ROMANIA: POTENTIAL WHEAT BASKET OF EUROPE

Romania is a traditional agricultural country and plays a unique and important part in European agriculture. The soil is fertile and the climate is favorable for agriculture, animal husbandry and horticulture. With a total area of 238,000 sqm, Romania is one of the countries of the most pronounced agrarian profile in the European Union. Having about 15 million ha of farmland, of which more than 9 million ha devoted to arable crops, Romania owns almost 1/3 of the total  agricultural land in the EU.  The country offers opportunities for silos, agricultural machinery, and agricultural inputs such as fertilizers and feed supplements.

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With a population of over 21 million, Romania is one of the largest countries in Central and Eastern Europe. Romania is endowed with substantial natural resources including rich agricultural lands, diverse energy resources such as coal,oil, and natural gas, and an industrial base encompassing a wide range of manufacturing activities. It started the transition from communism in 1990, but the transition was difficult because of 40 years of rigid central planning that took the economy to near-collapse. Macroeconomic conditions improved after 2000 as a result of fiscal adjustment, enhanced financial performance of state-owned enterprises, and privatization. Romania joined the EU in January 2007.
As an EU member state, Romania offers a sizable domestic market and a comparatively low-cost foothold for accessing the entire EU market. The country’s location in Southeast Europe, bordering on the Black Sea, provides a view beyond Europe and shortens the distance for export sales to Turkey, the Balkans, the Middle East, Ukraine and Moldova.

Romania is a market with excellent potential, a strategic location, and a favorable business climate. Its economy is among the EU’s fastest growing; 4.8% growth in 2016 and 6.9% growth in 2017 (the highest since 2008).

Romania is a traditional agricultural country and plays a unique and important part in European agriculture. The soil is fertile and the climate is favorable for agriculture, animal husbandry and horticulture. With a total area of 238,000 sqm, Romania is one of the countries of the most pronounced agrarian profile in the European Union. Having about 15 million ha of farmland, of which more than 9 million ha devoted to arable crops, Romania owns almost 1/3rd of the total agricultural land in the EU.

Both crop production and animal production in Romania follow an upgrowing trend. Main locally produced agriculture products are wheat, corn, barley, sugar beets, sunflower seed, potatoes, grapes, pork, poultry, milk, wool and eggs.

The contribution of agriculture to the GDP formation in Romania fluctuates between 4% – 6%, as agricultural production is highly dependent on weather conditions, the sector counting over 25% of the working population, figures which are high above the EU average.

The agricultural land is fragmented into millions of plots which does not allow intensive agriculture. Romania ranks 1st in the EU for the number of holdings, namely 3630 thousand farms,but last in the EU for the average output per holding, namely 3303 Euro. Therefore Romania’s agriculture is still a subsistence and semi-subsistence one, practiced in small farms which do not allow horizontal and vertical integration in the production chain. Therefore the modest performance of the Romanian agriculture sector places Romania far from having the agricultural competitiveness of the other EU member states. Farms with more than 100 hectares, or 250 acres, make up a very small proportion of Romania’s farms. However, commercial farms are investing to increase productivity.

In Romania agriculture is a significant contributor towards national economic performance. The significant share of the agricultural sector in the Romanian economy also results in its products being exported worldwide. In 2016 the total external trade in agricultural products, mainly wheat and corn followed by sunflower seeds and oil, rapeseeds, barley, live sheep and goats, chicken meat, and live cattle, amounted to 6.2 billion Euro, more than 9% of total Romanian exports. Romania is ranked 1st in the EU for growth of agricultural exports.

Romania continues to strengthen its position as a grain and oilseed producer and as a leading exporter among EU member states. In 2017, due to favorable planting for winter grain and favorable weather conditions over the course of development, total grain and oilseed production increased by 12%. Grain exports expanded by an estimated 11%, mainly due to corn and sunflower crops that expanded by 40%, respectively 25%.

OPPORTUNITY FOR SILO MANUFACTURERS
EU member states are the major source and destination for local agri-food products. In general, around 80% of imported agricultural goods originate from the EU. Hungary, Germany, Poland and Bulgaria are Romania’s major trading partners. Romanian exports to the EU account for about 60-70% of total agri-food exports, with Italy, Bulgaria, the Netherlands and Germany as the main markets.

Romania’s principal crops – corn, wheat, and sunflower – account for about 15 million acres of farmland. In addition, the country’s fertile soil and varied topography support forestry, pasture and rangeland, orchards, vegetables, and vineyards. These offer opportunities for silos, agricultural machinery, irrigation equipment, greenhouses, and agricultural inputs such as fertilizers and feed supplements.

