Agricultural producers working in the crop cultivation and horticulture sector may have a new, two-pillar risk management system available from January 1, 2012. Thanks to the new system, farmers will be better protected against the effects of adverse meteorological conditions.

The Government has accepted the proposal on legislation regarding the risk management of meteorological and other natural risks that affect agricultural production. The Ministry of Rural Development will soon bring the bill before Parliament.

Agriculture is an important take-off point for the country. The natural disasters and extraordinary meteorological occurrences of the past few years have caused great damage to agricultural producers in Hungary. Damages were not covered sufficiently by either the current damage mitigation system or by expensive business insurance. Farmers had no choice but to continue rolling their losses forward year by year, thus endangering the stability of the operability.

The Ministry of Rural Development has recommended the introduction of a new system for the mitigation of agricultural damages. We require an efficient risk management system that is possible covers all producers and which is able to provide farmers who are in trouble with compensation that is in proportion with their losses.

The Government feels it is important that the overhauling of the system should increase farmers' willingness to become self-providers and should provide incentives to local insurance companies to develop the agricultural insurance market.

According to plans, those farmers will be eligible to be included in the new damage mitigation system who receive support on the basis of a standardised support application form, and for whom the size of land utilized is greater than 10 hectares within the arable farming sector, 5 hectares within the vegetable farming sector and 1 hectare in the case of crop plantations.

Meadows, pastures, grassland, and other areas of farmland not yet utilized as plantations are not included under the damage mitigation measures, and so land of this type may not be included in the new system. According to the plan, deposits paid by farmers will be equal to 1000Ft/ha per year in the case of plant cultivation, and 3000 Ft/ha in the case of field vegetables, grapes, fruit and other crop plantations.

The sum thus accumulated from farmers' deposits will be supplemented by the Government in an equal amount from the central budget.

Only those producers will receive full damage compensation under the new system, which provides motivation for farmers to become self-providers, who have acquired insurance from a business insurer with regard to at least 50% of their activities, while those with no insurance may receive only 50% of the maximum possible damage mitigation allowance.

According to preliminary calculations, the volume of farmers' deposits paid into the new system may reach a total of 4-4.1 billion Forints, meaning that with the addition to the planned budget contribution 8-8.2 Billion Forints will be available each year for damage mitigation from the fund.

The second pillar of the new risk management system comprises a new, business-bases agricultural insurance construction for those producers who wish to decrease their production risks to a higher level than the protection provided by the central damage mitigation fund. New features include the fact that agricultural insurers will now provide cover against drought, spring frosts, torrential rain and inland floods.

Support will be available to farmers from both Hungarian and European Union budget resources for up to 65% of the insurance premium.

The first and second pillars are closely interconnected. The combined use of both pillars means that many more farmers than previously will be provided with a much higher level of protection against adverse meteorological conditions, because of the fact that affected farmers may now receive both damage mitigation support and insurance damage compensation payments with regard to the same damage event.

Producers will receive damage mitigation payments from the Agriculture and Rural Development Agency by March 31. In view of the fact that the system also includes support from the state, the European Commission must also be notified.

Included by the Government in the social consultations on the legislation proposal were the Association of Hungarian Insurance Companies (MABISZ), the Hungarian Chamber of Agriculture (HCA), the National Federation of Agricultural Cooperators and Producers (MOSZ), the National Association of Hungarian Farmers' Societies (MAGOSZ), the Association of Hungarian Producer's Sales and Service Organisations and Co-operatives (HANGYA), the National Council of Wine Communities (HNT), the National Forestry Association (OEE), and the Young Farmers' Association (AGRYA).

(Press Office of the Ministry of Rural Development)