Examination of the European Union’s Intervention Price Regulation on the Hungarian Grain Market

Nógrádi, Judit

Keywords: price stabilisation, market price, agricultural policy objectives, market regulation, price instability

This study looks for an answer to how different agricultural policy objectives relate to the market regulation methods regarding price regulations, and if there is a need to stabilise these prices on a governmental level. Experts’ opinions are divided regarding this matter. According to the reviewed bibliography, agricultural policy objectives usually include price stabilising endeavours. The main reason behind price instability is the short-term price inelasticity of the supply/demand of agricultural products. Researchers’ opinions are divided regarding the need for state intervention. According to Timmer (1989) the government uses price stabilisation programmes for agricultural products because the open market prices do not provide the appropriate level of price stability.
As a result of Hungary’s accession to the European Union (EU), the EU’s grain intervention system was extended to Hungary; namely a fixed purchase price of 101.31 EUR/tonne is paid by the EU. So theoretically the system does not allow prices to fall below the intervention price. As a result of introducing the EU’s intervention system, a decrease in the volatility of prices on the national market can be presumed.
Results based on the analysis of wheat and maize market price variation, have shown that following Hungary´s accession to the EU, market price fl uctuations for wheat and maize were lower in years when there was an intervention system in place. According to the results, the volatility of prices on the national market has decreased after introducing the intervention system. As the prices of wheat and maize meeting the intervention quality standards are prevented by the system from falling below 101.31 EUR/tonne, the minimum prices were higher than those before the introduction of the intervention system. During the period after EU accession, wheat and maize not reaching the minimum takeover quantity produced by small producers as well as cereals of low quality have been eliminated from intervention. Overall, the average market price rose due to the intervention measures.
Further operation of the intervention system is recommended in order to stabilise market prices. When developing Hungary’s position on the issue and establishing the national measures, it is worth noting that the intervention measures will continue to be a good tool to strengthen price stabilisation.

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