COMPETING WITH ITS NEIGHBOURS
ON THE BLACK SEA IN WHEAT PRODUCTION
The EU has provided millions of euros in grants annually to rural businesses, including farms, for investment in agricultural machinery and equipment, manufacturing facilities, and other agricultural purposes. Between 2014 and 2020, a substantial percentage of EU structural funds (about $24 billion) are destined for agriculture within the European Agricultural Fund for Rural Development.

Thanks to its location and relatively large size among European countries, Romania has become a grain exporter competing with its neighbours on the Black Sea. Constanta port is the main gate for agricultural transportation, the storage capacity in the port expanding continuously.

A RECORD CEREALS HARVEST IN 2017
Romania registered in 2017 a record harvest of cereals of 27.1 million tonnes, up 25 percent compared to 2016, wheat production soaring to all time high of over 10 million tonnes, according to a report of Romanian National Institute of Statistics (INS). According to the report, the harvested production of wheat rose by 19 percent last year to 10.03 million t (from 8.4 million t in 2016), maize increased by 33 percent to 14.3 million t, while barley grew by 5 percent to 1.9 million tons.

Last year, Romania was the fifth largest wheat producer among the 28 EU member states, with 6.6 percent of total EU wheat production, the second largest maize producer (22 percent) and the largest sunflower producer (28.1 percent).

But Romania’s wheat exports have dropped in the first nine months of 2018 by 20 percent year-on-year, from 6 million tons to 4.8 million tons, due to lower output and the exit from markets such as Morocco and Turkey. Romania usually exports its wheat to the Middle East, but is likely to prefer European clients in 2018, due to higher prices offered.

STRATEGIC GRAIN PORT: CONSTANTA
According to USDA Foreign Agricultural Service’s (FAS) last Romania report, the country’s annual grain area planted covers between 5.2 and 5.4 million hectares (HA), depending on the oilseed area fluctuation. Wheat and corn account for about 85 percent of the total grain area. Romanian grain production is likely to fall in 2018/19 season by eight percent, based on the current crop status or initial harvest reports. Grain exports are projected to fall by 11 percent in 2018/19 year-on-year.

As a net grain exporter, Romania is heavily reliant on its transportation infrastructure to ship grain to the Black Sea. The Port of Constanta is the main trading hub for agricultural commodities from not only Romania, but also neighboring Bulgaria, Hungary, and Serbia. Grain storage capacity in Constanta is expanding, with current capacity estimated at 1– 1.5 million metric tons (MMT).

Romanian wheat exports fell by 20 percent year-on-year during the first nine months of MY 2017/18, mainly due to lower stocks in the region, chiefly Hungary and Serbia. Wheat exports reached 4.8 MMT versus 6.0 MMT during the first nine months of the MY. Unlike previous year when about 80 percent of wheat exports were shipped outside of the European Union, this year more 30 percent of Romania’s wheat was bound for other EU members. The notable buyer was Spain, which bought nearly 1.0 MMT, a 250-percent increase over the previous marketing year.

Egypt, a traditional market for the Romanian wheat, ranked the first among the non-EU destinations with 814,000 MT, a 17-percent reduction from last season. The drop in wheat exports to Egypt may be attributed to competition from Russia and Ukraine. Jordan imported 656,000 MT. Libya and Sudan were also viable markets. Overall, FAS Bucharest estimates that the total wheat exports will be closed to 6.1 MMT, about a 10-percent decline year-on-year.

DECREASE IN CORN PRODUCTION
The 2018/19 season corn area declined from last year, mostly due to corn farmers losing money during the previous year’ drought. As neonicotinoid application remains prohibited in the EU, Romanian farmers appealed to the Ministry of Agriculture to approve a new derogation for corn and sunflower. Following the notification to EU, the Ministry of Agriculture granted the derogation in January 2018, earlier than previous years.

Corn yields are expected to be six percent lower than last year due to the late planting and poor spring weather. This forecast is based on the assumption that weather conditions will not negatively affect pollination. Total corn output is forecast to reach 10.7 MMT, a ten-percent decline from the previous exceptional year. Regarding utilization, feed consumption is expected to keep rising, encouraged by good prospects for swine, sheep, and cattle production.

Corn exports increased by almost 40 percent during the first half of the MY 2017/18, following last year’s bumper crop. Other EU members accounted for 80 percent of Romanian corn exports, significantly more than usual. Exports to Spain, Portugal, Italy, and Greece almost tripled during the first six months of the MY, mostly driven by unfavorable weather conditions in those markets. Turkey, Lebanon, and New Zealand are the most notable non-EU markets for Romanian corn.

The barley area fell by approximately 10 percent in MY 2018/19 in response to reduced profitability. USDA’s barley production estimate is trimmed to 1.55 million MT, a 14-percent decrease from last year. Although average yields are similar to last year, the area is reduced. Barley is mainly an export crop—generally less than a quarter of production is used domestically.

We also suggest you to read our previous article titled "A MAJOR PLAYER IN THE GLOBAL BARLEY AND CORN MARKET".

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