Examination of Witnesses (Questions 360
- 379)
THURSDAY 8 MARCH 2007
MR ZOLTÁN SOMOGYI
Q360 Chairman:
Can we go on to grubbing-up? You say that you are against grubbing-up
because basically you have not got a surplus, you want all the
wine production that you can have and you fear that, if you have
a grubbing-up process which is open to the producer, people will
take the easy money and you will just lose the production.
Mr Somogyi: It is not as simple as that. We
are against the approach which was formulated by the Commission
that grubbing-up would be left to the discretion of the farmers,
so Member States would not have any influence on the system. We
are happy with this measure, but some control should be given
to the Member States in order to have an influence on the uptake
of grubbing-up. If there is no control, we are afraid that it
might have some really negative effects. We are not against grubbing-up
but it should be given to the "national envelope" and
it should be left to the Member States to decide which measure
within this envelope should have priority. Just to give you a
technical example, especially during the previous political and
economic system we had big vineyards, big wine production farms.
Most of them were state-owned and there was a kind of privatisation,
or compensation called a restitution in kind process, when we
changed our system. So, if we take the example of a state farm,
almost all the employees were able to get part of the vine-growing
area. Sometimes they had to pay for it and sometimes they just
had to use their tickets that they received to compensate previous
confiscations. If we look, for example, at a wine parcel of 20
hectares somewhere in the great plain of Hungary, which is a flat,
sandy, not a classical wine-producing area. Anyway, we still had
these big farms, so during these privatisations the new owners
received certain parts of this parcel. For example, I was invited
to my friends and I helped them to harvest the grapes and his
father has two rows in a big parcel. He was lucky because he had
two straight rows and not different small plots, but I might imagine
that this 20-hectare parcel had 30 or 40 owners. Obviously, after
a while, most of them got rid of it and sold it to others, but
still it has quite an interesting owner structure. And now not
only the state but also if this local wine community does not
have any influence on the grubbing-up scheme, perhaps 30% of them
would prefer to buy a new Suzuki for their daughter and grub up
the area, and the others would prefer to continue production.
So you can imagine what would be the result of this completely
free grubbing-up scheme. We are not against the measure and we
should not have state influence but it should become a bit more
complicated than Commissioner Fischer Boel imagines.
Q361 Lord Plumb:
I would like to pursue this a little because it is rather important.
What you have just said relates very much to the Commission's
own thinking, and indeed to the proposal, and that seems to have
come from even people like COPA, the farm organisation, and COGECA,
and also from some of the other organisations. I think it comes
out of the report of the European Parliament. In other words,
the initiative has to be taken by the individual and therefore
(if it worked) come out of the "national envelope" that
is the responsibility of each of the nations. I was rather intrigued
when you said, if I have got my figures right, that about 140,000
hectares were used for wine production and the figure is now down
to 80,000. In other words, you had 140,000 and then you joined
Europe and went down to 80,000 at a time when you were going to
be ultimately on a par with other countries as wine producers.
You have reached a position now where you do not have a surplus,
but in any reconstruction, as I understand it, you are looking
for the use of funds to help with marketing and with further reconstruction.
What interests me is to know what has happened. Have those vines,
the 140,000 or the 80,000, been grubbed out already? What is the
land being used for? Is there greater incentive for other use?
Is Hungary taking an interest in and advantage of the possibility
of growing non-food crops, because that seems to be a growing
interest and is becoming quite fashionable? One has only got to
look at Germany to realise the way they are going and the amount
of biofuels that are being produced now from crops. Are these
the sorts of alternatives as you see it. And, having said that,
obviously, in a wine sector you are going to concentrate on the
quality wines? I have to tell you that I have a bottle of that
in my wine shelter at home given to me by Mr Csaba Csáki,
when I was with him not very long ago, and I am sure you know
him rather well, and he promised to send me more if I liked it.
I have not opened it yet.
Mr Somogyi: That is a mistake.
Q362 Lord Plumb:
It is really a matter of asking you to pursue further what you
said. It is interesting, is it not, that here is a country just
joining Europe that has already done what Europe is saying you
have to do, because this is a crisis. You cannot go on with surpluses
like this and face the competition. Could I just follow on with
this because we were seeing this last night when talking to the
Commission. They were saying, "Yes, we want to encourage
the grubbing-up scheme for areas where it is needed, but we want
to continue with the non-planting scheme until 2013". You
can understand that in principle and in economic terms, but the
grower is going to say "If we allow the stuff to come in
from elsewhere while we grub out our vineyards, we are opening
the door to wines coming in from all over the world".
