Focus on Romania
December 01, 2008
Romania is one of Europe’s biggest grain producers, and European Union (E.U.) membership means access to markets and funds for development. With a good supply of high-quality farmland and a processing sector that, at least as far as the big firms are concerned, has invested in modern machinery, the potential is there for continued success.
"Romania is still a blessed country with its more than 12 million hectares of top-quality flatland," Viorel Marin, president of the Romanian National Association of Flour Milling and Baking Industries, told World Grain. "This potential combined with the constant high Romanian appetite for bread, bread specialties and pastry products can drive Romania to become quite a heaven for the milling industry."
According to the International Grains Council (IGC), Romania’s total grain production increased 143% in 2008, reaching 17.5 million tonnes, compared with 7.2 million in 2007. The total wheat crop grew to 7.4 million tonnes, up from 2.9 million. Maize rose to 8.3 million tonnes from 3.5 million. The barley crop was 1.4 million tonnes in 2008, compared with 500,000 the year before.
The European grains industry body COCERAL puts Romania’s production of soft wheat in 2008 at 7.898 million tonnes, from an area of 1.95 million hectares, an average yield of 4.1 tonnes a hectare. For 2007, COCERAL estimated Romania’s wheat crop at 3 million tonnes from 1.5 million hectares, a two-tonne-per-hectare yield. This year’s increased crop has enabled Romania to export. For example, the IGC reported a sale of 100,000 tonnnes of Romanian wheat to Iraq on Sept. 10 as well as sales to Pakistan.
Romania is also a big oilseeds producer. According to the European oil and protein meal industry organization FEDIOL, the country produced 376,000 tonnes of soybeans, 180,000 tonnes of rapeseed and 1.436 million tonnes of sunflower seed in 2006. It put oilseeds exports in 2006 at 54,000 tonnes of soybeans, 131,000 tonnes of rapeseed and 635,000 tonnes of sunflower seed.
COCERAL predicts a Romanian sunflower seed crop of 1.131 million tonnes in 2008 from 850,000 hectares, a yield of 1.33 tonnes a hectare. As with grains, 2007 was a poor year for sunflower seed, with a crop of 595,000 tonnes from 700,000 hectares, an average yield of 0.85 tonnes a hectare.
COCERAL puts Romania’s rapeseed crop at 730,000 tonnes in 2008, based on an area of 386,000 hectares and an average yield of 2.8 tonnes a hectare. Rapeseed production was 347,000 tonnes in 2007 on an area of 330,000 hectares, giving an average yield of 1.05 tonnes.
According to COCERAL, Romania’s soybean production was 210,000 tonnes in 2008, with an average yield of 2.1 tonnes a hectare on 100,000 hectares. In 2007, Romania produced 110,000 tonnes of soybeans on 110,000 hectares.
Marin puts the wheat crop lower than some of the international bodies, "In 2008, Romania produced up to 5 million tonnes of soft wheat, from which half was milling wheat," he said. "In the last five years, Romania has been processing annually about 2.5 to 3 million (wheat equivalent) tonnes of soft wheat and up to 20,000 tonnes of durum wheat."
He explained that most (80% to 85%) of the wheat flour is used for bread and bread specialties, with the rest going for pastry, pasta, biscuits, cookies and wafers. Most of the bread produced (about 80%) is fresh bread with a maximum shelf life of 24 hours (using 650-type flour), the rest being packed toast and sliced pan bread.
TWO BIG NATIONAL GROUPS Marin put the total number of companies currently registered in the milling sector at 1,300. There are two large national groups, Boromir group and 7 Spice (former VelPitar). "They each have several processing units of more than 200 tonnes a day processing capacity distributed in all regions of the country," he said. "Boromir is 100% owned by a very aggressive Romanian group of young businessmen. Boromir has the main durum wheat processing unit of the country, based in Sibiu. 7 Spice is owned by a foreign equity investment-type fund."
There are three other groups that each have two large flour mills (units processing from 150 to 600 tonnes a day). The Titan group (formerly Loulis) was recently acquired by the Austrian-based group LLI, while the Abo Mill group is owned by the ABO Hungarian group and Vital & Heyl group.
There are also about 14 single-unit milling companies — one or two in almost every county of Romania — with 150 to 700 tonnes per day of capacity. All of them are fully Romanian owned. They are Dobrogea SA, Pambac SA, PangroupSA, Galmopan SA, Spicul SA, Morarit Baneasa SA, Oltina Impex Prod Com SRL, Farinsan SA, Interago SRL, Harmopan SA, Mopan SA, Cerealcom SA Timis, Panimon SA and European Food SA.
According to Marin, all the processing units in these first three groups have full modern milling technology, most of them from Buhler but also from Ocrim, Alapala and GBS.
The rest of the industry consists of others with daily capacities between 20 to 70 tonnes, of which more than 80% have less than 40 tonnes of daily capacity. About 3% to 5% are owned by small foreign entrepreneurs, with the rest being Romanian owned. "Most of them have re-engineered Romanian technologies," said Marin. "A certain number are intent to modernize their existing capacities, with (expansions) up to 60 to 70 tonnes a day, taking advantage of the important E.U. rural development funds available from this year until 2013."
OVERCAPACITY The major problem faced by the Romanian milling industry is overcapacity. The industry could, in theory, processes more than
five or six times annual consumption. "Competition is really tough, and many mills are currently using 25% to 60% of their installed capacity," said Marin. "The main solutions that are currently taken into account are increasing the sales into the E.U. common market and exporting to (non-E.U.) countries."
One factor which will force rationalization on the industry is the E.U.’s insistence on the implementation of Good Manufacturing Practice and Hazard Analysis and Critical Control Point systems, something which is proving technically and financially difficult for many of the smaller units.
Marin believes Romania has the potential to feed 120 million people, far more than its population, but the lack of development in Romanian agriculture is holding it back. "Wheat production is far below what can be a ‘normal’ one, both in quantity and quality terms," he said. "This leads to an important lack of four-quality consistency and (makes it necessary) to import blending wheat. Hopefully, this problem will be solved and be leverage to efficient flour production and increased exports."
A further challenge facing the industry is getting the right staff in place. "Attention has to be paid to the development of the professional and management training and education system as there are fewer and fewer specialists available locally," Marin said.
The Romanian grains industry does have particular strengths. "Local demand remains pretty high as Romania is one of the countries with the largest bread consumption per capita in the world," he said. "All large flour mills have the top modern milling technologies."
Five-year (2008-2013) E.U. and national development funds (including 25% to 50% granting facilities) are available for the milling industry.
Marin also noted that ties between the increasingly efficient farm sector and the processing industry are getting stronger.
Romania has introduced rules making it compulsory to use biodiesel in fuel blends. According to a U.S. Department of Agriculture attaché report published in May, this mandate was introduced for the first time in July 2007, when the fuel retailers had to use at least 2% of biodiesel in blends. The percentage increased to 3% in January 2008 and is scheduled to rise to 4% in July 2009. Starting in July 2009, a minimum 4% of ethanol based on volume should be blended with gasoline. WG
Chris Lyddon is World Grain’s European editor. He may be contacted at: email@example.com.