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The Possibilities of Futures and Option Hedge in Price Risk Management for GrainProduction
72-80Views:81The greataest risk tograin production is fluctuation in market prices, which is over 50% over the course of a year; and year by year, as well. There are real market circumstances in the grain market, instead of state guaranteed fix prices, which was the norm under the former political system.
According to the general opinion of producers, losses come from their defencelessness against buyers. The real situation is that price risk can be managed by suitable market strategy, and loss production can be avoided.
Hungary has a futures market (which is organized according to the CBOT system) in the grain sector, which is an unique institute in Europe. This organisation is suitable for hedge businesses and it has convenient technical and institutional background.
There are two possibilities to make hedge business. One of them is the short hedge with futures contract when the producer sells his product for long term if an acceptable profit is included in market price. In this case seller can protect himself against low market prices.
This technique can be considered as professional for price risk management, but possibly has financial cost because of the weak financial situation of Hungarian producers this solution seems expensive for them.
There is an other possibility in the Commodity Exchange for manage price risk, that is the option technique. This solution is suitable for insure prices as well, and has an other additional advantage, namely: there is no financial costs in this case. -
Presentation of sales price reserves for live lamb
37-45Views:89Although sheep breeding in Hungary is grounded in strong traditions, its activities only comprise 1% of the total production value generated from agriculture, and 2% of that for animal-based products. The most significant portion of incomes earned in the Hungarian sheep sector has, for years now, stemmed from the sale of live animals. The sector is decidedly export-oriented, as the domestic demand for its main product, i.e. lamb meat, and is minimal, equaling some 20-30dkg per person per year. Part of the sold animals is sold to market as dairy sheep, while the greater
part is sold in the category of lamb carcasses. For this reason, the average weight of slaughter sheep has lied between 19-22 kg for years now. The target markets for live lamb sales are predominately Italy and Greece. In Greece, movement on this market has shown an upward tendency in recent years; noteworthy are also sales to Austria, Holland, Bosnia-Herzegovina and Poland. In 2003, we exported sheep meat in the form of carcasses to Italy, as well as to Germany, and of these exports, 94% went to Italy, while the remaining 6% went to Germany.
Among sheep products, only the trade balance for live animal sales is positive. But even for such producers, only those who are specialized in intensive breeding and those sheep farms “targeting” meat production can obtain earnings. Specialized literature on the sector argues that the quality of Hungarian lamb has diminished dramatically and is beginning to lose its market position. If Hungarian lamb does not meet market expectations, then it will only be bought from producers at lower prices.
My research focuses on those factors which influence price. I separately discuss the question of quality, as one of the most important decisive factors on price. Within this discussion, I describe the market expectations which actually have an effect on the acceptance of live animals for sale on commission. In practice, after the problems of quality, the next most important question is that of when sale is made. In the course of my research, I studied the development of averages for sales on commission of live lambs using statistical methods. The most important problem of this sector is the hierarchical system used in sales: this is the topic hich neither the producer, nor the buyer, wish to discuss, not even with each other. On the basis of the information at my disposal, I outlined the levels of traders and individual levels used to arrive at commission prices. Finally, I examined the components of the production value of live lamb sales. The results I obtained quantified the key role of the prices and the yield, as well as the factors influencing income. -
Comparative analysis in residential property price level and price dynamics in urban and rural areas of Hajdú-Bihar County
85-90Views:120In modern market economies residential real estate prices, price shifts and their correlations with macroeconomic factors are surveyed quite frequently. However, in contrast with the wide scope of foreign examples, so far existing analyses in Hungary have ignored examining relation and extensity of macroeconomic indicators and failed to examine their effect on real estate pricing. The scope of this survey is to highlight these potential correlations and thus develop new aspects of analysis. Although the examination needs further extension both in time and space, the results of this survey may help to understand the importance of the responsible management of the most precious element of national wealth from the perspective of sustainable rural development.
