The expected evolution of the Hungarian milk market
EU accession had a drastic effect on the Hungarian milk sector; in such an environment it is particularly important to have reliable information available regarding future trends. In this article I present an overview of the Hungarian, EU and global market situation as well as the expected evolution of the Hungarian milk market based on available forecasts.
As a result of growing demand, a rise in the global market price of dairy products is probable. The biggest price increases can be expected in cheese and butter, while the price of powdered milk will rise to a lesser extent. OECD forecasts state that global production will grow significantly until 2013, while EU-25 production will stagnate. According to the forecasts, milk market prices will fall between 15 and 20 percent between 2004-2007, primarily as a result of reduced intervention prices.
Hungarian milk production fell significantly after EU accession as a result of reduced profitability and the coming into force of stricter quality regulations, as a result, the country is unable to take advantage of the quotas guaranteed by the EU. The price of unpasteurised milk has risen continuously since Hungary’s democratic transformation; however, in recent years the rate of growth has fallen. By the end of 2003, the redirection of excess milk to foreign markets had become financially unsupportable. Prices began to crash, which brought drastic changes for Hungarian milk producers.
Taking these factors into account, my forecast suggests that in the period to the end of 2005, unpasteurised milk production prices in Hungary will fall slightly and stagnate.