Cultivating Romania’s agri potential

With difficulties in accessing loans, no state-run research centres, unhelpful agricultural policies and almost no voices speaking up for Romanian interests in European forums, the local agricultural scene could fall 20 years behind against the European market if urgent measures aren’t taken. Over 130 decision makers from state institutions joined Romania’s top farmers and landowners to debate the pressing.
Ineffective policies in the agricultural sector, the lack of a transparent exchange of information between financial institutions, the authorities and the beneficiary – the Romanian farmer – the low investment yields on this sector and the need to build farmers’ alliances and associations in order to access loans more easily and quickly are just some of the current issues facing Romanian agriculture.
Loans for the sector are available both through banks and loan institutions such as the National Credit Guarantee Fund for SMEs and the Rural Credit Guarantee Fund. Still, the banks’ interest rates and the problem of co-financing investment projects are among the main impediments to the development of Romanian agriculture. Representatives of the National Federation of Farmers (FNPAR) believe that more loans would be accessed if the rates were lowered to 2-3 percent. However, Banca Transilvania issued in April alone half of the entire value of comfort letters sent out in the whole of 2010. According to bank representatives, more than 90 percent of the letters materialised into loan agreements.
Romania is the seventh state in the EU, out of 27, in terms of size and population, and yet the investment ratio and yields in this sector are the EU’s lowest. There are many factors behind this poor productivity. Farmers are still working the land using traditional methods, modern technology is non-existent, and in many cases the farmers’ need to sell their produce fast, because of lack of storage space, drives down prices in the market.
“The issue of title deeds for land also holds up agricultural developments,” said Bryan Jardine partner at Wolf Theiss. With five different types of measurement systems used to calculate agricultural terrain, the technical issues of property deeds must be carefully considered by investors. Furthermore, legal changes are often a problem for all players in a transaction involving agricultural land. Still, there are hopes that more loans will be granted once the new Civil Code comes into force this year.
Romania is seen as a powerful generator of agricultural investments and business opportunities within the region as a result of some major global trends: higher demand for agriculture production, the growing need to reduce dependence on fossil fuels, the promotion of environmentally-friendly projects and life enhancement issues and development in emerging markets. Besides the loans obtained through European projects, Romanian investors must take into account EU regulations and develop their projects within the larger economic context.
These topics were all raised at the Romanian Agri Business Forum 2011, a one-day conference organised by The Diplomat – Bucharest on 11 May, at Radisson Blu Hotel in Bucharest. The conference was organised under the auspices of the Ministry of Agriculture and Rural Development of Romania (MADR) and National Federation of Farmers (FNPAR), with the support of product and services companies DuPont, Monsanto, Pioneer, law firm Wolf Theiss with Bryan Jardine mediating the second section and travel agency Happy Tour. The event was supported by the Romanian Payment and Intervention Agency in Agriculture (APIA), Dana Bucur, agribusiness consultant at Agriland 2000, the British-Romanian Chamber of Commerce and the Royal Danish Embassy.

Loans rear local farming projects

With the current legal framework and a new Civil Code expected to come into force this year, loans in this major economic field should see a boost, according to Ciprian Glodeanu, senior associate and head of the real estate and energy departments at Wolf Theiss. At the same time, with a significant volume of comfort letters issued in April this year, compared to the whole of 2010, both loans and the eligibility of projects are on an upward trend, according to a Banca Transilvania official. Meanwhile, 10,000 SMEs are expected to benefit from loan guarantees this year through an online application developed by the National Credit Guarantee Fund for SMEs, IFN.

Ciprian Glodeanu, senior associate and head of the real estate and energy departments at Wolf Theiss
Regarding the legal framework for agricultural properties, Romania can be considered safe as long as players on the market make it safe. There are inconsistencies in the title deeds between legal documents and the actual situation. So far in Romania, about four or five kinds of measurement systems have been used to calculate agricultural terrain. Before embarking on a transaction in this segment, an investor must take into account both legal and technical aspects. Once the new form of the Civil Code comes into force this year as expected, we hope to see a revival of loans in the agricultural sector.

