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Challenges of the Cereal Intervention

Challenges of the Cereal Intervention. Dr. László Rieger, Director Directorate of Intervention Measures, ARDA, Hungary. CAP Implementation in Hungary, The Agricultural and Rural Development Agency (ARDA). Ministry of Agriculture and Rural Development Competent Authority. Certifying Body.

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Challenges of the Cereal Intervention

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  1. Challenges of the Cereal Intervention Dr. László Rieger, Director Directorate of Intervention Measures, ARDA, Hungary

  2. CAP Implementation in Hungary, The Agricultural and Rural Development Agency (ARDA) Ministry of Agriculture and Rural Development Competent Authority Certifying Body ARDA Farmers, clients, companies

  3. Agricultural and Rural Development Agency

  4. Structure of ARDA PRESIDENT Vice-President Vice-President Direct Payments Directorate Intervention Measures Directorate Intern. Audit Dept. HR Department IT Directorate Communic. and Management Dept. Rural Development Directorate Physical Control Dept. Budget Management Directorate Market Support Measures Direct. County Offices Directorate Legal Department Financial Directorate ARDA County Offices

  5. Execution of CAP Direct Payments Directorate Intervention Measures Directorate Market Support Measures Direct. Rural Development Directorate County Offices Directorate ARDA County Offices

  6. S S D The theoretical effect of the Direct Payments • Price (P) Pmark P dp Q dp Quantity (Q) Q mark.

  7. S S D The theoretical effect of the Market Support • Price (P) Input Support Pmark P is Quantity (Q) Q is Q mark.

  8. S S D The theoretical effect of the Market Support • Price (P) Export Support P es Pmark Quantity (Q) Q es Q mark.

  9. S S D The theoretical effect of the Rural Development • Price (P) Pmark P rd Quantity (Q) Q rd Q mark.

  10. S D INT D The theoretical effect of the Intervention • Price (P) Pint Pmark Q int. Quantity (Q) Q mark.

  11. The Goal of Intervention: Protection of the Cereal Farmers • Stabilize the market price. • Ensure the fair standard of living for agricultural community. • Paying Agencies buy in the product at intervention price set by EU. • 101,31 euro/tonne • 0,36 euro/tonne monthly increase • Keep the product in storage until it can be sold without undermining prices on the EU market.

  12. Characteristics of the Intervention • At the beginning: • Substantial lag of administration • Present: • Oversupply of storage capacity • Storages are local monopolies • Storage operators are traders also • Storage oversupply means: • More competition at the cereal market • More competition at the storage business

  13. The reasons of the lag of intervention in the beginning • Extremely high tech. requirements for intervention storages • Complicated organization of the process • Public Administration vs. Market • Initial lack of experience • Constrained human and IT resources • Lack of interest of public servants

  14. Criteria for accreditation related to cereal intervention • Ensure that quantities, and associated costs, are correctly and promptly processed and recorded • Ensure that the quantity and nature of stocks at every location may be determined at any time • Stocks shall be physically verified by departments independent of storekeepers

  15. Expected changes in the cereal market „Predictability” • EU quality is the requirement • Quantity is not constrained • Intervention price is not negotiable • Price negotiation just above intervention quality • Instead of domestic trade the storage activity provides the business for traders • International trade through big EU tenders

  16. Tasks are restructured „Quality is in the focus” • Producer, farmer – less price negotiation • Domestic Trader – logistics, less trading, less price negotiation • Storage Operator – logistics, longer storage time-scale • Processor, Coordinator – more logistics • Foreign Trader – expensive tenders, exploration of Europe

  17. PRESIDENT PublicWarehouse PublicWarehouse PublicWarehouse Storages Storages Storages Storages Storages Storages Storages Storages Storages Operation of Intervention VICE-PRESIDENT Physical Control Dept. Intervention Measures Directorate County Offices Directorate Financial Directorate IT Directorate CountyOffices (19) Administration Market Storages Storages Storages Storages Storages Storages Storages

  18. Main Players,by Quantities Offered

  19. Main effects of EU intervention in Hungary • More transparent market prices • Min. + 80 million euro increase in the production value of the cereal sector • Longer storage duration of cereals • Min. + 80 million euro revenue annually in the storage and logistics business • Fewer number of trading companies and a significant change in their activities • Domestic animal husbandry and processors have lost the low price advantage

  20. „Land-locked Countries”

  21. Importance of Cereal Intervention in Hungary,

  22. Intervention 2004 Intervention 2005 Cereal Sector Hungarian Cereal Market • In 2005 and in 2006 harvest was cc. 16 million tons • In 2005 and in 2006quantity of interv.was 4 + 4 million tons • Market ratio is 25 + 25 %

  23. Figures of Take Over and of Selling Million tons

  24. The quantity of grain bought in and sold by month

  25. The quantity of stocks and storage space

  26. Intervention warehouses with administrative contracts

  27. Take Over and Selling by Counties,

  28. The capacity of storagespaces by location

  29. Intervention stocks by location

  30. Grain offered for intervention by counties(2008-2009)

  31. Interventioncenters

  32. Concentration of the Take Over

  33. Distribution of offerers (4,2 million tons)

  34. Szerződés 2004-05 Storage Capacity, 2004

  35. Szerződés 2005-06 Storage Capacity, 2005

  36. Szerződés 2006-07 Storage Capacity, 2006

  37. Szerződés aktuális Storage Capacity, 2007

  38. Storage Capacity, 2008

  39. Storage Capacity, 2009

  40. Distribution of Interv. Storages2006.10.01.

  41. Intervention Storages over 35 thousand. tons Dunaalmás

  42. Selling of the Intervention Stock2004-2009

  43. Selling Price and the Quantity Selling price < Interv. price Selling price > Interv. price

  44. Selling Decisions Autumn Present Summer

  45. Winning Bids Other Bids Distribution of Bids Price (euro/ton) 2007.07.26 Quantity (1000 tons)

  46. Winning Bids Other Bids Distribution of Bids Price (euro/ton) 2007.09.27 Quantity (1000 tons)

  47. Huge benefit Selling Price and the Quantity Selling price < Interv. price Selling price > Interv. price Small loss More than 1,5 million tons

  48. Selling Price and the Quantity

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