Based on my preliminary results, there exists a strong correlation between the number of inhabitants of a settlement and the average real estate prices. Nevertheless, the correlation seems to be significant only for cities. In the case of smaller settlements the correlation still exists but at a lower level. As opposed to the results of former publications and my own expectations, no direct link could be tackled between the amount of income tax paid by private individuals and real estate prices either in the cities or in the villages within the territory and time span examined in my analysis. Although this correlation is measurable on a macro-economic level, my micro-regional analyses revealed the complexity of asset pricing and price volatility. Continuing this survey, my goal is to identify the hidden factors influencing real estate prices, whose thorough mapping may promote conscious rural development.
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Pricing in the pig production
25-29Views:83During my research work I will exame the state of pig production and the pigmeat trade in Hungary as well as in the EU. In this article I am looking at this branch, I plan to ask consumers about this topic. There is no point in importing pork if there is no market for it. The reality is that we like what is new, unusual and different. What lies behind this way of thinking?
Everybody agrees, consumer habits differ culturally, and this is true in European countries as well. I find it interesting to examine what parts of the pig are favoured the most by consumers in certain countries. As habits are different we can say that certain countries prefer pork chops while on other countries’ menus pork knuckles can be found. If we follow this train of thought it becomes apparent that due to these differences the price of pork varies from country to country.
According to figures, it is clear that certain countries are able to produce pork products cheaper. Since market works on the principle of supply and demand, those who offer their products cheaper will have a greater chance of remaining in this sector. Those on the other hand who can only produce their products at a higher price will eventually disappear from the market. The price is determined by the rate of the forint to the euro. Today’s strong forint is leading to the growth in imports. Recently, pork exports have fallen, but if the rate were to be 280 forints as it has been in the past, then it would be more favourable to sell pork products.
As Hungarian prices are high, meat processing companies are forced to import from neighbouring countries, which means a cheaper source of product. This has led to a decrease in the number of pig in Hungary meaning that we are now an overall importer of pork products rather than an exporter. -
How can we determine the expected prices for lambs? – Analysis of the Hungarian and Italian lamb prices
59-67Views:70The Hungarian sheep sector has become a one-market sector, almost the whole amount of slaughter lamb went to Italy, which increased its defenselessness. In addition to the sole Italian market showing a permanent demand for Hungarian lambs, it would worth to exploit possibilities in other European markets considering the seasonal differences in Italian prices. Such markets can be the Spanish and Greek for ”light” and the French, German and English markets for ”heavy” lambs. Both the Italian and Hungarian prices have three major periods: Easter, Ferragusto and Christmas. Due to the changes in the prices, the producers often suffer great losses, therefore, the temporal adaptation of production, market research, technological and development activities need to be improved. It is important that the living of Hungarian sheep breeders should not be dependent solely upon the Italian market, distribution of products should be ensured in other markets too, so that the safety of sales be increased and higher prices and higher income could be achieved. The European lamb prices are characterized by large seasonal fluctuation and the degree and timing of changes are different in the different countries. Study of the literature and the results obtained in my study on lamb sales called for an analysis and study of the possibilities of price forecasting. In my study, I performed a forecasting of lamb prices in Hungary and Italy for the period between 1996 and 2006 based on the data of the European Committee. Among the forecasting methods, seasonal decomposition and SARIMA models are the most precise, producers can achieve a better market position by using these in the practice.
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Price Risk Management by Futures Markets and Public Warehousing
58-65Views:85The principal achievement of this paper is the combinative use of two market institutions: public warehousing and commodity exchange and how their joint application is beneficial for the players on the grain market. Based on a theoretical foundation, a calculation model was developed in order to assist short and long-term marketing decisions. It allows all the three participants of the market: producers, consumers and traders, to use this model in order to establish their own business strategy. The model can be used to analyse factors influencing the establishment of price; therefore, it can be also used for policy-making decisions.
