Modernisation of agriculture is a process of transforming agriculture from

traditional labour-based agriculture to technology-based agriculture. It is one of the

fundamental issues in agricultural policies, particularly in countries, where
agriculture is less developed. We can see that in many countries agriculture is a
sector of economy which keeps a greater distance than the remaining sectors from
modern solutions in the areas of: production technology and organisation,
implementation of modern technological and IT solutions as well as management
methods, but also with regard to the utilisation of the institutional setting. The
speed and the scope of the creation and implementation of modernisation of farms
ensure their permanent competitive edge. We can also see that low-income
countries are burdened with primitive technologies, which is both a reason for, and
a consequence of low incomes. Therefore, the modernisation process and
technological change are regarded as the driving force behind economic growth.
As a result of an appropriately implemented process of modernisation of farms, the
effectiveness of management improves, the working conditions improve and,
finally, the level of satisfaction from the performed work increases. However,
inappropriately designed or inappropriately implemented modernisation may bring
unfavourable effects.
Modernisation of agriculture is a continuing process and it is the essence of
progress in agriculture and in rural areas. Constant creation and implementation of
new technologies is used as a standard reference in differentiating modern
agriculture from traditional agriculture. Agriculture in economically developed
countries has changed significantly thanks to broadly understood progress.
Implementation of new solutions in the organisation of farms and of new
production technologies has increased production volumes, decreased employment
levels in agriculture and lessened the burdensomeness of work as well as has
brought a better quality of products and has decreased the environmental nuisance
of agriculture. Beside the increase in the effectiveness of management in
agriculture, technological progress contributes to the reduction in the level of risk
of management.
Basic Principles of World Agricultural Modernization
Agricultural modernization is an objective phenomenon and a world trend. The
theoretical studies of agricultural modernization have attracted the attention of
some scholars. The theories of agricultural modernization comprise the classical
theory of agricultural modernization, the theory of two agricultural modernizations,
and the general theory of agricultural modernization. The latter was an application
of the theory of second modernization in the agricultural system.
1. Operational Definitions of Agricultural Modernization
Definition: Agricultural modernization is a frontier change and international
competition in world agriculture since the 18th century, a frontier process of the

formation, development, transition and international interaction of modern

agriculture, a compound process of the innovation, selection, spreading and
withdrawal of agricultural factors, and also a process of international competition
and international polarization in order to catch up with, reach and maintain the
world advanced level of agriculture. Those that have reached and are maintaining
the world advanced level of agriculture are developed agricultural countries, while
others are developing agricultural countries. The two camps are interchangeable,
and the status change observes certain probability.
Agricultural modernization is a mixture of agricultural development, agricultural
transition and international agricultural interaction since the 18th century.
In short, agricultural modernization is the world advanced level of modern
agriculture and the behavior and process of catching up with, reaching and
maintaining the world advanced level of agriculture. It comprises the transition
from traditional agriculture (self-sufficient agriculture) to preliminary modern
agriculture (marketized agriculture), the transition from preliminary modern
agriculture to advanced modern agriculture (knowledge agriculture), the
continuous increase of agricultural efficiency and farmer income, the continuous
improvement of farmer wellbeing, the assurance of agricultural product supplydemand balance and national food security, and the change of national agricultural
status and international agricultural system. During the 18th ~ 21st centuries, the
frontier process of agricultural modernization can be divided into first and second
agricultural modernizations. The coordinated development of two agricultural
modernizations means integrated agricultural modernization, which is mainly
suitable for developing countries.
From the perspective of agricultural evolution and agricultural transition,
agricultural modernization can advance and succeed in every country. But
countries vary from each other in the speed of agricultural advance, the level of
agriculture, and the timing of success.
From the perspective of world frontier and international competition, only some
countries can reach and maintain the world advanced level of agriculture and
different countries have different success probabilities. Over the past 50 years, the
ratio of developed agricultural countries has been less than 20% and that of
developing agricultural countries has been more than 80%. The probability of
developing agricultural countries rising to developed agricultural countries has
been about 2%, and that of developed agricultural countries declining to
developing agricultural countries has been about 10%.
Agricultural modernization has three criteria: conducive to the emancipation and
enhancement of agricultural productivity, conducive to the improvement of farmer
life and the all-round development of farmers, and conducive to agricultural
ecological balance and national food security.

