Country Focus: Romania

by Intern Intern1
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Like the broader economy, agriculture has suffered from dislocations since 1989, but a rebound is under way.

Agricultural policy. Agricultural reforms after 1989 included privatization of land, inputs and distribution channels. Although supports and subsidies continued for private producers, the government in 1993 phased out almost all consumer subsidies except for those on bread and milk.

The centerpiece of land privatization consisted of dissolving state farms representing 9 million hectares by returning plots of up to 10 ha each to former owners. By late 1994, most of the land scheduled for this privatization was controlled by private owners; but few had received legal title, as land surveys were slowed by lack of funds, so farmers were reluctant to make improvements.

Many of the former land owners found it difficult to manage their new agricultural operations because of age or because they no longer lived in the area. For this reason, the legislature also passed land lease laws.

Those who farmed their new plots struggled with shortages of inputs and credits and a drought in the early 1990s. But government efforts to provide inputs and subsidies have been somewhat successful in increasing crop production, as has beneficial weather.

The Romanian grain marketing system currently mixes private and governmental participants in a dual system. Romcereal, the state grain agency, buys grain from producers at fixed prices, distributes it to state-owned users at fixed prices and is involved in governmental grain exporting. The government also controls most grain storage and transportation.

But an active and growing private trade also exists. These traders also may buy from producers and sell to domestic customers at market prices.

The private market notched a milestone in early December 1995, when two hard currency contracts, one for 5,000 tonnes of wheat and another for 20,000 tonnes of flour, traded on the Romanian Commodities Exchange (B.R.M.). in Bucharest. The wheat contract, the first grain contract to trade at the B.R.M., was a spot transaction, while the flour trade was for future delivery in January 1996.

The Romanian news media reported the trades as "big grain deals," not because the quantities were large, but because they represented private business and opened the way for "more such deals in Romanian agriculture." The flour contract also was the first future delivery contract traded with hard currency and was the largest single transaction of its kind to date at the exchange.

The government encourages this private enterprise, and other commodity exchanges have been opened around the country. The government also announced plans in December to begin to privatize Romcereal.

Under the plan, the grain agency will be split into 41 independent companies and a "National Agency for Agricultural Products." Shares of the 41 companies eventually will be sold to the public under the government's Mass Privatization Program. One announced purpose of the Romcereal split was to provide more participants — and hence, liquidity — in Romania's agricultural markets.

Flour milling. The milling industry has undergone changes since liberalization began, although privatization also has been slow in this sector. The country has about 2,000 flour mills, and as of 1994, only about 100 were owned privately. Many of the new private owners were not previously involved in milling, but entered the industry as entrepreneurs. Most of the state-owned facilities are large, industrial milling complexes, while the private facilities generally are small, with daily capacities of fewer than 100 tonnes.

In 1994, 45 private mill owners founded the Romanian National Association of Private Millers and Bakers (ANAMOB-CP). The group's goals are to provide financial, economic, management, technical and legal support to its members, who number in excess of 200 and consist of millers, bakers, grain and seed processors and allied trades representatives.

According to the 1995 ANAMOB-CP directory, many members operate in several grain-related areas; milling of wheat and maize, as well as baking and/or pasta production takes place at some facilities. Others plan to diversify grain-related output, while still others have become, or plan to become, vertically integrated. Some companies also are expanding into feed manufacturing, livestock feeding and meat processing.

Among the members' goals are to construct private grain and flour storage facilities, to improve flour extraction rates and quality and to modernize flour packaging and packing systems. Flour traditionally has been sold predominantly in 40-kg jute bags.

ANAMOB-CP has embarked on an ambitious plan to help its members and millers and bakers in other Central European countries. Under the plan, the Independent Center for Cereal Sciences will be established in stages over the next year; it will integrate training, technology and research and development in milling, baking, testing, marketing, grain storage, feed and seeds research into a single program. ANAMOB-CP is working with officials at the American Institute of Baking and Kansas State University, both in Manhattan, Kansas, U.S., and with the newly formed Grain Industry Alliance in Romania to develop the program.

Trade. In 1995-96, Romania is expected to become a net grain exporter for the first time since 1988. A joint commission of the Ministry of Trade, the Ministry of Agriculture and Food and Romcereal oversees export activity, with Romcereal organizing official tenders. Private traders also may sell for export, but they must receive export licenses from the government.

Until the last half of 1995, Romanian grain exports, which are not subsidized, were constrained by domestic prices that were higher than world prices. Although export licenses were granted, companies could not complete the transactions without losing money.

With higher international prices, exports, primarily of wheat, are expected to exceed 1.5 million tonnes; government officials discuss exporting up to 4 million tonnes, but the lack of capacity within the grain transportation and export infrastructure is likely to make that level impossible to attain.

The export commission is studying how to expand the country's grain shipping capacity. The commission has solicited information and offers on equipment to improve transport, elevation and ship loading; grain handlers in the private sector and Romcereal will be responsible for financing any improvements.






(1,000 tonnes)











Wheat flour only