to be ready for membership, Hungary's efforts now need to focus on finalising the ongoing alignment; further reinforcing the administrative capacity to implement and enforce the acquis, in particular in the veterinary field and that of food safety; ensuring that establishments are duly upgraded to meet Community standards; and continuing to adequately prepare Hungary's institutions to manage the Common Market Organisations and the rural development measures. With regard to the establishment of the Integrated Administration and Control System (IACS), due priority needs to be given to the development of a parcel identification system. Ongoing efforts need to be substantially stepped up.

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