2. Process of Agricultural Modernization

In general, the process of agricultural modernization can be classified into two
types: the frontier process and the catch-up process. The former mainly refers to
the agricultural modernization in developed agricultural countries, while the latter
mainly refers to the agricultural modernization in developing agricultural
countries. During the 18th ~ 21st centuries, the frontier process of agricultural
modernization can be divided into two major stages. In the 22nd century,
agriculture will undergo new changes.
From 1763 to 1970, the frontier process of world agricultural modernization
constituted the first agricultural modernization.
The first agricultural modernization refers to the transition from traditional
agricultural to preliminary modern agriculture and from self-sufficient agriculture
to marketized agriculture.
Its unique features include marketization, commercialization, intensification,
specialization, industrialization, mechanization, electrification, automation,
chemicalization, improved seeds, increasing of irrigated land, scale operation,
standardization, scientification, institutionalization, and systematization. They also
include the enhancement of agricultural labor productivity, agricultural land
productivity and farmers living standard, and also the declining ratios of
agricultural labor and agricultural added value. Its results include the formation of
first agricultural modernity, distinctive features and diversity, and its side effects
include agricultural environmental pollution and soil erosion.
From 1970 to 2100, the frontier process of world agricultural modernization
constitutes the second agricultural modernization.
The second agricultural modernization refers to the transition from preliminary
modern agriculture to advanced modern agriculture and from industrialized
agriculture to intellectualized agriculture. Currently, its unique features include
intellectualization, informatization, intelligence, precision, ecologicalization,
greenization, naturalization, diversification, order-based operation, threedimensional operation, factory operation, internationalization and the universal use
of biological technologies. They also include the overall efficiency of agriculture,
the quality of farm products, the international competitiveness, the improvement of
quality of life of farmers, and the continuous decline in the ratios of agricultural
labor force and agricultural added value. Its results include the formation of the
second agricultural modernity, distinctive features and diversity, and its side effects
include agricultural trade conflicts and food risks.
If the first agricultural modernization is a preliminary agricultural modernization
and a transition from traditional agriculture to preliminary modern agriculture, the
second agricultural modernization is an advanced agricultural modernization and a
transition from preliminary modern agriculture to advanced modern agriculture.

The coordinated development of two agricultural modernizations means an

integrated agricultural modernization.
Integrated agricultural modernization is a basic path for agricultural modernization.
It comprises the interaction between two agricultural transitions (from selfsufficient agriculture to marketized agriculture and from industrialized agriculture
to knowledge-intensive agriculture) and the continuous transition toward
knowledge-intensive agriculture. It includes the coordinated development of
agricultural marketization, mechanization, informatization, greenization and
internationalization, the enhancement of agricultural efficiency and farmer income,
the improvement of farmer wellbeing, the decline of the ratio of agriculture, and
the enhancement of international agricultural competitiveness and international
agricultural status.
3. Results of Agricultural Modernization
The results of agricultural modernization include the formation of agricultural
modernity, distinctive features, diversity and side effects, the enhancement of
agricultural productivity, the improvement of farmer wellbeing, the change of
agricultural ecology, the all-round development of farmers, the dynamic balance of
agricultural supply and demand, the development of agricultural science and
technology, the decline in the ratio of agriculture, and also the changes in world
agricultural frontier, international agricultural system and national agricultural
status. Agricultural modernization may have common and different results in
different countries.
The result of the first agricultural modernization is the formation of the first
agricultural modernity, unique features and diversity. It includes the enhancement
of agricultural labor productivity, agricultural land productivity and farmers living
standard, and the decline in the ratios of agricultural labor force and agricultural
added value. Its side effects include agricultural environmental pollution and soil
erosion etc. The main indicators for the completion of the first agricultural
modernization are the completion of agricultural marketization, mechanization and
specialization and for agricultural efficiency, agricultural ratio and farmer income
to reach the advanced level of marketized agriculture (the world advanced level in
the 1960s).
The result of the second agricultural modernization is the formation of the second
agricultural modernity, unique features and diversity. It includes the enhancement
of the overall efficiency of agriculture, the quality of farm products, the
international competitiveness of agriculture and the quality of farmers life, and the
continuous decline in the ratios of agricultural labor force and agricultural added
value. The side effects include agricultural trade conflicts and food risks. The main
indicators for the completion of the second agricultural modernization are the
completion of intellectualization and ecologicalization and for the overall

