Focus on Romania

by Chris Lyddon
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Romania, in south Eastern Europe, plays a major role in E.U. grains production. But in 2012, it’s been affected dramatically by poor growing conditions. With a former Romanian farm minister in charge of piloting through planned reforms to the E.U.’s Common Agricultural Policy, Romania also has assumed a central role in shaping the legislative background to grains production in Europe.
 
In September, the International Grains Council (IGC) cut its estimate for Romanian grains production in 2012-13 to 12.9 million tonnes from a previous estimate, made a month earlier, of 14.5 million, which was already well below the 19.2 million tonnes produced in 2011-12.
 
The cut in the IGC’s wheat estimate, however, was small, from 5 million tonnes in August to 4.9 million in September. Romanian wheat production was 6.7 million tonnes in 2011-12.
 
Maize took the big hit, with the IGC’s crop estimate reduced to 6.5 million tonnes in September from 8 million in August, down from a 10.5-million-tonne crop in 2011-12. The IGC left its barley production estimate unchanged at 900,000 tonnes, compared with the previous year’s 1.5 million.
 
According to the U.S. Department of Agriculture (USDA) attaché, wheat harvesting in Romania this year finished nearly a month earlier than normal. In a report published recently, the attaché put wheat production at 4.95 million tonnes, down from 7.1 million in 2011.
 
“Wheat exports are expected to fall to 1.6 million tonnes, about 25% lower than the previous year,” the attaché said. “Romania’s price competitiveness remains strong, however, as in September it was awarded contracts for about 300,000 tonnes of wheat for Egypt.”
 
The attaché put the maize crop at 6.1 million tonnes, down 42%, adding that the agriculture ministry has not released any official preliminary figures to avoid creating any local market disturbances.
 
“The rapeseed crop was drastically affected by the harsh winter with almost three quarters of the acreage replanted in the spring,” the attaché report continued. “Total rapeseed acreage plunged from 360,000 hectares planted in the fall to 91,000 hectares by the spring. Production is estimated at 140,000 tonnes, versus 750,000 tonnes last year.”
 
Average yields are down by 16% on 2011 levels. Exports are unlikely to exceed 15% of last year’s volume of 600,000 tonnes and domestic crush demand will likely require imports in order to be satisfied.
 
Farmers replanted part of the winter-killed rapeseed area to sunflowers, the attaché said, leading to an expansion in area of around 11% to 1.1 million hectares.
 
The sunflower crop was less affected by the drought with production estimated down by about 25%. Production is expected at 1.38 million tonnes, which is equivalent to an average yield of 1.23 tonnes per hectare. Last year, the average yield was 1.8 tonnes/hectare.
 
“While sunflower heads were generally smaller in size, the plant density per hectare compensated for the loss in weight,” the attaché said. “This year’s production is expected to be sufficient to cover both domestic crush requirements and foreign (export) demand.
 
“Similarly to corn, dryness and heat accelerated the maturation process. Harvesting started in early August, two weeks earlier than normal. Initial harvest results indicated lower oil content, not more than 37% to 38%. But as the harvest advanced, the aggregate crop oil content approached normal levels.”
 
A key role in E.U. agriculture
 
As a member of the E.U. since 2007, Romania’s farm policy comes under the E.U.’s Common Agricultural Policy (CAP). Romania plays a key role in running the CAP, as the European commissioner in charge of its administration is the former Romanian agriculture minister Dacian Ciolos, who has held the role since February 2010. His role includes guiding current negotiations on the CAP after 2013.
 
A more enthusiastic approach to biotech
 
Romania has reacted more positively to developments in biotechnology than some E.U. countries.
 
“Romanian farmers continue to remain in the group of E.U. member states utilizing the opportunity to cultivate biotech crops,” said an attaché report published in June. “Currently the only genetically modified (GM) crop under commercial cultivation in Romania is MON 810 insect resistant corn.”
 
The report put the area cultivated in 2012 at about 300 hectares, most of it for seed production. That is a drop of 48% compared to the previous year, mainly as a result of extensive traceability requirements, minimum isolation distance in the context of corn plantings expansion as well as the difficulties in marketing the harvest, the report said.
 
“Romanian farmers are eager to regain access to biotech soybeans, considering their positive experience with this crop before E.U. accession,” the report said. “Over the past several years, the soybean acreage has declined drastically, dropping to about 72,000 hectares in 2011, which is 38% of the area registered five years ago. In 2012, a similar area of soybeans is expected to be harvested. Soybeans high production cost and lower productivity influence farmers’ decision.”
 
Low domestic availability led to increasing imports of biotech soybeans for the livestock and poultry industry. Total soybeans and soy meal imports grew in 2011 by about 5% to reach 490,000 tonnes, with Brazil and Argentina the main suppliers.
 
Importance to transport
 
Romania is of vital importance to the countries of central and eastern Europe, because of the river Danube, which flows through Romania to the Black Sea. However, in 2012 a lack of rain and high temperatures threatened transport on the rover.
 
“Serbia and Hungary grain exports may be affected when their crops are harvested in the near future and the volume intended for water shipment to Constanta Port on the Black Sea is expected to increase,” the attaché said in a report on the problem issued in August.
 