Mr Somogyi: Thank you for this very professional
question. I am afraid that I will not be able to respond to all
aspects of this complex issue. When I told you that it is a mistake
not to open this bottle, it is true because yesterday I showed
this bottle to our expert and he told me that it is just about
the time to drink it. It is a vintage of 2006 and these wines
cannot be kept even for two or three years. So you have to drink
it by next year. It has a very fruity, spicy flavour.
Q363 Lord Plumb:
If I may say so, my Lord Chairman, we have a very good salesman
with us.
Mr Somogyi: Really I am a bit worried because
I have told a nice story about this wine and maybe you will open
your five-year old bottle and be very disappointed.
Q364 Lord Plumb:
I will open it tomorrow evening.
Mr Somogyi: Coming back to these developments
and what happened to the wine growers and the vineyards, I do
not know exactly what happened to them, but I will give you some
more background information. I was talking about this restitution
in kind and compensation and privatisation. With the remaining
85,000 hectares of production area we still have more than 130,000
wine growers in Hungary, so wine-growing does not mean that a
wine grower is a wine producer. We have 130,000 wine growers registered
somewhere, but we have only 12,000 wine producers who are producing
wine for the market. Obviously, out of this 130,000 there is my
father, for example, who is a wine grower but he is not registered
as a wine producer; he is producing about 15 hectolitres, 1,500
litres. We have a big family and it is for our own consumption,
and he also gives some to neighbours and friends. Let me go to
the grubbing-up scheme. These 130,000 wine growers are usually
not full-time farmers; it could be, for example, an employee of
the Hungarian railway system, who has this vineyard and after
work he cultivates it, and I am sure that he is somewhere on the
edge of giving it up and he would be happy to get this grubbing-up
money and leave the sector and he would not care what we did to
his land. Maybe he would just leave it as set-aside or plant some
fruit trees or whatever. I can imagine that mainly this is what
happened to these 60,000 hectares, that they have mainly become
arable land because the fruit sector is also in difficulty. In
Hungary we also produced a low-quality apple especially for the
Russian market, and now there has also been quite a big decrease
in production. I have to tell you that it was a very tough period
for those farmers who survived these economic and political changes.
I was an agricultural student at that time, so I did not feel
it really closely but we were able to read in the newspapers that
this or that farmer had hanged himself because he was so disappointed
with this situation and was unable to survive. We lost tens of
thousands of hectares which became arable land, and these developments
also contributed to the fact that we have this maize situation,
for example, where we are producing a great surplus of maize.
When I look at the developments of the Common Agricultural Policy,
on the one hand we are saying that agriculture plays a very important
role in rural areas on the other hand we are just reforming all
the regulations and legislation, and at the end of the day we
see farmers leaving production. We are trying to create jobs in
the rural area and on the other hand we are making it impossible
to stay in production. Obviously, we should not do it in an artificial
way but we should really think about this special rural situation,
especially in the new Member States—although the situation
is not as difficult in Hungary as in other new Member States,
because agricultural employment has decreased, I think, to four
or five% now. It was about 10% and, as you probably know, it is
still around 20% in some other Member States, so we are quite
close to the European average employment figures. Coming back
to alternative uses of land, this is a very interesting issue
in Hungary and we talk about this issue a lot, especially now
due to this maize intervention stocks and surpluses, and especially
due to the planned abolition of maize intervention. In our new
Rural Development Strategy it is a priority to help farmers to
find alternative outlets for their classical agricultural products.
Coming back to arable crops, now we are planning to set up a processing
capacity within a few years for about two million tonnes of cereal
to produce bio-ethanol, especially from maize. Also, sugar beet
can be a kind of alternative raw material for this bio-ethanol
industry but I am afraid that it has nothing to do with grape
production so we are not planning to produce grapes for bio-ethanol.
Q365 Lord Cameron of Dillington:
Is there any appetite for some wine growers to plant new areas?
Mr Somogyi: Yes. I got some figures from my
colleague yesterday. The demand for restructuring aid according
to the present system has always been higher than the possibilities.
Now we can restructure less than 2,000 hectares per year, and
out of these 2,000 hectares which we can call restructuring around
400 or 500 hectares are new plantations, so there is an appetite
for it.
Q366 Lord Cameron of Dillington:
At the top end of the market?
Mr Somogyi: Yes, exactly, and actually it will
also be a priority within our "envelope" to focus restructuring
and new cultivations on re-cultivating all those areas which were
prestigious areas and produced good quality wine. But during the
socialist period wine production came down from the hills to the
skirts of the hills because it was cheaper to produce. The quality
was lower but it was cheaper and more economical, but now we would
like to bring it back.
Q367 Lord Cameron of Dillington:
My proper question is about labelling. Are there any state rules
about labelling in Hungary at the moment? Or can people, as long
as they are being truthful, put on what they want?