efficiency of agriculture and the overall qualification of farmers to reach the

advanced level of knowledge-intensive agriculture (some time in the future).
The goals of national agricultural modernization include the completion of the first
agricultural modernization, the realization of the transition from traditional
agriculture to preliminary modern agriculture, the completion of the second
agricultural modernization, and the realization of the transition from preliminary
modern agriculture to advanced modern agriculture, so as to catch up with, reach
and maintain the world advanced level of agriculture, become an agricultural
developed country, narrow international agricultural gap, and ensure food security.
The realization of the first two goals is a matter of time, which means all
countries can achieve them sooner or later. The realization of the third goal is a
matter of ratio and probability, which means only some countries can reach and
maintain the world advanced level.
From the policy perspective, national agricultural modernization has two main
goals: improve agricultural productivity and the quality of farmer life and ensure
the stability of the agricultural ecosystem. The policy goal of developed countries
is to maintain the world advanced level and that of developing countries is to catch
up with and reach the world advanced level.
5. Models of Agricultural Modernization
Agricultural modernization is a historical process that involves time span and
development path. Development path refers to the road between the starting and
finishing points of agricultural modernization and has directional, phasic and
structural features. The model of agricultural modernization represents a historical
cross section of the development path of agricultural modernization, a combination
of key factors of agricultural modernization, and has time effectiveness and
relevance. Agricultural modernization has path dependence and resource
dependence.
In agricultural modernization, there is no standard or optimal model. It has only
suitable models. There are about 40 models of agricultural modernization,
depending on factor combinations and resource endowment. The selection of
models in the first agricultural modernization was more influenced by its own
conditions, but the selection of models in the second agricultural modernization is
more influenced by science and technology and international environment.
6. Policy Choices of Agricultural Modernization
The policy analysis of agricultural modernization must respect the objective law of
agricultural modernization and must conform to the natural endowment and
practical conditions of a country or region. Different countries and regions require
special studies when they select policies for agricultural modernization.
In the 21st century, developed agricultural countries may adopt the second
agricultural modernization path. But developing agricultural countries may have

three options: the catching-up agricultural modernization path, the integrated

agricultural modernization path, and the second agricultural modernization path.
The three paths have different contents and unique features and require different
policies. The innovation of agricultural policies and the selection of measures in
general should observe five principles: conducive to the emancipation and
enhancement of agricultural productivity, conducive to agricultural supply-demand
balance and food security, conducive to the improvement of farmer life and the allround development of farmers, conductive to the balance and stability of the
agricultural ecosystem, and conducive to the advance of agricultural science and
technology and the enhancement of international competitiveness.
I. Prior to Hungarys accession to the EU, Hungary limited ownership of its
agricultural and forestry lands to Hungarian citizens. Upon joining the Union,
Hungary was required to open ownership of agricultural lands to citizens of other
member states. A grace period to adopt such laws will lapse on 30 April 2014. The
new law, ActCXXII of 2013, which fully comes into force on 1 May 2014, allows
citizens of EU member states to purchase agricultural land in Hungary. Only
natural persons are allowed to purchase agricultural land; corporations are
excluded from purchasing land. Exceptions exist for the Hungarian state, credit
institutions, religious institutions, agricultural cooperatives registered with the
agricultural authority, and for the municipality the farmland is located in. Farmers,
or close relatives of farmers, are able to acquire the most land: up to 300 hectares.
If a person is not a farmer, then any land acquired is limited to one hectare. The
agricultural cooperatives do allow for larger purchases, but at least one of the
managing directors of the cooperative must have been working as a farmer, or in
the agricultural industry, approved by the agricultural authority for at least three
years. Land possession restrictions may be exceeded if the land was acquired from
the termination of a joint tenancy, termination of marital joint property, or if
purchased from compensation for the governments use of eminent dominion. In
order to exceed the land possession maximums, any one of these conditions must
exist as of the date this provision of the law comes into force 1 May 2014.
Pre-emption rights
The Act also creates pre-emption rights. The State is given a preemption right in
the first place followed by local Hungarian farmers. Pre-emption rights are given to
any farmer who either works in or lives in the same city where the land in question
is to be sold. The only requirement being that the farmer has had to have lived or
worked in the surrounding area for at least three years. For the sale of grazing land,
any farmer who has operated a livestock plant for at least one year in the same city,
is also given a pre-emption right. Pre-emption rights cannot be exercised if the