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The Examination of the Effects of Value Modifying Factors on Dairy Farms
36-40Views:69We wish to present a method to quantify the value modifying effects when comparing animal farms. To achieve our objective, multi-variable statistical methods were needed. We used a principal component analysis to originate three separate principal components from nine variables that determine the value of farms. A cluster analysis was carried out in order to classify farms as poor, average and excellent. The question may arise as to which principal components and which variables determine this classification.
After pointing out the significance of variables and principal components in determining the quality of farms, we analysed the relationships between principal components and market prices. Some farms did not show the expected results by the discriminant analysis, so we supposed that the third principal component plays a great role in calculating prices. To prove this supposition, we applied the logistic regression method. This method shows how great a role the principal components play in classifying farms on the basis of price categories. -
Impact of precision irrigation on the unit income of maize production
157-162Views:39The study of the economic/economic impact of precision farming should be a priority area in digital agriculture, as the results, profitability, and efficiency indicators can have a significant decision-support effect on the development of both the agronomic and the technical regions of individual farms both in the longer and shorter term. Individual firms, companies, farmers, and family farms quantify the effectiveness of their farming processes. The modern age offers the possibility of digitally recording all the elements of farming technology, making it possible to analyse the cost-effectiveness of a farm more effectively and, in some cases, to carry out more detailed analyses. Nevertheless, the number of farms demonstrating their profitability with such precise economic calculations is still minimal.
Our analyses were conducted on a 56,02 ha field of Balogh Farm-Tépe Ltd. The agricultural operations carried out were fully documented so that the inputs (seeds, fertilisers, pesticides, crop enhancers) were recorded in coordinates and kind, as well as the specific yields, grain moisture data, irrigation norms, and irrigation rotations. At the same time, the company's owner provided the data's monetary value. The main econometric indicators (yield, production value, cost of production, income, cost price) related to the evaluation of the enterprise management were evaluated along with the spatial data in the irrigated and non-irrigated tables. Our calculations show that a given year's climatic and market characteristics fundamentally determine the cost and income relations of a plot of land (and thus of an entire farm). In addition to additional inputs, introducing some elements of precision farming and intensification and increasing yields improves yield security and allows for excellent yield stability.
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A study of product strategy priorities at the small enterprises of the North-Alföld Region
55-64Views:74Through a non-representative sample of the small enterprises of the North-Alföld Region, this paper studies the product strategic priorities enabling us to make a detailed typology of small
enterprises. According to the relevant technical literature, the types of small enterprises have typical strategic priorities. Obviously, each group can be characterised with certain strategic
priorities, which are sharply distinct from each other. These priority features are shown in the form of characteristic features in the enterprise’s marketing activities, market behaviour (product policy, innovation attitude, technology, price policy). This paper studies the enterprises of the sample through the role of production technology, material quality, low price and branding endeavours affecting product positioning. -
Technological and Economic Analysis on the Hungarian Rice Sector
226-233Views:76Hungary lies on the northern edge of rice production area. According to this, the climatic conditions area not perfect for this species. The production area of rice involves typically the poorer quality soils, however these meet the requirements of rice. In Hungary exclusively domestic types are grown which have high yield and good quality and these are usually wore successful than foreign types. On the other hand, these Hungarian types should be improved considering safety in production. Nowadays, rice is grown in large scale companies with 300-1400 hectares, where production technology already exists, machinery is suitable, however the latter one a little bit old.
