AGRICULTURAL AND RURAL DEVELOPMENT AGENCY (ARDA) Dr. László Rieger

AGRICULTURAL AND RURAL DEVELOPMENT

AGENCY(ARDA)

Dr. László RiegerDirector of Intervention Measures

INTRODUCTION OF ARDA

PRESIDENTStructure of ARDA

Vice-President

Direct PaymentsDirectorate

Market Support Measures Directorate

IT DirectorateFinancial

DirectorateBudget

ManagementDirectorate

InterventionMeasures

Directorate

RuralDevelopmentDirectorate

County OfficesDirectorateHR Department

Internal Audit Dept.

Legal Department

Communication and Management Dept.

Physical ControlDept.

ARDA CountyOffices

The staff of ARDATotal number of staff of ARDA 1 406

Number of staff at the Central Office (Budapest) 484

Number of staff at County Offices 922

Number of staff with college/university degree 1 149

Number of staff with secondary education 257

Percentage of male colleagues 46,5 %

Percentage of female colleagues 53,5 %

Number of staff of the Directorate of Intervention Measures 43

Percentage of staff of the Directorate of Intervention Measures 3,0 %

European Agricultural Guidance and Guarantee FundEAGGF Guarantee Section

EAGGF Guidance Section

Internal market measures

External market measures

Intervention measures

Direct payments (SAPS & CNDP)

Accompanying measures(Rural Development Plan)

National subsidies

Pre-accession fund: SAPARD

ARDOP

Measures implemented by ARDA

Total Amount of Payments by ARDA

Type of MeasuresType of Measures Payments Payments 2005.2005.

(million €)(million €)

PaymentsPayments2006. 2006.

(million €)(million €)

Direct paymentsDirect payments 682.8682.8 810.2810.2

InterventionIntervention 531.2531.2 577.9577.9

NRDP measuresNRDP measures 142.7142.7 267.3267.3

Market measuresMarket measures 56.856.8 24,724,7

Rural development Rural development measures measures (AVOP(AVOP++SAPARD)SAPARD)

174.8174.8 160.4160.4

TotalTotal 1588.31588.3 1840.51840.5

* Exchange rate: 275 HUF/EUR

The Importance of ARDA in the Hungarian Agricultural Sector

• ARDA is the only Paying Agency in Hungary (the advantages and disadvantages of the one-PA-model)

• ARDA implements all subsidy schemes in the Hungarian Agricultural Sector For the EU’s EAGF found;For the EU’s EARDF found,For existing national schemes

The total amount of subsidies is approximately 1,6-1,8 Billion € yearly

• National decision on the Institutional structure which implements EAGF and EARDF – Pros and contras for the one-PA model, and the handling of

delegated tasks;

• Determination of the national quotasDetermination of the national quotas – Hard negotiations with EU on the basis of statistical figuresHard negotiations with EU on the basis of statistical figures

• Parameterisation of CMO’sParameterisation of CMO’s– EU accepts all national EU accepts all national solution solution within within the the limits of existing CMO limits of existing CMO

regulationregulationss

• Developing a National Rural Development planDeveloping a National Rural Development plan– A crucial process to handle the very different national interests A crucial process to handle the very different national interests

within the Countrywithin the Country

Areas of Experiences of Hungary’s EU accession

Competent authorityCertifying bodyThe number of Paying Agencies (Coordinating body – if more than one PA)Decisions on delegated tasks

Major decisions on the Institutional structure – basic institutions

Major decisions of institutions of CAP implementation in Hungary

Ministry of Agricultural and

Rural Development

Competent Authority

State Audit Office

Certifying Body

ARDA

Farmers, clients, companies

• Hungarian Customs and Finance Guard• Hungarian State Treasury• Institute of Geodesy, Cartography and Remote

Sensing• Hungarian Chamber of Agriculture• National Institute for Agricultural Quality Control• National Council of Wine Communities• National Wine Quality Institute• State Forestry Service• Hungarian Institute of Agricultural Engineering• Ministry of Environment

Major decisions on the Institutional structure – delegation of tasks

INTERVENTION ACTIVITIES OF ARDA

Cereal ARDA implementsAlcohol three out of the sixSugar Intervention

schemesButterSkimmed milk powderBeef

Intervention Schemes in CAP

CEREAL INTERVENTION IN ARDA

In 2005 intervention quantity was 4 million tons

In 2005 harvest was 16 million tons

Market ratio was 25 + 25 %

In 2005 intervention quantity was 4 million tons

In 2005 harvest was 16 million tons

Market ratio was 25 + 25 %

Intervention - a New Player in the Cereal Sector

Intervention - a New Player in the Cereal Sector

Quantity of cereals offered for intervention

Total quantity offered 6 862 000 t

Withdrawn quantity 2 276 000 t

Rejected quantity 228 000 t

Net quantity of offered cereals

4 358 000 t

Buying-in of cerealsAmount of cereals taken over by ARDA

3 291 000 t

Intervention storage capacities

Storage capacities offered for intervention

Total offered storage capacities

6 540 000 t

Storage contracts

Amount of contractual storage capacities

4 672 000 t

Sales of Intervention stocks

Internal market Export Aid for the most deprived people Special measures (transport to Portugal

etc.)