Crymhilde Galos, senior relationship manager of European programmes at Banca Transilvania
Banca Transilvania issued comfort letters worth 150 million RON in April, compared to some 300 million RON throughout 2010. Over 90 percent of the issued letters materialised into bank loan agreements. This year’s value stands at 70 agricultural projects involving animal farms, warehouses and agricultural equipment. Due to the reduction in the evaluation period – with a comfort letter sent out within three to four days – the loans granted in this segment are visibly higher than last year.

Sabina Manolescu, deputy director of FNGCIMM – National Credit Guarantee Fund for SMEs, IFN
The fund has made over 22,000 loan guarantees in the past two years worth about 1.65 billion Euro, in support of credits which reach 3.1 billion Euro. We estimate that more than 10,000 SMEs will benefit from fund guarantees this year through an online application. An advantage of this tool is that the main reason loan applications are turned down – the lack of guarantees – is mostly eliminated. The fund recently launched a new product which offers guarantees for beneficiaries who access European structural funds. What is new about this financing instrument is that it can be issued within two days for a guarantee of up to 2.5 million Euro.

Ileana Bratu, director at the Rural Credit Guarantee Fund, NFI SA
The guaranteed volume issued by the fund in 2009 and 2010 doubled since 2006. The fund issued guarantees for projects involving production, investments and co-loans for SAPARD (Special Accession Program for Agriculture and Rural Development) and the European Agricultural Fund of Rural Development (FEADR), worth over 1 billion RON last year.

Daniela Giurca, general manager with the Ministry of Agriculture
There is room for small, as well as for big farmers, but they have to grow and do business together. Romania needs a long term vision and I believe it will have it. Romanian farmers have to get organised, and the Ministry needs to identify a representative partner.
Agriculture needs a lot of money, but looking at what the EU allows us to give, what our current budget allows for, I think the situation is acceptable. Of course, compared to the EU per area subsidies, ours are a lot smaller, but this is because Romania has a different history.
There is indeed a difference in productivity, but let’s not forget that over 50 percent of the area subsidised is being cultivated by large commercial farmers, who own more than 100 hectares. I doubt that it is these people’s fault. It is clear that the black market has had a significant influence on prices.

Viorel Matei, president of the National Federation of Farmers (FNPAR)
Our problem is co-financing investment projects. The banks have huge interest rates which reach as much as 10 percent. No farmer would have any problem accessing a loan if the interest were lower, say up to 3 percent. Indeed, we do have the guarantee fund, but that’s also for those who already have money to finance their projects.
We are talking about the Young Farmer program, but the available funds are too low. With 6,000 Euro one can’t even buy a tractor. We don’t have laws that encourage and stimulate young farmers, to give them the opportunity to replace us. There is no chance for the youth at this time.

Global trends sow the seed for homegrown agriculture investments

Global demographic trends and economic evolutions – such as the increase in agricultural production and reduced dependence on fossil fuels – determine development opportunities for agricultural investors in Romania. Companies such as DuPont, Pioneer Hi-Bred and Monsanto have identified Romania’s great potential to generate business opportunities in this sector. Meanwhile, representatives of European and local farmers’ associations put the Romanian agricultural scene in the context of the wider European background and regulations.

Vasile Iosif, DuPont Romania GM
DuPont has identified several major trends worldwide driven by population growth, which can be translated into development opportunities: the increase in agricultural production, the decrease in dependence on fossil fuels, environmental and life protection and development in emerging markets. Likewise, water will become a major restrictive parameter in agriculture in the near future, while countries also face restrictions in expanding their agricultural areas. Meeting the global objective to reduce famine in large areas will require twice the volume of water currently used for agriculture

Chavdar Dochev, operations director Bulgaria, Romania and Moldova at Pioneer Hi-Bred
Pioneer’s main investments in Romania have targeted new technologies and development. The company completed a 40 million Euro investment in a production plant in Ganeasa, Ilfov, near Bucharest.