The average yields of the analysed companies were 3-4 t/ha in the past few years, which were a little bit above the national averages. The operating cost per hectare is almost 200 thousand HUF, from which the main part is the cost of machinery (35%) and the material cost (34%). The main part of the latter one is the irrigation costs (30%). The average cost, calculated from the total production cost, is 80 thousand HUF/t. Considering the above-mentioned costs and the price of rice (75 thousand HUF/t) it can be stated that the profitability of the rice sector is not the best, the cost rated profitability is -6.6%. According to the results of this analysis possibilities for the increase in profitability and improvement are increased subsidies and market price, as well as genetic improvement. -
Alternative protein sources in the nutrition of farm animals
21-31Views:405Protein requirement and its demand of farm animals became one of the critical problems in nutrition on a global scale. Protein requirement has been an explicit demand for a long period with soybean meal and animal protein, but recently there are some limitations in relation to their use and the availability of the high quality fishmeal decreases constantly. For this reason there is increased demand for finding new protein sources which could be the alternatives of soybean meal and fishmeal. Alternative protein sources can be divided into seven categories, according to their origin. In different countries, their use depends on the availability in large quantity and at reasonable price.
There is a long tradition of using legume seeds, as alternatives of soybean. Most of them contain some anti-nutritive compounds, but it can be reduced with systematic selection. Oilseed meals are also generally use in poultry and pig nutrition, but those crude protein content varied, depending on the oil extraction technology. Green fodder and leaf protein was also proposed as alternative protein sources, but their use is limited, in particular because of the market price. The amount of bioethanol and starch industry by-products increases gradually in recent years, therefore those became alternatives of soybean meal, or in much less extend, fishmeal. However, amino acid composition of such by-products are far from optimal for poultry and pig; therefore, in the case of their use amino acid supplementation is necessary. Several novel protein sources are proposed in the last decade, such as algae or insect proteins. Recently, their availability and use is limited, but in the near future those would be alternative protein sources in monogastric animal nutrition.
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Production and economic risk analysis of pig fattening
171-176Views:123I prepared a “model farm” producing fattening pigs in order to examine the main risk of production and market factors affecting the profitability of fattening pig production. Values of body weight (at the beginning of fattening and at the end of fattening), mortality rate, feed conversion ratio (FCR) of fattening pig as well as the main cost and price data were recorded as the input data of the model. Production value per unit, production cost per unit and income per unit were used as output. The Monte-Carlo simulation was used in the model for risk assessment. Based on the results of the analysis, it was concluded that the production value per unit was most affected by the selling price of fattening pig (ß=0.972), the production cost per unit were most influenced by the body weight at the beginning of fattening (ß=0.567) and the feed conversion ratio (ß=0.537), in addition, the change of the income per unit was most determined by the previously factors.
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Strategic Steps in the Sheep and Goat Branches
61-68Views:130The balance of the sheep and goat branches can be summarised as follows:
If the increase in stock size, specific yields, genetic improvement and modernisation are not realised, several thousand shepherds will lose their jobs and possibilities to work, and their families will lose their only source of livelihood.
Several hundred hectares of grassland will become weedy and the costs of crop protection will increase in these regions. Pollen pollution, the number of allergic ailments and medical costs will increase, mentioning only the main disadvantages. Its financial requirement is nearly equal to the one required for development without any essential compensation or production.
