*This is the English-language version of a contribution made to the Hungarian Free Market Foundation. The original publication is available here
Introduction
The Hungarian agricultural sector faces major challenges – drought, low irrigation rates, weak agri-food processing capabilities, missing export logistics, as well as major hurdles equally facing other European nations, such as reliance on CAP payments, influenza outbreaks, and high input costs. More uniquely, Hungary also faces the challenge of a subsidy allocation system that has favoured politically connected individuals. This paper attempts to show how regulatory changes and positioning at the EU level can improve facing those challenges, while maintaining and increasing consumer welfare.
Abstract
The election manifesto of the now governing majority goes broadly in the right direction. It wishes to guarantee the independence of both subsidy allocation and animal and food health authorities. This assures that growers can increase their trust in the regulators, and will be more incentivised to trust the central government on matters of regulation. Where the government should refrain from further action are matters of protectionist policies. Restrictions on non-EU labour would exacerbate the ongoing labour shortage in the agricultural sector, and restrictions on non-EU imports would hurt consumers who are already struggling with inflation. Major improvements in the agricultural sector could be reached if this government, unlike the previous one, were to embrace New Genomic Techniques (NGT), by supporting the file being fast-tracked on an institutional EU level, and then enabling approvals in Hungary. The goal ought to be that Hungary, as well as other countries such as Denmark, put its name on the map of creating new varieties that better withstand drought and reduce resource input.
Overall, the Hungarian ought to put food affordability, availability, security, and innovation at the core of its ambitions.
Hungary should reform water rights by introducing tradeable water-use permits, allowing water to move toward farms and crops where it is most valuable. Approval processes for privately owned wells should also be faster and less expensive. At the European level, Hungary should support rapid approval of New Genomic Techniques and enable farmers to use drought-resistant, resource-efficient crop varieties.
Import restrictions and tariffs would raise costs for consumers, food processors, and livestock farmers. Instead, the government should help producers on the Great Plain transition toward livestock farming, horticulture, and other higher-value activities. CAP funding and regulatory simplification can support this adjustment while preserving the benefits of affordable grain imports.
Hungary should reduce licensing delays, simplify overlapping health and hygiene requirements, and ensure that smaller processors are not disadvantaged by unnecessary packaging and labelling rules. A light-touch regulatory sandbox would allow businesses to test new processing technologies, while easier access to capital would help innovative SMEs expand domestic production.
Hungary should negotiate better access to the ports of Rijeka and Koper and improve the rail and road connections serving agricultural exporters. Greater competition in freight rail would reduce dependence on dominant national operators and lower transport costs. A shift from road to rail would also support European environmental objectives while improving farmers’ margins.
The government should diversify fertiliser supplies beyond Russia and Belarus by strengthening trade routes with Norway, Western Europe, the Middle East, and North Africa. Hungary should also support faster EU approval of innovative crop-protection products and provide the European Food Safety Authority with the resources needed to evaluate alternatives efficiently.
Environmental support should reward measurable outcomes rather than farm size or administrative capacity. Hungary should seek simpler CAP requirements that smaller farms can meet without disproportionate costs or damaging yield losses. Future schemes should account for the actual financial burden of compliance and avoid transferring support toward the largest operators.
Hungary should reduce licensing delays, simplify overlapping health and hygiene requirements, and ensure that smaller processors are not disadvantaged by unnecessary packaging and labelling rules. A light-touch regulatory sandbox would allow businesses to test new processing technologies, while easier access to capital would help innovative SMEs expand domestic production.
Hungary should liberalise access for seasonal workers from non-EU countries and reduce unnecessary delays in work permits. Recognition of agricultural qualifications should be faster for machinery operators, veterinary technicians, and other skilled workers. Lower taxes on low-wage agricultural employment would also make formal rural work more competitive with informal employment or emigration.
Hungary should remove unnecessary certification and import barriers that increase the cost of agricultural machinery. Accelerated depreciation and faster VAT refunds would make investment more affordable. The legal and tax treatment of machinery cooperatives should also be simplified so smaller farms can share equipment, while farmers should retain control of data generated by precision-agriculture technologies.
Agricultural subsidy allocation should be transparent, independent, and subject to public scrutiny. Hungary should publish searchable recipient and beneficial-ownership data, cap excessively large payments, and use redistributive support more effectively for small and medium-sized farms. Restoring confidence in the system is essential for investment, regulatory cooperation, and the credibility of wider agricultural reform.
Senior Policy Analyst