Pekka Pesonen, secretary general at COPA-COGECA
Romanian agriculture has huge potential and it needs to be used, both for national gain and for the benefit of the European community. That is especially the case because Romanian agriculture receives European financing and should take advantage of it to ensure subsidies in advance. We have to consolidate and improve production on a European level, and also strengthen the role that agriculture plays in Europe’s economy, so that we can guarantee food security for EU consumers and generate new jobs.
Also, Romanian farmers need to join the European farmers’ association and build alliances in order to protect their interests on a European level. They need to take part in debates. You have to do this for yourselves, to regain your place in the EU family. Young farmers must be encouraged through national programs and financing. Also, small farms need help to become competitive.

Romania’s agricultural potential ‘delayed by about 20 years’

Despite the fact that Romania is the seventh largest country in Europe in terms of population and size – resulting in a large agricultural area – the country still has the lowest investment yields in Europe. If the current development pace in the sector is maintained, agriculture in Romania will close the gap with the other countries in 20 years’ time. This warning came from Yves Picquet, president of the AIPROM.

Yves Picquet, president of the Romanian Crop Protection Industry Association, member of the European Crop Protection Association (AIPROM)
Compared with other European countries, Romania has a low ratio – around 20 Euro of investment in agriculture – if we calculate the proportion of potential agricultural land and the investment market. For instance, Hungary has a value of 50-60 Euro, and the figure is even higher in Western European countries. Romania has major investment potential for agriculture but it might take 20 years to reach it if the current development rhythm stays the same. Currently, less than 30 percent of farmers and agricultural projects in Romania get loans.

Martin Schuldt, GM at Cargill Grain & Oilseed Supply Chain Europe
Romania has significant potential in agriculture due to the regional trends: the growing demand for agricultural produce in the Black Sea region, good regional infrastructure – both around the Constanta Harbour area and along the Danube Delta – and, overall, growing demand worldwide for agricultural production. Currently, Romania has the lowest yields for corn, wheat and sunflowers. For instance, wheat yields are estimated at an average of 2.4, corn 3.4, and sunflowers 1.4 compared to the European yields of 3.6 for wheat, 5.3 for corn and 2.3 for sunflowers.

Nicolae Sterghiu, director of the Agriculture and Payments Intervention Agency
Romania has an area of 8.7 million hectares eligible for European financing, 6.2 million hectares of which are arable land. Of course, the country is bigger than that, but that’s what the EU calculated. So as the EU allocated EUR 700 million for 2010, that means that we got 80 Euro per hectare. Subsidy requests by farmers were for a total of 9 million hectares, which led to that 5 Euro per hectare adjustment that the farmers really felt.
This is where that adjustment came from, from the fact that the area declared by the farmers was bigger than the area that was approved.
In the media we keep seeing shock news that Romania will be fined millions of euro by the EC. Where do these numbers come from? Romania has to be in control of at least 5 percent of the area for which the request is submitted. Because of the error rate, this went up to 10 percent. Following the inspection, the resulting cultivation area was more than 10 percent smaller than in the past years (around 11 percent in 2010). The error rate that the EU accepts is 2 percent, which is our target for this year. And that’s where that EU fine comes from. In 2010, through the measures we took, the error rate dropped to 4 percent.

Nicolae Sitaru, president of the Romanian Agricultural Producers’ Associations League (LAPAR)
We mustn’t forget about irrigation, because if we get hit by another drought like the one in 2003, the entire agriculture system will go down. All irrigation projects and investments must be re-launched such as for instance the Siret-Baragan project, which has been abandoned for 25 years.

Local farmers seek to raise international voice
Romanian farmers must have a representative at European level but the frequent changes in the industry policies and government organisation give Romania the least support at this level. European representatives of COPA – COGECA and local representatives of the National Federation of Farmers (FNPAR) are trying to find a solution to unite European expectations, Romanian potential and the solid ground of current business opportunities.