In order to develop a competitive branch, a subsidisation of 10-20 billion HUF is needed until the accession of Hungary to the EU, depending on the scale and progressivity of development. The subsidisation and realisation of the strategic steps would result in:
– the establishment of a registered livestock with 1.5 million ewes, which would ensure better market position for the branch in the EU (5%),
– the establishment of a competitive and marketable branch with a production value of 15-25 billion HUF, calculated using the present price level (after accession, the branch would be self-operating and profitable, with the 6-8 billion HUF/year normative subsidisation by the EU),
– the establishment of a genetic potential which would ensure our participation in profitable international breeding animal market, which provides extra profit,
– the establishment of a sheep husbandry with better genetic potential and phenotypic performance, producing a quality of international level,
– the maintenance of the workplace of more than 10.000 people (saving 3-5 billion HUF/year of the budget),
– the maintenance of the condition of growing areas of grasslands with their advantages (crop protection and public health) whose financial effect is considerable. -
Complex problem analysis of the Hungarian milk product chain
43-47Views:95Hungarian dairy sector went through significant changes in past two decades. The most significant changes were caused by our accession to the European Union. In Hungary milk production remarkably declined after EU accession. The size of our dairy herd has been practically reducing since the political transformation, but increasing yields per cow could compensate it in some way and for some time. However, in recent years, increasing yield per cow came to a stop and in parallel, the number of cows declined further and faster. Low prices, high production costs and tightening quality requirements ousted several producers from the market in past years. Feeding cost represents the highest rate in cost structure of production, but animal health expenditures and various losses are also significant. There are undeniably competitive disadvantages in the level of organisation and labour productivity; however competitiveness already depends on cost effectiveness in the medium run. In Hungary concentration of the dairies is relatively strong in spite of the relative high number of corporations. The dairies compete with each other and with the export market for the raw material and the better exploitation of their capacities. Applied technology of the Hungarian dairies lags behind the Western-European competitors’; in addition they have handicaps in efficiency and product innovation. Presence of chain of stores being dominant in sale of milk products does also not favour in all respects to the position of the dairies. The aforementioned retail chains are namely consumer-centric, engage in price follower conduct and weaken the position of the dairies with their private label products. As a result of increasing import of milk and milk products Hungary became a net importer in recent years. Today, disposable income still essentially determines the consumption habits of price-sensitive consumers. Loyalty for Hungarian products is not typical, consumers are open for import products being preferred by retail chains. In addition Hungarian milk and milk product consumption is about half of the Union average and it is far behind the level being necessary for healthy eating. In Hungary lack of competitiveness and vertical integration relationships and backwardness are revealing among the dairy farmers and the dairies, while chain of stores are in unprecedented “monopolistic situation”; the whole sector can be characterised by defencelessness.
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Influence of collective wine marketing on hungarian wine sector
37-41Views:90Nowadays, the importance of marketing is increasingly obvious. The number of those who apply those possibilities and methods provided by the marketing with which more efficient operation and higher amount of profit can be obtained is increasing. Special marketing fields have appeared that make the marketing characteristics of the single trades, product groups and industrial branches are widely known and utilized. During the more than 10 years following the changes of regime, the Hungarian wine market underwent a huge change. It is obvious, that this process has not stopped, and further market rearrangements may be claimed. The product and price policies have changed. Out of the marketing mix elements, mostly the marketing communication has changed, and the costumer has come to the centre. This marketing approach resulted in the formation of the newly established Hungarian Wine Marketing Public Benefit Company. The common marketing activity of the organization should have positive impacts on the industrial branch, although its efficient operation still has hindrances
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Use of Forecasting Methods in Price Analyses
240-247Views:40The cost of products changes not only seasonally in relation to time, but also follows a hectic motion. It is necessary for the farmers to calculate in advance the size of the future income, which is one of the basic conditions of the economical production. Many authors have examined the change of the prices but since the tendency of the change of the prices can be only rarely observed purely by itself, therefore it is difficult to separate it. During my research I examined how the monthly prices of corn and the monthly buying prices of pigs for slaughter have changed since 1991 and how much their future value will be. I examined how much is the α factor wich gives the minimal residual variation in case of the Brownian dual exponential smoothing and the corrected dual exponential smoothing and how will the future (2002) prices, which were in this way calculated, change compared to their real market prices.
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Connections between settlement structure, land use and the process of gypsy segregation in Hajdúböszörmény
41-50Views:75The main aim of this study is to explore the connections between the unique settlement structure circumstances of Hajdúböszörmény and the social problams related to the gypsy minority. After the change of regime, the gypsy population increased especially quickly in some parts of the city, which is in connection with the settlement network position and the internal division of the settlement. The significant segregation of the gypsy
minority appeared as a new phenomenon in the city, whose reason was the increasing migration of gypsies from Northeastern Hungary and the relatively low price of the abandoned real estates located in the outskirts and external settlement parts of the city. Even the gypsy population living in the city for a long time separates itself from the immigrant groups that live in run down houses and practicle have no connection with the job market of the city. It is the typical rural segregation process known only in small village regions (e.g. Southern Baranya, Cserehát) that now goes
on in the outskirts of Hajdúböszörmény. -
Special Investment Support Under the Agricultural Reorganisation Programme 1995-2000
64-73Views:75Since the political changes in Hungary, agricultural businesses have worked in a declining economic environment and hectic market situation, with a widening price gap between agricultural and industrial products and low profitability. A declining export comes then by no surprise. The sector has not been able to even benefit from export opportunities provided in the European Agreement. The area least benefiting from quotas is animal products (beef, mutton, lamb, slaughtered chicken, cheese, egg). The ministry of agriculture was lagging behind in responding to these problems, and it was as late as in 1995 when it launched a reorganisation programme for export stocks fund build-up (5).
