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

Million EUR
Fig. 2: The total turnover of the factoring houses in Hungary Source: AKI

To sum it up we can say that the 1-3% of agricultural factoring in 2008-2011 plays a very small role in financing the agriculture, and it isn’t likely to change in the near future.

3. 
   Financing of integrators
   

The financing of integrators has an important role in purchasing of machines, large amount of inputs, and financing the distribution chain. In Hungary the integrators have a relevant position in acquisition, but in sale their influence is smaller than their possible role.
Between the integrators and the producers was a relatively close relationship, so it is not surprising, that a part of the integrators searched some producers having connection with them to create a producer group with the knowledge of support opportunities. That is why it is understandable that – regarding to the short deadline for proposals – the members of these groups were primarily producers affiliated with the integrators. In these groups, the integrator typically undertakes to finance the production, it lends with up to 5-10% points lower interest rates in comparison as if the producers (especially the smaller ones) would turn to financial institutions one by one. (Villányi, Vasa, 2007)
The agricultural entrepreneur has its produce financed with an integrator contract, and after the sale of the product is fulfils its liabilities toward the integrator. The integrator can be business organization or individual entrepreneur. According to the integrator contract the integrator:

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  Helps and coordinates the production of the integrated partner
  
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  The partner of the contract finance partly or totally the current asset needed to produce.
  
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  Buys up the product in order to processing or resell (except of the case, if the partners agreed differently in the contract)
  
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  At least 70% of the purchase price will be equalized in 30 day after receipt, the remaining amount within a further thirty days.
  
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  It demands technical and / or administrative services on request
  
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  The required subsidies and discounts will be passed for the integrator and it enforces them in the accounts.
  

Based on the integrator contract the integrator typically doesn’t give money but product to the farmer belonging to the circle. As a guarantee the integrators usually make the farmers take out insurance. The options contract is frequent, the bill of exchange and the joint and several guarantee occur as well.
The lending process of the integrator can be successful and fill the gap, because they know the farmers better than the credit institutions, so they can decrease their lending risk with choosing their partners without operating a particular credit scoring system.
As the integration activity cannot be separated from the basic activity of a business organization, the measure of the integration activity can only be estimated. Based on the AKI estimations (AKI 2010) the annual approx 250-360

million EUR stock of the classical, nationally-known integrators cover about the two third of the integration activity. The rest one third, approx. 110-180 million EUR is made by the small integrators classified as traders. Based on these estimations the financing of integrators ‘measure can be annual 360-540 million EUR.

4.