Hungary is hitting high with CAP

The Hungarian dairy industry and supporting government officials are looking ahead to incoming financial support from the European Union (EU), now that the European Commission has approved the country’s Common Agricultural Policy (CAP) strategic plan for 2023-2027. This has cleared the way for a €8.4 billion transfer in funding from Brussels, despite the friction between the EU and the Hungarian government, led by populist right-wing Prime Minister Viktor Orbán. Under this plan, which started operating on 1 January, Hungary will spend at least €2 billion of the funds on green programmes, including environmental and climate objectives, such as reducing methane emissions from the dairy sector. About €186 million will be used to support Hungarian farmers, including dairy producers. 
Speaking to Dairy Industries International, Hungary’s agriculture minister István Nagy, says the strategic plan, which has a five-year budget of €14.7 billion (including national spending) “provides a historic opportunity”. He said more than half of the rural development spending – about 1,500 billion Hungarian forints (€3.8 billion) will go on economic development, with the country’s strong livestock sector benefiting. And more than HUF1,000 billion (€2.5 billion) will be spent on sustainability programmes. “By the end of the decade, the productivity of Hungarian agriculture can increase by one and a half times, and the added value by two times. Exports of almost €10 billion at the beginning of the decade may rise to €15 billion by 2030,” adds Nagy. 

He says the funding had been welcomed by dairy industry representatives, who have been bidding for national dairy development project funding over the past two years – with investments for precision farming technologies being popular. This includes the dissemination of milk yield recording systems and milk component monitors, for example.  

The first payments 

Dairy farmers received, along with other farmers, HUF43.3 billion (€109 million) in 2022, ahead of the ramping up of funding through the new CAP programme, which is expected to improve the automation and modernisation of dairy farms. The minister also stressed that special attention will be paid to small-and-medium-sized enterprises (SMEs), including specialist dairy producers.  

All spending will benefit major milk processing companies in the Hungarian market, which includes FrieslandCampina Hungária Zrt, Alföldi Tej Értékesíto és Beszerzo Kft, Sole-Mizo Zrt, and Tolnatej. These companies attract consumers with many brands, including Mizo, Magyar Tej and Tolle. 


The Hungarian dairy industry and market is expanding, despite inflation and recession challenges associated with the Russian invasion of neighbouring Ukraine and the end of the Covid-19 pandemic. Annual inflation reached 22.5% in November (2022) and GDP growth is projected to decline from 6% in 2022 to 1.5% in 2023, according to the OECD.  

Raw milk prices producer inputs have been rising fast as a result, although Zoltán Harcz, managing director of the Tej [Hungarian for ‘milk’] Trade Association and Product Council stressed to Hungarian-language media in September 2022 that milk production in Hungary has been continuously expanding in recent years, despite difficulties. 

He told Hungarian food and drink magazine Termékmix, “Despite the record high raw milk prices, milk producers are in a difficult situation due to the increase in input costs – at an unpredictable pace and duration — which does not make the situation easier for the processors either, despite the fact that the volume of milk processed by the domestic dairy industry and the sales revenue have increased in the past years.” 

In short, the industry will hope that input costs, such as energy, feed, fertiliser (for feed), labour and packaging, will start to fall soon, because raw milk inflation has sparked government action. The price of 2.8% fat UHT milk rose by 61% in November, compared to the same period in 2021, according to officials at the Hungarian Central Statistical Office. The government has responded by freezing the price of 2.8% UHT milk as of December, until 30 April 2023. That will cause short term pain to the industry: “If all the main components of the cost of a given dairy product….increase, then the industry is powerless,” concludes Harcz.  

Restricted trade 

Extreme weather conditions such as the 2022 summer drought, rising financing costs and labour shortages may remain a problem, however, and the situation is aggravated by the Russia-Ukraine war and sanctions imposed by the EU on Russia because of its invasion – which directly impact EU member state Hungary, restricting trade with Russia.  

The good news is that the longer-term health of the Hungarian dairy industry looks robust.  

According to London-based market researcher Euromonitor International, the retail value of the Hungarian dairy market reached HUF595 billion (€1.5 billion) in 2021 and was forecast to grow by 11%, reaching HUF662 billion (€1.67 billion) in 2022 – the country’s population is 9.71 million. Drinking milk products is the biggest dairy category (HUF177 billion in 2021), followed by cheese (HUF134 billion), butter and spreads (HUF80 billion) yogurt/sour milk products (HUF75 billion) and other dairy products HUF129 billion). The Hungarian industry satisfies just under half of this demand, with production turnover for all dairy products being HUF258 billion in 2020 and HUF270 billion in 2021.  

Given this, it is maybe not a surprise that the number of milk cows in Hungary has been increasing from 414,000 to 420,000 head from 2020 to 2021, according to the Hungarian Central Statistical Office.  

The core of the industry is medium-sized dairy farms (between 51 and 500 cows), which account for around 50% of Hungarian dairy farms. The majority are in Central Hungary, around Budapest, and the Great Hungarian Plain to the east.  

As for market trends, according to a spokesperson for Euromonitor International’s spokesperson: “There are a couple of main trends that influence the Hungarian dairy market. Firstly, consumers are open to trying out new flavours in categories such as flavoured milk, and flavoured yogurts.
Secondly, the health and wellness trend remains a prominent influence on demand. There is growing awareness of healthy and clean eating and of sustainable sources of raw materials and packaging. In addition, more 0% sugar content and lower salt/fat products without artificial additives, colourings, and preservatives are appearing in stores.

“Finally, increasing interest in plant-based diets and the rising incidence of lactose intolerance are leading to growing consumption of plant-based and lactose-free milk and other dairy products,” says the spokesperson.  


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