Abstract

The principal achievement of this paper is the combined use of two market institutes, Public Warehouse and Commodity Exchange, and how their joint application is beneficial for farmers and for sustainable development in rural areas. Development of rural areas has become an increasingly important issue in Hungary as well as in the European Union, which could increase the profitability of small family businesses, raise the employment rate in rural areas, decrease the rate of migration of people from rural into urban areas, as well as solve social problems. Hungary has the biggest agricultural field per capita in Europe and seventy per cent of it is owned by small farmers who produce “under one hectare” of grain. In the European Union, agricultural and rural development are supported by the European Agricultural and Rural Development Fund until 2013. For the end of the current financial period, Hungary’s main goal must be the creation of an agriculture that is competitive while ensuring sustainable development in addition to strengthening market approach. The institutes above have 135 years of tradition and are accepted by the commercial banks dealing with Lombard financing. However, farmers do not have this financial possibility because of their low credit standing. The combined utilization of the two techniques solves the problem. On one hand, the bank uses warehouse receipts as security; the key element of the construction on the other hand is that future contracts guarantee the value of the collateral. This solution can eliminate the financial problems of small farmers with the market conforming to a way of helping the development of their enterprises, given the main basis of rural life and the sustainable development of these areas.