The Financing of the Agricultural Enterprises in Hungary Between 2008 and 2011

Introduction

Due to the cyclicality in the agriculture the financing of the business means a remarkable challenge in this sector. While the production process lasts, expenditures must be financed, but the additional costs resulting from the interruption of the incomes’ continuity are significant in this sector. If this is financed from credits, interest means obviously an additional cost.

However, the particularity of the cycle has remarkable consequences for the agricultural policy. Farmers are not always able to cover their costs of livelihood and the cost of the expenditures during the producing period until the sale from their reserves.
We think, it is an important objective, to develop a coordinated financing structure. Because the, current economic challenges of the global food supply cannot be answered by individual, isolated corporate strategies. (Csonka, 2012)
Our goal is to examine the way these companies can get funding. From these methods which are the most common in Hungary and whether is this way of getting financing effective? Before that, however, it is important to be able to take stock the farmers’ external liabilities besides their equity properly.
We worked from two sources: on the one hand, we made use of the test farm system’s queries of the Research Institute of Agricultural Economics (AKI), on the other hand, the finding of agricultural studies were used to determine the liabilities.
The test farm system of the AKI concluded on the functioning of the domestic agricultural enterprises from the regular monitoring of 1,925 business units – of which 1,528 are individual farms and 392 are joint ventures – during the year 2011 (in 2010 1,920 units). Because of the representativity of the sample it means 105,975 observed enterprises altogether from the basic population, of which 99,623 are individual farms and 6,352 are joint ventures.
First, the indebtedness of the agricultural enterprises are need to examine, namely the ratio of how many enterprise use external liabilities and to what extent.

Table 1: The indebtedness of agricultural enterprise in 2008 and 2011 (percentage)

Individual farms	2008	2011
Without liabilities	33,1	30,2
Low indebtedness (<20%)	54,1	53,9
Medium indebtedness	10,5	11,9
High indebtedness (>50%)	2,3	4,0
Joint ventures	2008	2011
Without liabilities	2,4	2,5
Low indebtedness (<20%)	32,7	49,0
Medium indebtedness	37,8	34,1
High indebtedness (>50%)	27,1	14,4

Source: AKI

The relative position of individual farms has not changed in three years. In the case of joint ventures the rate of the agricultural enterprises with high indebtedness decreased significantly from 27.1% to 14.4%, the share of enterprises with low indebtedness grew considerably, they are almost half of the joint ventures.

Overall, the level of indebtedness characteristic of partnership enterprises in the food industry is similar to the general national-economic average; however, there are significant variations across the branches. (Koroseczné, Parádi- Dolgos; 2015)

2.