In a traditional centrally planned economy, state and collective farms play the key role in agricultural production small private-plot farming is tolerated but is expected to "wither away." The state makes production and marketing decisions for the farms, and individual state-farm managers and collectivefarm members have little input into decision making.

Hungary collectivized its agricultural sector in two campaigns beginning in 1949 and ending in 1961. In the first campaign, the government coerced peasants to move to state and collective farms, enforced compulsory delivery quotas and high taxes, and set prices artificially low to gain control of agriculture and use it to generate capital needed for industrial development (see Rakosi's Rule , ch. 1). Peasants reacted by slowing production and departing from the collective farms in great numbers, especially during the Revolution of 1956 (see Revolution of 1956 , ch. 1). The government changed its tactics in the second campaign, which began in the late 1950s. The authorities relied more on persuasion than coercion and eliminated compulsory deliveries, increased material incentives, furnished loans, offered tax breaks, and provided seed, fertilizers, and farm equipment. By 1960 about 90 percent of Hungary's farmland was collectivized, and in 1961 nearly 94 percent of the agricultural earners worked in the socialist sector.

After the mid-1960s, the agricultural sector often served as a testing ground for reforms later introduced into the overall economic system. In the 1965-67 period, the government eliminated obligatory plan targets, allowed farms to plan production, loosened restrictions on self-financing, and permitted production on private plots. After the NEM was introduced in 1968, cooperative farms gained true autonomy. In the 1980s, agricultural producers could buy inputs from a variety of sources and sell to purchasers of their choice.

Data as of September 1989