The European Union plans to monitor grains trade and exports and member states’ stocks in a model similar to the one recently announced by Hungary.
According to the leaked plans, Brussels is considering a system similar to the Hungarian model, but unlike Hungary, it is not expected to interfere in market processes as the crisis intensifies.
The export of the most important cereals and oil seeds must be reported in Hungary. If there is a risk of food shortages, the state could exercise its right of pre-emptive purchase, keeping the crop at home. No such step has taken place since the beginning of March, and the obligation to notify has not disrupted trade in cereals.
According to sources close to the European Commission, the information system will contain a similar obligation to report intended exports, making the trade of grain throughout the European Union visible and contributing to the maintenance of a secure food supply.
The EU information system would make it possible to monitor trade in cereals on the EU’s internal markets while providing detailed information on member states’ cereal stocks. At the same time, market participants would be obliged to notify the state, and the member states would forward data to the new EU system.
The Hungarian government introduced a tightening of grain exports in early March. This, in itself, does not constitute an export restriction, as companies only have to report the sale of their crop abroad to the National Food Chain Safety Office (Nébih).
In Hungary, however, according to the government decree in force until May 15, the state may exercise the right of pre-emption on the declared items if the export would make the country’s self-sufficiency risky.
The notification obligation applies to wheat, rye, barley, oats, maize, soybeans, and sunflowers.
The Hungarian regulations are being severely attacked due to the state’s pre-emption right, as Brussels believes that this possibility constitutes a strong market intervention that could violate EU law on the free movement of goods. However, no export restrictions have been imposed so far, and international grain trade remains smooth.
According to the Hungarian government, the measure is in line with the Treaty on the Functioning of the Union, which allows for significant restrictions on exports when public order, public security or human health may be at stake — this would happen in the current situation if domestic grain disappeared due to international panic purchases. In such a case, food shortages would occur.
The purchase price of wheat and corn was already 60 percent higher in early April than a year ago.
The Hungarian model, previously introduced in the construction industry, can therefore serve as an example to the European Commission of being able to keep an eye on movements in the grain market in the future. There is currently no such data available at an EU level. However, the chances of the EU intervening in the market with pre-emption rights are slim.