The author has conducted empirical studies on agricultural enterprises in Csongrád county to see what results the special investment support delivered under the reorganisation programme produced. The fundamental aim of the reorganisation programme for export stocks fund build-up was to boost exportable Hungarian animal product stocks in a bid for businesses to better benefit from the preferential quotas set by the European Agreement. The author examined how the special investment support scheme succeeded in its aims, whether livestock grew considerably in its wake, whether farmers were able to attain exportable quality and what development funds enterprises were able to raise. -
Economic Assessment of Biodiesel Production for Hungarian Farmers
72-76Views:77Utilisation of oil of plant origin as a fuel is gaining acceptance in the European Union and elsewhere. Besides environmental protection, energy saving, and decreasing over-production of food. Additionally, the subsidisation of farmers and the development of rural sub-regions also contribute to its spread. This study specifically focuses on the direct effects biodiesel's raw materials and final products are now having on farmers, while reviewing and quantifying these effects. I have purposely restricted my analysis to these two elements of the biodiesel chain.
The biodiesel chain seems to be a great method for improving the economic and social position of participant farmers in many ways. Presently, the profitability of raw materials’ production looks to be the crucal point in the chain, and could be strengthened best with intensive, habitat-specific agrotechnic. It would only be possible to reach a favourable profit margin for farmers if yields reach unrealistic averages or if there is a significant hike of the 2000 producer’s price in the oil plant branch.
The main attraction of sunflower- and oilseed rape production lies in the stabilization of market conditions, which is not only gong to appear in oil plant branch but – thanks to the reduction of outputs – also in the cereal branches. Better economic safety for farmers may play a role at least on the same level as in plant production, which involves more risks than profit maximalization.
The reduction of the prime cost of biodiesel could be possible through the direct combustion of the whole oilseed plant or its residues or electricity production using them. Whereas energy demand for biodiesel production is low (appr. 5%) but it needs subsidization and the prices of natural gas and electrical energy presently look favourable in Hungary. Additionally harvesting and baling of the residues is technically problematic, which is why their use may seem to be reasonable just over the middle or long term. Another possible factor of cost reduction could be the centralization of some partial operations, which needs serious financial resources to reduce amortization cost per product, provided there be several biodiesel projects near each other during establishment. Creation and operation of a logistical system could also be a good method for improving the viability of the biodiesel chain, in order to optimize transport schedule and distances. However there are also some organizational difficulties in this case. -
Global and national economic importance of pig meat production
13-20Views:318The pork production has changed significant in recent decades. Pig production fell significantly due to the need to adapt to new animal welfare rules in the sector. Furthermore, change in the meat consumption habit had also a negative effect on pig meat production. Hungarian pig sector and meat industry are in a difficult situation. Due to the high feed prices, the average production cost of pig farming has often exceeded the producer prices in recent years, therefore an increase of pig population could not be realised yet. Pig market is characterised by cyclical fluctuations of supply and prices, furthermore the decreasing producer price occurred parallel with increasing feed prices.
Technology is also a critical fact in the Hungarian pig sector because there is a huge gap in the level of technology compared to that of competitive member states. With the development of production methods the efficiency of pork meat production can be improved in an environmentally friendly way.