“Danube river speed flow at the entry point in Romania was in July about 60% of the multi-year average, due to lower rainfall and heat in the countries upstream,” the report said. “According to the forecast issued by the Romanian Hydrologic Institute for the timeframe August-October 2012, the Danube river speed flow at the entrance in Romania will remain under the multi-year average.”
 
The attaché reported an improvement in soil moisture following precipitation in the third week of September. However, it was not enough to replace depleted soil moisture levels, so the subsurface moisture is notably under the level registered last year.
 
The dryness made it difficult and costly to sow winder crops. Water conservative agriculture practices, with minimum till, are being adopted at an increasing rate among farmers, the report said.
 
“In case of rapeseed, the optimal timeframe for sowing was the end of August. Farmers who were able to prepare the land and sow their rapeseeds benefited by the September rainfall as it created good conditions for seed germination,” according to the report.
 
However, many farmers have decided to move into spring crops and rapeseed area is expected to fall by 45%. Wheat area is expected to be near last year’s level which was 1.9 million hectares.
 
“Wheat sowing is ongoing and recent precipitation will help ensure good germination conditions prior to winter’s arrival,” the attaché said.
 
Ministry to support farmers
 
The attaché also reported that Romania’s agriculture ministry has assured farmers they will receive compensation for loss of income during the drought. In September, the ministry limited the aid to 100 lei (about $30) and to small farmers (between one and 10 hectares).
 
“The agriculture ministry estimates that about 600,000 farms (commercial and non-commercial), cultivating 1.9 million hectares (23% of the total arable land), will apply for this form of compensation,” the attaché said. “This measure was strongly criticized by the farmers’ associations, which perceive this subsidy more as a populist message in advance of the December Parliament election, rather than as an incentive for increasing the producer’s competitiveness.”
 
Industry sources put total Romanian flour production at 1.6 million tonnes a year. There are some 200 mills with a capacity of over 2,000 tonnes a year and 120 below that level. The industry is concentrated around Constanta, Timisoara and Bacau. Capacity utilization is around 45%.
 
Big names in the industry include Boromir, which has around 10% of the market, 7 Spice, Seven Spice, Pambac, Dobrogea, Titan, and Galmopan, all companies with a high level of integration in the food chain.
 

Key Facts
 

Capital: Bucharest
 
Population: 21,848,504 (July 2012 est.)
 
Religions: Eastern Orthodox (including all sub-denominations) 86.8%, Protestant (various denominations including Reformate and Pentecostal) 7.5%, Roman Catholic 4.7%, other (mostly Muslim) and unspecified 0.9%, none 0.1% (2002 census).
 
Location: Southeastern Europe, bordering the Black Sea, between Bulgaria and Ukraine.
 
Government: Republic. Chief of state: President Traian Basescu (since Aug. 27, 2012); head of government: Prime minister Victor-Viorel Ponta (since May 7, 2012).
 
Economy: Romania, which joined the E.U. on Jan. 1, 2007, began the transition from Communism in 1989 with a largely obsolete industrial base and a pattern of output unsuited to the country’s needs. The country emerged in 2000 from a punishing three-year recession thanks to strong demand in E.U. export markets. Domestic consumption and investment fueled strong GDP growth but led to large current account imbalances. Romania’s macroeconomic gains have only recently started to spur creation of a middle class and to address Romania’s widespread poverty. Corruption and red tape continue to permeate its business environment. Inflation rose in 2007-08, driven by strong consumer demand and high wage growth, rising energy costs, a nation-wide drought, and a relaxation of fiscal discipline. As a result of the global financial crisis, Romania’s GDP fell more than 7% in 2009, prompting Bucharest to seek a $26 billion emergency assistance package from the IMF, the E.U., and other international lenders. Drastic austerity measures, as part of Romania’s IMF-led agreement, led to a 1.3% GDP contraction in 2010. The economy returned to positive growth in 2011 due to a strong export performance, but in a deflationary environment caused by bountiful crops and weak domestic demand. In March 2011, Romania and the IMF/EC/World Bank signed a 24-month precautionary stand-by agreement, worth $4.9 billion, to promote compliance with fiscal targets, progress on structural reforms, and financial sector stability.
 
GDP per capita: $12,600 (2011 est.); inflation: 5.8% (2011 est.); unemployment: 5.1% (2011 est.).
 
Currency: lei (RON): 3.527 RON equals 1 U.S. dollar (2011 est.).
 
Exports: $62.68 billion (2011 est.): machinery and equipment, metals and metal products, textiles and footwear, chemicals, agricultural products, minerals and fuels.
 
Imports: $73.12 billion (2011 est.): machinery and equipment, chemicals, fuels and minerals, metals, textile and products, agricultural products.
 
Major crops/agricultural products: Wheat, corn, barley, sugar beets, sunflower seed, potatoes, grapes; eggs, sheep.
 
Agriculture: 7.9% of GDP and 30% of the labor force
 
Internet: Code: .ro; 2.702 million (2010) hosts and 7.787 million (2009) users.
 
Source: CIA World Factbook
 

Chris Lyddon is World Grain’s European editor. He may be contacted at: chris.lyddon@ntlworld.com.

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