transaction is between close relatives, executed to terminate a joint tenancy, or the

land is to be purchased by the municipality for public use. The provision regarding
preemption rights comes into force on 1 March 2014. Most agricultural and
forestry land acquisitions are subject to review and approval by the agricultural
authority. The agricultural authority will declare null and void any agreement that
does not comply with the Act and also verifies whether the purchase price matches
the market value of the land. The agricultural authority may impose penalties for
invalidated agreements based on of a percentage of the land considered for
purchase. Note, agricultural authority approval is needed even if the land is
acquired by means other than a sale and purchase agreement. Approval is not
needed if the land is sold or acquired by the state or the municipality, donated, sold
between close relatives, transferred to terminate a joint tenancy, or acquired by
exempted legal entities.
Use restrictions
Any acquisition of agricultural or forestry land is restricted to agricultural or
residential activity. For the first five years of ownership, the landowner cannot
lease the use of the premises to a third party. Exceptions do exist if the tenant is a
farmer, or someone who engages in forestry activities or seed production. Lease
agreements are also subject to approval by the agricultural authority, where the
same penalties can be imposed for non-compliance with the Act. Farmers can lease
up to 1,200 hectares of land for farming purposes. If the farmer also owns land,
then the amount of land available for lease is reduced by the amount of land
owned. Religious institutions can lease the land for educational, social, or
economic purposes. Tenants cannot assign the use of the land to a third party
unless it is to a close relative, a farmer, an individual who engaged in forestry
activities or seed production. Lease agreements may be concluded for periods of
one to 20 years. Pre-emption rights for local farmers also exist for lease
agreements, similar to the preemption rights available for sale and purchase
agreements.
Impacts of the introduction of the CAP
Since the accession to the EU, the direct subsidies from CAP funding increase
gradually each year, and will reach the level of old member states in 2013.
Hungary was given the opportunity to supplement the EU funding from national
sources (top up), thus the level of subsidies will be equalized in 2010.
For the disbursement of direct EU funding Hungary introduced the so-called area
based system (SAPS - Single Area Payment Scheme), and taking into account the
sectoral characteristics of agriculture, Hungary has developed a separate procedure
for the related national top-ups.

Hungary paid 318 billion HUF in direct EU subsidies in the period between 20042006, out of which 252 billion HUF was SAPS, 66 billion HUF were market
(intervention) subsidies. The total amount of subsidies (EU direct payment, top-up
and other national subsidies) came to 756 billion HUF, the income of the farms
(pre-tax profits) in the same period came to approximately 370 billion HUF. Thus
the proportion of direct EU subsidies (SAPS and market) compared to all subsidies
is 42%, and reached 86% percent of the income of the farms. Approximately 210
thousand farms received direct CAP subsidies.
Both the positive and negative impacts of the application of the CAP are visible,
however, this short period of time is not enough to make reliable conclusions. The
negative impacts are mostly due to the fact, that Hungarian producers failed to
realize that competition in increasing not only in foreign markets, but also on the
domestic market as well, and the majority of foreign competitors are better
organized due to their producers associations. The perceptible impacts are the
following:
1 relatively large and well-organized farms could get more support than
before, their production performance increased, and income position became
sounder,
2 larger producer farms spend significant amounts on modernizing production,
approximately 10 percent of them used rural development (modernization)
subsidies,
3 the non-supported, mostly part-time farms are facing increased difficulties
on the market,
4 the direct support measures improved the situation of mainly the plantgrower and mixed production profile farms, not those dealing with animal
husbandry (especially pig and poultry),
5 due the existing main sectoral imbalances (the feed demand of animal
husbandry is significantly lower than agricultural feed production) a large
amount of excess cereals were produced, which was compensated by the
successful interventional buy-up,
6 the restructuring of plant production (to the direction of producing non-food
and non-feed products) and diversification of production (renewable energy)
have started,
7 support provided for producers' organizations did not result in significant
improvements for the sectors requiring extensive manual labour, which are
especially important for rural employment (primarily: vegetable and fruit
production, grape production, winery),
8 the farmers became more interested in environmental conscious farming,
imposing less load on the environment,

