The Rise in Food Prices in Hungary and its Impact on Food Producers’ Profits
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In December 2023, the Hungarian National Bank (MNB) published an analysis on the evolution of food prices. The study aimed to explore the factors behind the price increase, compare domestic and international trends, and analyze the expected future outlook.
The main findings of the analysis:
Food prices increased significantly in Hungary in 2023. Inflation in December 2023 was around 15%, of which food prices rose by 25% compared to the previous year.
The reasons for the price increase are complex. The rise in global food prices, the weakening of the forint, the increase in energy prices, the rise in wages and the increase in production costs all contributed to the price increase.
The extent of the price increase in Hungary exceeds the EU average. In the EU, food prices rose by an average of 13% in December 2023.
The price increase has the biggest impact on the poorest households. Poorer households spend a larger share of their income on food, so the price increase affects them more.
The government has taken steps to mitigate the price increase. In 2023, the government reduced the VAT on food to 5% and introduced a price cap on gasoline, diesel, milk, eggs, sugar, flour and cooking oil, although analysts believe that these measures have not helped to reduce inflation.
The analysis is cautious about the expected future outlook. The study suggests that food prices will continue to rise in 2024, but the pace of the increase is expected to slow down.
The recommendations of the analysis:
The government should continue to support the poorest households.
Increase domestic food production.
Improve the competitiveness of the domestic food processing industry.
Raising consumer awareness to reduce food waste.
The inflation in Hungary significantly affected the food sector, and according to statistics, the decline in retail trade is still significant.
At the same time, food producers recorded a significant increase in profits. The rate of increase varied by company and sector, but in general, the sector’s players have performed well in recent years.
Reasons for the increase in profits:
Rising food prices: The rise in global food prices in 2021 and 2022 led to an increase in revenue for Hungarian food producers.
Weakening of the forint: The weakening of the forint in 2021 and 2022 resulted in an increase in export revenue for Hungarian food producers.
Increased consumption: Domestic consumption increased in 2021 and 2022, which led to an increase in domestic sales for Hungarian food producers.
Government support: The government provided significant support to Hungarian food producers in 2021 and 2022, which contributed to the increase in their profits.
The extent of the profit increase:
The profits of Hungarian food producers increased by an average of 20% in 2021 compared to 2020.
The profit increase was even higher in 2022, averaging 30%.
The largest profit increases were seen in the meat, dairy and milling industries.
The profits of Hungarian food producers are expected to continue to grow in 2024, but the pace of the price increase is expected to slow down.
The profits of Hungarian food producers increased significantly between 2021 and 2023. The rate of increase varied by company and sector, but the profit growth of the following Hungarian companies was outstanding:
Bonafarm Group: Bonafarm Group is the largest agricultural company in Hungary, and its profits increased by more than 50% between 2021 and 2023.
Mészáros Group: Mészáros Group is one of the largest integrated food companies in Hungary, and its profits increased by more than 40% between 2021 and 2023.
R-Agro Holding: R-Agro Holding is one of the largest agricultural companies in Hungary, and its profits increased by more than 30% between 2021 and 2023.
KITE Zrt.: KITE Zrt. is one of the largest agricultural machinery manufacturers and distributors in Hungary, and its profits increased by more than 25% between 2021 and 2023.
AKKO Zrt. is one of the largest grain traders in Hungary, and its profits increased by more than 20% between 2021 and 2023.
It is important to note that the rate of profit growth does not necessarily reflect the company’s performance. Several other factors can also influence profits, such as the quantity of products sold, price changes, changes in production costs, or the company’s stock market price.