Is the new horror price increase here? This type of meat is incredibly expensive at Hungarian butchers

In the first quarter, both the volume index of domestic and export sales of the food industry fell by more than 10 percent compared to the first quarter of last year, Tamás Éder, social president of the Association of Responsible Food Producers (FÉSZ), told Világgazdaság. This means that what used to work no longer worked this year, indicating that during difficult times for the food industry, exports were a lifeline for manufacturers. At the same time, when evaluating the data, it must also be taken into account that the base effect was significant, since in the first quarter of 2022 there was a large outflow of money for various purposes – for example family tax refund or 13th month pension – and people spent more in shops – he said to it.

The price of meat doubled in a short time

In the case of exports, on the other hand, such an effect does not exist, there may be another reason behind the decrease. According to the FÉSZ president, the reason for the decline could be, for example, the lack of raw materials or the lower level of production resulting from the increase in the price of energy carriers. Processors tried to keep certain energy-intensive operations – such as milk powdering or meat freezing – to a minimum, which resulted in fewer goods being produced, but presumably the decline in consumption, which is typical in Europe, also contributed to the decline in exports.

If inflation decreases, it should be felt in consumption as well, said Éder, adding: he hopes that the first quarter was the worst, and that the second quarter will bring better indicators both at home and on the export markets, and from the second half of the year the growth waiting to start. Of course, there will be a base effect in this as well, since last year the third quarter was positive in production, the fourth already negative, but domestic sales stagnated in the third quarter and fell by 6 percent in the fourth.

At the same time, in addition to the hoped-for decrease in inflation, the growth is also based on the fact that this year – perhaps with the exception of some fruits – a good harvest can be expected.

The situation in the industry is “extremely diverse” on the cost side, he said. There are quite amazing differences between the individual players, for example in energy costs. If a company re-contracted its energy procurement for a year last October, it has been buying at a very high price ever since, and those who bought for a shorter interval are in a completely different situation. In the case of the latter, the fact that the price of energy has gone down should already be felt in the costs.

The situation is slightly different for packaging materials, the price of which jumped big in the second half of last year, partly due to the weakening of the forint and partly due to the increase in the price of the hydrocarbons used as raw materials for their production. Now, however, despite the fact that the HUF is stronger and hydrocarbons have become cheaper, this is not yet reflected in the price of packaging materials. Sooner or later, however, the price reduction should appear in this area as well, but this seems to be a slow process.

At the same time, the opposite process is taking place in the meat market, as raw material prices are falling in several food product lines, and it is not realistic to expect price reductions now.

The purchase price of pork doubled from HUF 350 in a relatively short time, and is now around HUF 750. However, the transfer prices of the meat industry have not risen nearly as much since then, nor have consumer prices

– He told. Although according to the April data of the Institute of Agricultural Economics, processors were able to overcome the 22 percent increase in pork prices compared to a year earlier, since the drastic increase in the price of pigs, this is no longer true.

Despite the decreasing demand, the price of pork has increased

The German pork price, which also determines the Hungarian market, is at a historic high, which would indicate a further increase in meat prices, but this is countered by falling consumption.

The situation on the meat market is therefore special now, since while in other sectors due to the decrease in the price of raw materials, a decrease in consumer prices can indeed be expected – and has already begun – in the case of foodstuffs, the pork market has seen almost continuous growth this year since the beginning of the year, and since neither value has yet caught up with the increase in costs due to the increase in pork prices. The situation is further complicated by mandatory promotions, whose impact on the food industry cannot yet be assessed.

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