Mr Somogyi: I am sure, yes.
Q368 Lord Cameron of Dillington:
Because other countries have quite rigid rules about how they
label their wines?
Mr Somogyi: Frankly, I am not a wine expert.
I do not know exactly what are the specific rules. I am 100% sure
that we are in line with all the relative regulations. But, focusing
on the future—and this is what I know because I have just
investigated our position—we are happy with the Commission's
proposal. We are happy with these two categories, wine with GI
and wine without GI. There are some other ideas for creating two
sub-categories within the category of wine with GIs but I did
not want to go into it.
Q369 Lord Cameron of Dillington:
I think our position would be that a businessman, an entrepreneur,
providing he is being truthful, as with other products, should
be able to put what he likes on his labels. We do not think it
should be for the Member State or the Commission to tell somebody
what they can and cannot put on.
Mr Somogyi: Yes, but apart from finding the
Commission idea a very good one, we would really like to focus
on the real protection of GIs and also we would like to be given
the opportunity to handle some specific problems or circumstances
under our national legislation or the internal rules of different
wine regions.
Q370 Lord Cameron of Dillington:
We know there are over 10,000 GIs in Europe and probably 9,990
of those mean nothing to the consumer.
Mr Somogyi: Exactly. It is the same in Hungary,
because as a producer I know plenty of GIs, and we also know that
despite the fact that we are a small country we have 22 wine regions,
which may be difficult to understand. We have plenty of GIs but
all we think of is that in our case Tokai has a real value.
Q371 Chairman:
You see, that label on your bottle there, which is a good one,
is really selling a brand rather than a GI, is it not?
Mr Somogyi: Yes, exactly.
Q372 Chairman:
That is what the New World labels do.
Mr Somogyi: Yes, I would agree with you. But,
as I told you, we really do not want to get into discussions with
different wine regions. They have their own rules and sometimes
even some state tasks are delegated to them, so there is an act
which is regulating the operation of these different wine communities.
Q373 Lord Cameron of Dillington:
The danger of that, of course, is that the existing older producers
control those organisations and the new people who are trying
to have flair and innovation cannot do very much about that?
Mr Somogyi: Yes, but today and starting from
last year in Hungary the political situation is so tense that
we are trying to avoid any unnecessary debates or fights with
any of this regions.
Q374 Viscount Ullswater:
The Commission have proposed that wine-making practices should
be more closely aligned to what is agreed by OIV—I do not
know whether Hungary is a member of OIV. I am sure they are, but
if it is agreed in that forum, then the Commission are also saying
that it should be for the Commission to decide, rather than the
Council, what practices of OIV should be allowed in the Member
States. We have heard quite a lot about chaptalisation, the aid
for grape must—I am sorry, but again I do not know about
production of wine in Hungary as to whether any form of sugar
is needed to be added or how you manage the alcoholic content.
Could you give us your views on what I have suggested?
Mr Somogyi: Sugar is called by my father "packaged
sunshine". Yes, we are using it. We are a member of OIV.
We were a founder member of the OIV, so we have been members since
1923 when OIV was established and, therefore, we have been following
all its recommendations and rules, so we were on the same track
as the European Union even before our accession. I am happy to
tell you that this is also part of the reform proposal with which
we can almost fully agree, in that we have found it useful to
follow OIV recommendations, and all those oenological practices
which are recommended or approved by OIV should be authorised
to be used by European producers. It would help to regain our
competitiveness, because we know very well that our trade partners
are using those kinds of techniques which are not really allowed
but which are appreciated by consumers. I still remember a discussion
when we were discussing wood chips, which are used everywhere
for barrique wine production. Even my ex-boss would put
wood chips in his own oven. He was grilling wood chips to put
into wine. So, yes, it is a good technique but is now authorised
in Europe. Generally, we are in favour of this approach but there
are certain specialities which must be tackled and they are treated
in a special way. The last part of your question related to chaptalisation.
Sugar is a very important part of our position, that the addition
of sugar should be allowed in future as well. I was happy to see
that, when we had the first exchange of views in the Council,
most of the Member States even the present Presidency expressed
the view that it was not really a good idea that the Commission
tabled a motion to abolish chaptalisation. It is a very important
part of our mandate, especially because as I told you at the beginning,
we have had some climatic differences, and especially for certain
categories of wine sugar is needed. Sugar is also used by most
of our competitors, so we believe that controlled use of sugar
should be allowed and we should not impose measures preventing
it.
Q375 Viscount Ullswater:
We have been hearing quite differing views on that from various
wine-growing areas. I think the position of the OIV is that it
should be entirely up to the Member State or the nation state
as to whether they should allow it or not. We do not think OIV
have their own view about adding sugar. They allow individual
members of OIV to take their own decision.
