"Cooperative" used to be a dirty word in this farming village just south of Budapest.

Under communism, which ended in Hungary in 1990, farmers were forced to combine in state-run operations that provided them with little incentive to work efficiently or produce quality goods.

But now, with their nation a new member of the European Union, some Hungarian farmers are taking another look at pooling their resources as a way to compete with heavily subsidized competitors in Western Europe.

"If we hadn't formed a new-style cooperative to market our goods, we would have gone bust by now," said Gyula Szick, director of an experimental cooperative whose members grow mushrooms in Bugyi.

"A lot of people don't like the sound of the 'cooperative' word, but most producers realize that this is something different and they can keep their independence," he said.

Unlike the cooperatives of the Soviet era, the new ones are like the capitalist-oriented co-ops prevalent in the American Midwest and other agricultural regions in which decisions remain in the hands of farmers.

"We share our resources to finance the costs of packaging, transportation, marketing and quality control," Szick said. "The cooperative puts us in a far stronger negotiating position than if each of our 25 members acted on their own."

In his cooperative's renovated storehouse -- once part of Bugyi's socialist cooperative farm -- staff members are working with computer-operated quality control systems that meet tough EU standards.

"I'm optimistic that we can maintain our position," Szick said, adding that more than half of the cooperative's products already go to Germany and other states of the pre-expansion EU.

For now, Szick's group is a rarity among Hungary's half million, mostly small-scale farmers, whose output accounts for around 4 percent of the national economy.

South of Bugyi, among the seemingly infinite vistas of the country's Great Plain, Dezso Szomor is fighting to keep his 1,200 cattle and pigs alive after a long winter and last year's poor harvest.

"I voted to join the EU because I thought we belong to the West," Szomor said. "But now we're on the verge of bankruptcy because Western farmers want to come here and take over our farms."

Szomor plowed money from his successful flower-growing business into starting the cattle business on a 12,355-acre former state farm because he believed the future lay in diversity.

Most of his stock is made up of rare breeds of long-horned cattle and buffalo, watched over on the plain by traditional herders and their attentive puli dogs.

Szomor says the market for naturally produced food is still small in Hungary -- and worries that he stands no chance of competing in EU markets without a bigger handout from the state.

"How can we compete with Western farmers who get full subsidies when we only receive half that amount from our government?" Szomor said, pointing to an aging tractor struggling to pull a trailer of cattle through thick mud at the farm.

The EU will give Hungarian farmers only 25 percent of the subsidies received by farmers in the 15 nations that belonged to the EU before May 1, while Hungary's government will be allowed to give them a "top-up" of 30 percent.

The EU insists that production costs are cheaper in Eastern Europe and that full subsidies would give farmers here an unfair advantage.

But Laszlo Vajda, an official in charge of EU affairs at Hungary's Agriculture Ministry, said the differences in operating costs are minute.

"People say that production in Eastern Europe is cheap because labor costs are low, but labor costs amount to just 2 percent of cereal production costs, for example," Vajda said.

He acknowledges that some eastern farmers are just not prepared for the more competitive world of the EU.

"In every sector there are producers who are competitive and those who are not," he said, adding that many farmers simply have no idea about their own production costs.

The year 2004 "is especially difficult because farmers will have to adjust to a changing environment," Vajda said. "We hope that from 2005 the situation will improve."

As workers at Bugyi's mushroom cooperative pack containers for export to Germany, Szick is already looking to the future -- and shows little sympathy for fellow farmers like Szomor.

"We've had to compete on the open market without many subsidies for years now," Szick said. "Farmers complain, but I'm afraid that if they received full subsidies, they would just sit back and not develop their businesses at all."

Hungarian herders prepare to take cattle to pasture. With new EU competition, some farmers are establishing co-ops.