Short- and mid-term prospects of the main agricultural sectors in Hungary: a model based analysis with a methodological overview

In our paper, we briefly discuss the outlook for the main agricultural sectors in Hungary until 2013, and present some of the latest results of our modelling work at the Research Institute for Agricultural Economics (AKI). In addition, we provide a short methodological overview of the applied modelling tools. To strengthen the quantitative analysis capacity during the pre-accession period, AKI developed a partial equilibrium model (Hungarian Simulation Model or HUSIM) by the end of the 1990's. Since then, AKI has been regularly carrying out agricultural policy analyses by applying this economic model. After gathering experiences with HUSIM, strong demand was raised on a modelling tool that enables us to investigate the structural changes in agriculture in more depth by focusing on the main sectors and their interrelationships. According to this concept, a partial equilibrium model, FARM-T was developed, which uses farm groups as agents to investigate the changes in agricultural output and the underlying structural progress. The first part of our paper describes the concept and structure of this model in more detail. In the second part, we focus our investigation on the changes in production structure and competitiveness on domestic and foreign markets. Only a few years after EU accession, Hungarian farmers again face considerable challenges: due to the full or partial decoupling of Complementary National Direct Payments already in 2007, the expected introduction of the Single Payment Scheme (SPS) in 2009, the probable abolishing of the EU cereals intervention regime, and the compulsory blending of bio-fuels, major changes in the agricultural sectors are foreseen. But structural problems and the lack of capital for modernization may slow down the adjustment process.