Viorel Matei, president of the National Federation of Farmers (FNPAR)
Romanian farmers want to be European farmers, but in reality they aren’t, because they’re not organised. When political changes take place, when ministers change, the role of Romanian professional organisations in promoting agricultural policies also changes.
Romania is the seventh state in the EU, of 27, with potential for production, as well as a right to vote, which unfortunately it cannot use. Why? Because every minister, every governing party will promise to support agriculture until they get to where they want to be. When that happens, they forget who promoted and supported them. We currently have the greatest agricultural potential, but also the least support in the EU.
At a COPA – COGECA level, out of 87 work groups, we are only part of two. It’s in Romania’s best interest to be where the policies for the future of the community are drafted. The government should understand that Romania should renounce at any hidden agenda. Romania must accept its position as an active player in agriculture and it must also understand that it has to follow European rules.
Romanian farmers will no longer be represented in the EU because we are stubborn and we refuse to pay the outstanding EUR 200,000 that every country pays to COPA – COGECA. The FNPAR risks being booted out of the European organisation because the state can’t help the farmers’ federation pay this sum by the end of June. Do you think that paying EUR 200,000 for getting to be part of all the European work groups, on all projects, is a lot?

Nicolae Sitaru, president of the Romanian Agricultural Producers’ Associations League (LAPAR)
After 1989, Romanian farmers had an aversion toward associations. They were seen as similar to the old CAPs, and the mere word “association” scares some of them. What the people who keep their distance from these organisations don’t know is that together we can be very strong, we can buy products at more affordable prices, and we can make every farmer turn in a bigger profit.
GMOs fertilise controversy
The growing of genetically modified organisms (GMOs) along with the pros and cons of using pesticides on crops have long been the subject of heated debate, with giant companies, such as Monsanto, flagging up the benefits of research and technologies in the field, and local managers of associations and companies also in favour.

Jonathan Ramsay, public affairs lead for Europe and Africa at Monsanto
People don’t really think that we have to produce more, but we think it’s very important, in fact we have a commitment to double the yield in our core crops. We mean to reduce the footprint of this yield by one third. So that’s using fewer natural resources while producing more. We believe that biotechnology is an important tool. What people are really amazed by with us is the effort we put into the improvement of our seeds. We are analysing those seeds, taking them to producers and growing them in double time, using three-season growth, in the southern hemisphere.
In biotechnology, the latest products are now helping to protect the yields, the seed quality. Nobody wants to have bugs in their food and no farmer wants to have weeds. We must accept that we do have to meet our needs and produce enough.

Nicolae Sitaru, president of the Romanian Agricultural Producers’ Associations League (LAPAR)
There is this whole controversy about growing GMOs. If anyone from the government discovers that there is even a minor risk involved, we’ll be the first to ban these crops, first of all because we’re consumers too. We definitely don’t want to grow dangerous crops, we want to be efficient. We want to grow profitable crops, so that the standard of living goes up, because, as you all know, the country is still poor, a fact which does us no credit.
We need laws to be approved on time, because good measures have often been adopted too late and didn’t have the desired result. That is without mentioning that sometimes we have laws that are downright nutty! We were talking about growing GMOs. If a European authority allows them, it means that the products aren’t dangerous. In the United States, too, corn production has doubled in the last 13 years, to 10 tons per hectare, while we have only 3.4 tons per hectare. It won’t be long until we’re so inefficient that American corn will be cheaper to buy in Constanta Harbour than our own corn.

Lucian Buzdugan, general manager at Trei Brazi
Research in agriculture has been neglected by the authorities. It wasn’t given any attention. Actually, the only attention went on destroying research in Romania. I’m not exaggerating when I say “destruction”, especially since this can be proven by the low number of research facilities in the country. While some of these aren’t really active any more, others ended up in the hands of dealers that cash in a lot of money, without paying anything back.
Our company had to develop its own testing facility, which can compete with two research facilities combined. Right now production has gone beyond the research stage, and a solution could be public-private partnerships – for producers to finance research facilities and to get the best results.
You can’t have competitive agricultural production without someone guiding you, doing research, bringing you up to date with the latest world scientific achievements, and coming up with the best solutions. This is one reason why per hectare production is so low.
Weeds are a big problem in Romania, and a hybrid pesticide-resistant type of corn might be the salvation, because corn still grows on large areas. It could also help the public, because we don’t have any more people to work the fields.

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