Hungary Adopts Cooperative Farming With a Capitalist Flair

“Cooperative” used to be a dirty word in this farming village just south of Budapest.

Under communism, which ended in Hungary in 1990, farmers were forced to combine in state-run operations that provided them with little incentive to work efficiently or produce quality goods.

But now with their nation a new member of the European Union, some Hungarian farmers are taking another look at pooling their resources as a way to compete with heavily subsidized competitors in Western Europe.

“If we hadn’t formed a new-style cooperative to market our goods, we would have gone bust by now,” said Gyula Szick, director of an experimental cooperative whose members grow mushrooms in Bugyi.

“A lot of people don’t like the sound of the ‘cooperative’ word, but most producers realize that this is something different and they can keep their independence,” he said.

Unlike the cooperatives of the Soviet era, the new ones are like the capitalist-oriented co-ops prevalent in the American Midwest and other agricultural regions in which decisions remain in the hands of farmers.

“We share our resources to finance the costs of packaging, transportation, marketing and quality control,” Szick said. “The cooperative puts us in a far stronger negotiating position than if each of our 25 members acted on their own.”

In his cooperative’s renovated storehouse -- once part of Bugyi’s old Socialist cooperative farm -- staff are working with computer-operated quality control systems that meet tough EU standards.

“I’m optimistic that we can maintain our position,” Szick said, adding that more than half of the cooperative’s products already go to Germany and other states of the pre-expansion EU.

For now, Szick’s group is a rarity among Hungary’s half a million, mostly small-scale farmers, whose output accounts for about 4% of the economy.

South of Bugyi, among the seemingly infinite vistas of the country’s Great Plain, Dezso Szomor is fighting to keep his 1,200 cattle and pigs alive after a long winter and last year’s poor harvest.

“I voted to join the EU because I thought we belong to the West,” he said. “But now we’re on the verge of bankruptcy because Western farmers want to come here and take over our farms.”

Szomor plowed money from his successful flower-growing business into starting the cattle business on a 12,355-acre former state farm because he believed that the future lay in diversity.

Most of his stock is made up of rare breeds of long-horned cattle and buffalo, watched over on the plain by traditional herders and their attentive Puli dogs.

Szomor says the market for naturally produced food is still small in Hungary -- and believes that he stands no chance of competing in EU markets without a bigger handout from the state.

“How can we compete with Western farmers who get full subsidies when we only receive half that amount from our government?” Szomor said, pointing to an aging tractor struggling to pull a trailer of cattle through thick mud at the farm.

The EU will give Hungarian farmers only 25% of the subsidies received by farmers in the 15 nations that belonged to the EU before May 1, while Hungary’s government will be allowed to give them a “top-up” of 30%.

The EU insists that production costs are cheaper in Eastern Europe and that full subsidies would give farmers here an unfair advantage.

But Laszlo Vajda, an official in charge of EU affairs at Hungary’s Agriculture Ministry, says the differences in operating costs are minute.

“People say that production in Eastern Europe is cheap because labor costs are low, but labor costs amount to just 2% of cereal production costs, for example,” Vajda said.