Romania third biggest corn producer in Europe

July 31, 2009 - PRLog -- Romania is a rural and relatively poor country, which, helped by EU accession and subsidies, is making positive, if sometimes gradual strides towards modernisation and improving the lives of its citizens. Romania is an important agricultural producer. Corn is usually the most important grain and in 2006 Romania was the third biggest corn producer in Europe. Wheat, sunflower seeds, rape and barley are also important crops. However, a spring drought which is forecast to continue into the summer has led to fears for 2009's crop output. According to local press reports over 1mn ha of crops have been affected, about 15% of sown arable land.

The government has said that it is looking for a solution to supply cheap electricity to irrigation systems. It is not thought that the drought will be as severe as in 2007. In 2008, of the figures available, Romania was the fourth biggest producer of tomatoes and the fifth biggest producer of potatoes. BMI is expecting growth in production and consumption of poultry until the end of the forecast period in 2013, although production of pork and beef is forecast to decline reflecting the fall in national herd numbers, problems with disease and limited investment. However, the number of sheep is on the rise, up to 8.9mn in 2008, making Romania the fourth biggest sheep producer in the EU.

It is the fifth biggest producer of sheep and goats meat combined. In 2005 45.3% of the population was classed as rural and just under a third of the country's population worked in agriculture. Fragmentation in land ownership creates a number of serious problems for Romanian agriculture and production has suffered. Small scale owners have not been able to invest in modern technology or inputs. According to a report by Banca Comerciala Romana SA 45% of farms are even smaller than one hectare (ha) and are therefore not eligible for most EU Common Agricultural Policy (CAP) support schemes. The report says average yield per hectare for main crops is well below EU norms, only about 40% of those in France.

The report adds that a significant proportion of the farm population find it difficult to comply with the new and complex set of agricultural requirements and so have been unable to fully utilise market opportunities and EU and domestic financial support to manage their income and assets. Also fragmentation has dissuaded some foreign investment. The report notes that investors usually want to buy sizeable amounts of land, but the red tape involved in buying up individual plots has made Romanian agriculture a less attractive option. Nonetheless, improvements are being made in the sector and given time, the situation will improve and a level of consolidation will occur allowing proper economies of scale and attracting further investment. Indeed, Ziarul Financiar reported in February 2009 that the recession was pushing land prices down which could provide opportunities for those who are in a position to invest. The top five entrepreneurs and their companies in the agricultural sector own 2% of Romania's arable land area. According to the report, Culita Tarata, owner of agricultural and industrial enterprise TCE 3 Brazi, has the largest area of farmed land, over 55,000ha. The percentage of the population classed as rural is forecast to drop to 36.9% by 2030, as people move to the towns attracted by work and better money.

According to a United States Department of Agriculture (USDA) report published in March 2008 Bucharest has a per capita income of more than three times the national average. Increased disposable income (before the recession hit wage growth had been accelerating quickly and the labour market had tightened in recent years) helped fuel a massive growth in the mass grocery retail (MGR) sector (total sales of which are expected to grow by 149% between 2008 and 2013) which has in turn encouraged investment in the food and drink industry, and provided incentives to agricultural producers. For instance, in 2007 the European Bank for Reconstruction and Development (EBRD) announced that it was investing EUR20mn to finance the construction of a new malt plant in south east Romania, being built by Soufflet Malt Romania SA (part of French Groupe Soufflet). It will have a maximum annual capacity of 105,000 tonnes of malt and Soufflet has said that it aims to buy all malting barley from local farmers. The permanent representation of Romania to the EU announced in May 2009 that construction will be completed this year. Consumption patterns are gradually converging towards those of more developed economies in the region and wider Europe. This has presented new opportunities for manufacturers and their suppliers. One of the winners so far has been the dairy industry. Ziarul Financiar reported in January 2008 that the dairy industry was the 'star' of the consumer goods sector, and some producers were forecasting increases of up to 25%, supported by the rising prices of end products and a growing consumer preference for healthier food alternatives. However, the recession is slowing down growth and profits. Growth potential has attracted foreign investment. In September 2008, leading European dairy group Muller entered the Romanian market and announced its intention to become the leading yoghurt brand in the country by the end of 2009.

In April 2008 French dairy conglomerate Groupe Lactalis purchased local dairy firm LaDorna. One of the key producers, LaDorna is mainly engaged in the manufacture of liquid milk, dairy products and cheeses. In 2007 LaDorna posted a turnover of EUR40mn, collecting some 35mn litres of milk. A good future is also predicted for local rice cultivation. Albeit starting from a low base, rice production in Romania has grown rapidly in recent years. 2003-2007 production shot up 78 fold. BMI expects that between 2007 and the end of the forecast period in 2013 production will continue to increase to 59,200 tonnes. Investment in Romanian rice from western European companies and farmers has helped, and will continue to help, push up production. Even though the majority of Romania's poultry population is still kept on small, private agricultural holdings, the poultry industry in Romania is relatively modern and concentration is high. According to the USDA in mid-2006 the seven biggest operators accounted for about 50% of commercial production. The largest companies are fully integrated and foreign investors and suppliers are active in the industry.

According to a USDA report the Romanian Ministry of Agriculture has said that it would like to see 400,000ha under organic cultivation and production by 2010, double the current rate. Problems remain which make development and investment difficult, such as run-down agricultural infrastructure and a transport system which lags behind much of the rest of Europe in terms of maintenance and modernisation. In February 2009 Ziarul Financiar quoted Culita Tarata as saying that he invests everything he earns because agriculture will endure. He said that Romanian farmland was currently only realising 35% of its potential. His company produced 370,000 tonnes of grain in 2008. Of immediate concern is the state of the global and national economy. Global and domestic recession (BMI is expecting Romania's real GDP growth to contract by 3.2% in 2009 from a 7.1% expansion in 2008 and unemployment to rise to 8.1% of the labour force from an estimated 4.4% in 2008) is putting a break on consumer spending growth, and negatively affecting food purchases in general. Foreign and private investment has slowed in the short term until confidence returns and dragged down industry growth. Credit tightening by the banks has impacted companies' ability to invest and expand and consumers' ability to spend. However, the IMF's approval of a 24 month EUR12.9bn Stand-By Arrangement should help.

http://www.companiesandmarkets.com/r.ashx?id=ADB3I6B12149257

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