9 the Hungarian farmers have been unexpectedly affected by the significantly

increased market competition,
10 the competitors in the EU that are better organized than the national farmers,
have better infrastructure and often selling by-products have gained
significant part of the domestic market, and as a result of this, the balance of
payments have decreased from the former 1,5-16 billion EUR to below 1
billion EUR, Hungary became net importer of pig meat, dairy products and
fruits.
Machinery and equipment, the technological development of holdings
Due to the lack of capital, the majority of farms in Hungary cannot on their own
invest the resources in the technical background which they would need to be
competitive in the marketplace. The call for modernization is particularly urgent in
the post-harvest phase. The average age of equipments and machinery exceeds 10
years, and they need to be renewed in the interests of environmental protection, the
standards of production and energy saving. The tractors and combine harvesters
used by privately owned farms are 4-6 years older than those operated by business
organizations. Tractors of smaller power are being replaced by more powerful
tractors by both individual farms and business associations; however the indices
such as engine power and number of machines per area are lower than the
European average. While in the EU each hectare is served by 5.2 kW of
mechanical power, this figure in Hungary is 2.1 kW/ha (2005). In Hungary the area
cultivated by a single tractor is 48.7 ha, while this figure is 19.6 ha in the EU.
National investment subsidies prior to accession, and the subsequent SAPARD and
ARDOP measures helped to renew the set of appliances, particularly the fleets of
power machinery in several thousands of farms in the arable crop sector. The
number of tractors used in agriculture increased by 6% between 2000 and 2005,
however, the development needs of many farms remained unsatisfied. The stock of
trucks fell significantly (39%) in five years, while the number of combine
harvesters increased with a mere 2%, and the number of harvester-thresher
machines remained constant. There is especially a need for development in the
purchase of the machines important in relation to environment protection and
energy efficiency. Besides this, the funds were not sufficient to renew the
important farm facilities (e.g. fertilizer and pesticide stores, produce driers, feed
mixers, manure silos and infrastructure elements). Hungary has an excellent
machine retail network, which is clearly an indispensable condition for technical
revival. The investment demand of viable small farms with a development
potential is expected to remain significant for the foreseeable future.
Essential technical conditions defining forest management include appropriate
infrastructure and available forestry machinery stock. The standard of supply with

forestry machinery in the state-owned forest areas is satisfactory, while the age of
the machinery fleet is high. Capital and equipment supply of the privately owned
forest holdings is particularly poor, so all of the stock of machinery and equipment,
the technologies applied and the IT background need to be modernised and
increased.
The equipment stocks of forestry-timber processing and the exploration of
technological possibilities should be modernised and increased. The complex
processing of timber gained from the forest stands means further sales possibilities
for the forest holder, i.e. enhances the safety of forest management.
Within the food processing industry mainly in the small and medium enterprises
conducting the initial food processing, and in some big processing enterprises- the
applied technology is obsolete, the structure of the products is out of date, the
quality of the products is not even. The modernisation of the sector is required to
be able to produce goods meeting the market requirements. The sale of the
products and, therefore, market uncertainty represent one of the major problems for
the sector of primary producers. The aim is that the producers have a share of the
profits of processing; they should retain a significant part of the resulting income.
Between 1995 and 2004 food industry attracted a steadily decreasing share of
investments on the national level (from 5% to 2.7%), while in 2005 there was no
increase, however no decrease neither. Then in 2004 its share rose again, partly as
a result of the adjustment to the criteria of EU accession. 70% of the investments
serve technical modernization, while more than a quarter (27.4%) of the available
resources was spent on the construction and renovation of ancillary buildings.
Particularly in sectors responsible for primary processing, the work of restructuring
has yet to be completed, in order to become competitive in European and global
markets. This should include the achievement of the concentration required for size
efficiency, as well as specialization and overall modernization.