Market friendly changes in the rules of trading with agricultural products.

Hungary: This March, the rules of trading with agricultural products have been changed in a trader friendly way. The new rules share the risks in a more balanced way between traders and producers and introduce new contract types.

Reduced risks

Under the new rules, traders and producers may agree that the producer should not deliver less than the contracted amount of products in the case of force majeure (e.g. natural disasters) or should provide collateral.

These agreements were forbidden in the last two years. As a result, traders bore the risk of diminished crops caused by force majeure. Due to the unbalanced sharing of risks, traders preferred to buy crops already harvested. This practice encumbered crop resales.

The new rules are expected to foster conclusion of contracts before harvest and thus enhance spot grain trading.

New contract types

As of this March, producers and traders can only choose the following two contracts for acquisition of crops before harvest:

• sales contract for delivering self-produced agricultural products
• sales contract for delivering agricultural products produced with buyer’s assistance.

Basically, the rules of these new contracts are similar to the previously mandatory sales contracts for agricultural products. Thus, for example, it is still possible in the case of self-produced agricultural products:

• to deliver 10% less than the contracted amount of crops and
• for the producer to deliver before the contractual deadline.

At the same time, the contract for sales of agricultural products, as a contract type, has been abolished.

Act No. CLXVIII of 2011

Act No. CXXVIII of 2012

Act No. V of 2013

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