Mr Somogyi: Yes. I was head of the negotiating
unit when we prepared ourselves for the accession, and at that
time we had to find some arguments to be allowed to use this chaptalisation
process after accession. So we collected some old Hungarian regulations
or legal measures which allowed us to add sugar. During the socialist
period the state gave authorisation each year, depending on the
harvest, to use sugar or not, so it was really controlled by the
state and we authorised the addition of sugar when it was really
necessary.
Q376 Viscount Ullswater:
So depending on the alcoholic content of the harvest?
Mr Somogyi: Yes, or of the vintage, whether
we had enough sunshine during the ripening period or not, but
we should not exclude this possibility. It should be left to the
decision of Member States or wine regions. The same goes for the
subsidy for using must concentrate.
Q377 Baroness Jones of Whitchurch:
Moving on to rural development, you have given us some fascinating
insights into what happens over the reduction in capacity that
you have already experienced. I think you said that, as far as
you are aware, a lot of the production then went to arable farming.
Was there a shift in population as well arising from this? Has
there been a shift from the rural areas to the towns, because
some of the evidence that we have heard is that some people are
quite anxious about the pressure from the Commission to reduce
production and are saying, in the way that you described, that
there will be an awful lot of upheaval, poverty, distress caused
by it? Was there in your experience an actual shift in the population
away from the rural areas when that decline took place?
Mr Somogyi: Not really. As I have told you,
since we have plenty of wine growers and for most of them it is
just a part-time job to bring in some additional income, giving
up wine growing did not have a significant effect on their everyday
life. In Hungary we have experienced a kind of tendency, which
is contrary to moving from rural areas to the cities, because
now there are more and more people who are moving from cities
to the suburbs. We are a small country. We have plenty of cities,
almost in each part of the country, and now with the improvements
to our infrastructure it is not difficult to travel 20 or 30 kilometres
a day, so we do not have this rural emigration problem. Obviously,
we are not happy to see that we are losing additional income from
society and we are losing jobs in rural areas, and maybe I am
just answering one of your questions in advance. But it is a firm
Hungarian position that rural development is very important also
for the wine sector but we would not like to see a transfer of
money from the present wine CMO budget to the Second Pillar. This
€1.2 billion which is spent annually on the Wine CMO should
be kept for the Wine CMO. For the future Wine CMO it should be
transferred to different Member States, to the "national
envelope", but the rural development problem should be solved
from the available rural development budget. Depending on the
outcome of this reform we might ask the Commission to be more
flexible in adjusting our already approved rural development plans
to the outcome of the reform if it is necessary, but we are against
moving the funds from the First Pillar to the Second Pillar, which
is quite understandable from a Hungarian point of view. I know
that you have a quite different position on this, but it is also
quite understandable from your point of view.
Q378 Baroness Miller of Chilthorne Domer:
Clearly you have taken quite a lot of areas out of production,
and you just mentioned that fruit and vegetables also have been
reduced. I wonder what you see as the future land use and how
that would tie in with some of the pressures that climate change
is likely to bring?
Mr Somogyi: That is quite a complex question.
If you look at the area and our production structure in Hungary,
it is quite obvious that we are in a specific situation. We are
a country where the proportion of arable land is much higher than
the European average. If I remember correctly, the total area
of our country is 9.3 million hectares, out of which 4.6 million
hectares is arable land, so 50% of the total area is good quality
arable land. You can see some figures in these pamphlets. I have
brought some pamphlets about the Hungarian agricultural sector.
I also have some CDs Each CD contains English, German, Hungarian
and Russian versions of this 2006 pamphlet. I am sure that, even
if some thousand hectares were grubbed up (and, as I told you,
we have some problems with the food sector), it does not have
a very big impact on the total production area and the utilisation
of this area. We might have more arable land or we might have
some more set-aside or we might have more grassland, so I do not
see a major impact of the wine reform on all those elements that
your question contained. Obviously, when we are coming to climate
change and global warming, I mentioned that now we are planning
to set up new infrastructures for producing things like bio-ethanol,
so we will do what we can and we will be able to reach these targets
which were approved a few weeks ago—to reach 10% biofuel
target and we have good potential for this.
Q379 Lord Bach:
You have already expressed your Government's support for the Commission's
proposal, which itself is supported by the Parliament, on "national
envelopes" being allocated to each Member States to provide
funding for this industry. You have already explained what you
would like to see funded from such envelopes, but you might like
just to give a priority order for me. Would the priority be further
restructuring of industry? Would it be rural development? Presumably
it would not be crisis distillation?
Mr Somogyi: That is right.
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