The transformation of Hungary’s dairy farming

Kõnig Gábor

Keywords: milk, dairy industry, dairy sector, EU, agrotrade

While the dairy sector’s domestic market expanded with EU accession (turnover and consumption increased), which was covered by a growth in cheap imports, procurement and sales (in both domestic and external markets) fell and stagnated. The growth of imports reduced the domestic market share of national companies to around 80%, while the concentration of businesses intensified in the Hungarian dairy sector, with large companies further strengthening their positions while the smaller ones weakened. In 2005, Parmalat was bought out by its producers – with state assistance – resulting in a strengthening of vertical integration. Foreign ownership achieved a dominant position in the dairy industry – an 87% share in 2004, the second largest in a food industry sub-branch – its aim, however, was to meet domestic market demand and not to expand exports.

The process of concentration can also be felt in the EU, however it remains to be seen whether the non-producing business or the co-operative one is the more viable. This is also valid for Hungary. In any case, increased concentration and cheaper dairy products are positive things, although they have a dramatically depressing effect on dairy producers.

Intensified competition can be expected in the future, “guaranteed” by the EU’s liberal policies, WTO reforms and the appearance of new competition partners. The transformation of diary farming continues in this spirit.

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