17%3%

48%

32%

Cereal intervention sales Marketing year 2005/2006

Type of intervention sales Quantity (tons)

Wheat - export 242 000

Wheat – internal market 32 000

Maize - internal market 142 000

Barley -export 78 000

Wheat transport to Portugal 49 000

Maize transport to Portugal 49 000

Barley transport to Portugal 25 000

Maize transport to Spain 141 000

Wheat transport to Spain 209 000

Food aid for the most deprived 28 000

Total 995 000

Connection with the Commission – cereal intervention

• Weekly national representation in the Cereal Management Committee

• Ad hoc bilateral negotiations (most recent issue: minimum quality requirements for maize)

• National information service – weekly cereal report to Brussels

Reimbursement of the costs of cereal intervention by the EU

• Reimbursement of product value – member state credits to the EU, final reimbursement is paid upon selling the product

• Monthly reimbursement of technical and financial costs

• The method of reimbursement – standard internet software (called: e-Faudit) for all 25 member states

Denomination Unit Total Wheat MaizeOther Cereal

Sugar Alcohol

1. Open stocksThousand

ton/hl**3 757,3 1 330, 7 2 188,6 111,4 110,5 16,1

2. Purchased quantity

Thousand ton/hl**

4 276,8 874,3 3 170,2 84,2 121,8 26,2

3. Sold quantityThousand

tons/hl719,8 435,5 192,7 83,1 8,3 0,2

4. Closing stock Thousand

tons/hl7 314,3 1 769,5 5 166,2 112,4 224,0 42,1

5. Stock value Million HUF 190 453,5 39 805,3 127 030,7 2 424,5 20 458,7 0,7

6. EU reimburs. Mill.HUF 2 479,9 691,0 2 199,6 -9,3 -505,6 104,3

a) Technical costs Mill.HUF 3 053,6 602,5 1 756,5 44,8 102,7 3,9

b) Financial costs Mill.HUF 820,1 171,9 544,0 11,2 88,6 4,5

c) Other costs Mill.HUF -1 014,6 -151,2 -100,9 -65,5 -696,8 -0,3

d) Depreciat. Mill.HUF 179,4 67,7 0,0 15,4 0,0 96,2

PUBLIC WAREHOUSE SYSTEM IN HUNGARY

Public warehouse system

• Hungary was the second country in Europe where a public warehouse system was established at the end of the 19th century (Act of 1875. XXXVII.)

• New public warehouse act after the Communism collapsed (Act of 1996 XLVIII.)– Large foundation capital (1.8 million €)– Several products (not only cereals)– The act contains professional minimum requirement

for the management– Trading by warehouses is prohibited, but lending is

allowed (in an intermediates role).

Better understanding of the Hungarian WHR System - A comparison with the US WHR

system

Areas of significant differences

Hungarian WHR System US WHR System

1. Products covered All storable goods (not only grain) Only grain2. Identifying storedgrain

Individual identification, using different parameters

A standard grading system exists

3. Supervision Supervision deals with a large number of products, limited

knowledge for grains

Only cereals with, full professional knowledge

4. Number of public warehouses

Because of the very high minimum capital requirement, highly

monopolized sector (only three warehouses)

Warehouses also dominates on the basic level of the grain flow, a huge

number of warehouses,

5. Activities Storing grain, trade is prohibited Insufficient profitability without trading, main activities are storage

and grain tradingClient to be served Trade law of 1875, basically

tailored for tradersWarehouse Act tailored for defence of grain producers

WHR companies in Hungary

Name of the company Year of foundationConcordia 1996Hungaria 1996Danubius 2006

The process of lending

• Public warehouse receipt is the collateral

• The warehouse ticket has two parts in Hungary

• Both parts are kept as collateral by the bank when lending against warehouse receipts

• Warehouse companies can be granted a line of credit by banks, and lend directly to the owner of the warehouse receipt.

The importance of WHR for the Hungarian cereal sector and especially

for the ARDAFor the cereal sectorWHR credit supports the financing of

cereal production in the critical period (before intervention buying-in starts)

For ARDAARDA has involved the WHR system into

the implementation of intervention

Public warehousing and EU intervention, cereal sector, 2005

Crop Public warehousing (1 000 tons)

EU interveniton (1 000 tons)

Hungarian production

Wheat 1 663 1 759 5 079

Maize

3 146 5 112 9 017

Total

4 809 6 872 14 096

Hungarian production = 100

Wheat

32,7

34,6

100,0

Maize

34,9

56,7

100,0

Total

34,1

48,8

100,0

Commodity exchange and EU intervention

• Price risk has been reduced by introducing EU intervention, this lessens the role of CE;

• In the first year of intervention the uncertainty of the intervention mechanism gave additional chance to the CE;

• CE has a role if market prices are high (above the intervention minimum).

CE and EU intervention – problems and possibilities

• Different standards (product qualities) for the CE and for intervention buying-in

• Two options for mega-storehouses– Involving mega-storehouses in the physical

delivery as delivery basis (these can be used as delivery points for futures contracts).

Information

www.mvh.gov.huwww.mvh.gov.hu

1/3743-603 és 1/3743-603 és 1/3743-6041/3743-604

1385 Budapest 62. 1385 Budapest 62. Pf.: 867Pf.: 867

Thank you for the attention!