"Until last year, 90-92 percent of the produce found a buyer in the EU market and in Switzerland," Czeller said.

Hungary's supermarkets also offer a range of organic foods, and a limited number of city dwellers are prepared to buy such produce even at premiums that can be as much as 100 percent, he added.

But most of the organic foods at the biggest retail outlets, such as those of French firms Cora and Auchan, are imported. Hungarian organic farmers usually supply only meat and milk, Czeller said.

The bulk of organic farming revenue comes from exports -- mainly wheat, maize, sunflower seed and rapeseed -- where Hungary also faces strong competition.

"There used to be a demand market, but three years ago it started changing and last year it completely became a supply market, and this year I don't even know how it will work," Czeller said.

"In the last three years the sale price of organic grain has dropped by 65 percent," he added.

The scarcity of storage that affects Hungary's conventional crop had depressed organic grain prices further, forcing farmers to sell early and cheap, Czeller said.

The Agriculture Ministry said a grain surplus of 3.5-4 million tonnes must leave the country and up to 2.5 million tonnes of new storage must be built to make way for the autumn maize harvest.

LOW VALUE-ADDED

Hungary's climate is well suited to extensive organic agriculture, but production must shift towards higher value-added items such as organic flour instead of wheat to achieve better margins, Czeller said.

"If this country's farmers only produce raw materials then the competitive disadvantage compared to farmers in the old EU countries will probably grow," Czeller said.

Use of chemicals and fertiliser was low in some impoverished eastern European countries after communism collapsed in 1989, but there is no organic sector by default in Hungary today.

"There were the two years after the fall of communism when agriculture was so starved of capital that farms used less fertiliser," Czeller said.

But chemicals use quickly picked up again in Hungary as the country led the eastern bloc's economic transformation.

Farmers decide to forgo pesticides only if the higher prices earned for organic produce outweigh the increased risks of plant disease, Czeller said.