AGRICULTURAL AND RURAL DEVELOPMENT AGENCY (ARDA) Dr. László Rieger Director of Intervention Measures

INTRODUCTION OF ARDA

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

The staff of ARDA Total number of staff of ARDA1 406 Number of staff at the Central Office (Budapest)484 Number of staff at County Offices922 Number of staff with college/university degree1 149 Number of staff with secondary education257 Percentage of male colleagues46,5 % Percentage of female colleagues53,5 % Number of staff of the Directorate of Intervention Measures43 Percentage of staff of the Directorate of Intervention Measures3,0 %

European Agricultural Guidance and Guarantee Fund EAGGF 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 Measures Payments (million €) Payments (million €) Direct payments Intervention NRDP measures Market measures ,7 Rural development measures (AVOP+SAPARD) Total * 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 figures Parameterisation of CMO’sParameterisation of CMO’s –EU accepts all national solution within the limits of existing CMO regulations Developing a National Rural Development planDeveloping a National Rural Development plan –A crucial process to handle the very different national interests within the Country Areas of Experiences of Hungary’s EU accession

 Competent authority  Certifying body  The 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 implements  Alcohol three out of the six  Sugar Intervention schemes  Butter  Skimmed milk powder  Beef 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 %  In 2005 intervention quantity was 4 million tons  In 2005 harvest was 16 million tons  Market ratio was % Intervention - a New Player in the Cereal Sector

Quantity of cereals offered for intervention Total quantity offered t Withdrawn quantity t Rejected quantity t Net quantity of offered cereals t Buying-in of cereals Amount of cereals taken over by ARDA t

Intervention storage capacities Storage capacities offered for intervention Total offered storage capacities t Storage contracts Amount of contractual storage capacities t

Sales of Intervention stocks  Internal market  Export  Aid for the most deprived people  Special measures (transport to Portugal etc.)

Cereal intervention sales Marketing year 2005/2006 Type of intervention salesQuantity (tons) Wheat - export Wheat – internal market Maize - internal market Barley -export Wheat transport to Portugal Maize transport to Portugal Barley transport to Portugal Maize transport to Spain Wheat transport to Spain Food aid for the most deprived Total

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

DenominationUnitTotalWheatMaize Other Cereal SugarAlcohol 1. Open stocks Thousand ton/hl** 3 757,31 330, ,6111,4110,516,1 2. Purchased quantity Thousand ton/hl** 4 276,8874,33 170,284,2121,826,2 3. Sold quantity Thousand tons/hl 719,8435,5192,783,18,30,2 4. Closing stock Thousand tons/hl 7 314,31 769,55 166,2112,4224,042,1 5. Stock value Million HUF , , ,72 424, ,70,7 6. EU reimburs.Mill.HUF2 479,9691,02 199,6-9,3-505,6104,3 a) Technical costs Mill.HUF3 053,6602,51 756,544,8102,73,9 b) Financial costs Mill.HUF820,1171,9544,011,288,64,5 c) Other costs Mill.HUF-1 014,6-151,2-100,9-65,5-696,8-0,3 d) Depreciat. Mill.HUF179,467,70,015,40,096,2

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 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

WHR companies in Hungary Name of the companyYear of foundation Concordia1996 Hungaria1996 Danubius2006

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 ARDA For the cereal sector  WHR credit supports the financing of cereal production in the critical period (before intervention buying-in starts) For ARDA  ARDA has involved the WHR system into the implementation of intervention

Public warehousing and EU intervention, cereal sector, 2005 CropPublic warehousing (1 000 tons) EU interveniton (1 000 tons) Hungarian production Wheat Maize Total 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).

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