Sunday, 9 September 2012

Sowing the seeds of profitable agriculture in Romania

The development of sustainable and profitable agriculture in Romania, problems with genetically modified organism (GMO) regulations in Europe and controversies over GM crops, the trade dynamics of agricultural products in Romania over the last decade and EU policies and their impact on Romania are among the most significant problems local agriculture is facing, say industry players. And these topics were duly raised and debated at the event. Currently, Romanian agriculture must undergo many changes to reach European Union levels. Although the country has no irrigation system, little storage space, a productivity level that is half the EU average, and just a fraction of European funds have been absorbed, market players are trying to see the light at the end of the tunnel. 

Achim Irimescu, secretary of state, Ministry of Agriculture and Rural Development 
"Sustainable agriculture is a very new concept but highlighted in the last decade. The Common Agricultural Policy (CAP) has focused on sustainable agriculture. As long as the farms respect EU rules, we can talk about sustainable agriculture at a local level. Large producers should be able to meet high standards. I believe that sustainable agriculture is the basis for future agricultural development." 
"The goal is to transform the European farmer into a rural entrepreneur. Romanians can align to European requirements. Also, one solution would be agronomic research to come up with revolutionary solutions to produce more with fewer resources." 

Veronica Toncea, general director, the Guarantee Fund for Rural Credit 
"Among Romanian agriculture’s advantages are that it is the only sector that has something like the Common Agricultural Policy, which means a common market, common rules and standards and a common budget, European funding sources and substantial national budgets, which are used to support agricultural production and environmental development areas." 
"Another advantage is the partnership with the banking system, given that all the sums will be distributed to beneficiaries through bank accounts." 
"The objectives of the Guarantee Fund include supporting food security and increasing the export of value-added agricultural products, in the context in which global demand is greater than the supply of such products, and some EU countries have reached their peak of productivity, plus the efficient use of natural resources and social cohesion in rural areas." 

Maria Cirja, marketing manager for Romania & Moldova at Pioneer 
"The European and Romanian farmer has to develop into an entrepreneur, and act according to business principles, if we want to develop profitable agriculture." 
"Production must grow continuously to cope with population growth, the consumption of fuel and increasing meat market demands. If the production cannot cope, marginal non-agricultural areas will be forced to become agricultural. Production must increase by 70 percent by 2050 to feed over 9 billion people." 
"We can develop through research and innovation. Sustainable agriculture is profitable long-term agriculture. Production on acreage obtained from Pioneer corn hybrids can provide animals with enough food to meet the annual average consumption of beef (2 billion people), pork (1.8 billion people) and chicken (1.4 billion people)." 

Klaus Amman, Bern University, Switzerland 
"I think we should change our focus from process to product. We should look at products because the processes change anyway. In Romania I love that farmers can talk to scientists. We are making progress and GMOs will develop in the future." 

Financing for farms 

Due to its weather conditions and higher than the average European arable area, Romania has excellent primary agricultural resources, but to achieve performance like farms in other European countries it needs major investments in upgrading and modernization, argue players. Compared with other EU members, Romania’s agricultural system is poorly financed, has major differences in unit production, a weak organization of capitalization and must fight farmers’ reluctance to join a cooperative. The Romanian agricultural sector has a high capacity to absorb new funds and to develop further and longer than any other field. The support of the European Union through grants is an advantage for those who wish to invest, without having a significant financial contribution of their own to make. The majority of financing in agriculture is done through banks, whether it takes the form of a grant, EU funds or a loan. 
In 2011, considered one of the best agricultural years since the revolution, agriculture contributed 11.3 percent to GDP growth, compared to previous years when the average contribution was 6-7 percent, and both high yields and good prices gave relief to Romanian farmers. 

Achim Irimescu, state secretary at the Ministry of Agriculture and Rural Development of Romania 
"Romania will benefit from EUR 13 billion for agriculture over 2007-2013, of which just EUR 6 billion has been accessed so far. Time is short and an acceleration of absorption is required. We have a partnership with the Guarantee Fund and the banks." 
"In Romania there are two main problems for agriculture: financing and bureaucracy. Clearly, investments in agriculture are very important and direct payments will continue to support farmers’ income." 
"It is difficult to achieve a balance between Pillar 1 and Pillar II. Romania needs both and we have supported this. For objective reasons Romania is among the countries with low direct payments. EUR 8 billion was allocated to Pillar II and EUR 5 billion to Pillar I. As long as the overall amount remains constant, GDP will not be affected. If it changes it will affect Pillar II." 

Veronica Toncea, general director, Guarantee Fund for Rural Credit 
"There is less interest in financial solutions for farmers than in 2011. Our recommendation for farmers is to take out credit in the national currency as they have revenues in RON. The maximum guarantee ceiling is 80 percent, while the maximum value of a guaranteed fund is EUR 2.5 million. There is open competition between banks to give credit for this sector. It is important to emphasize that individuals cannot obtain financing for agricultural projects unless they are authorized individuals (PFA), family associations, enterprises or other small companies. In terms of procedure, nothing has changed since 2011." 
"Current legislation allows the reduction of agricultural risk by having secured guarantees for both short-term and long-term loans. Financing agriculture and projects using European funds are among the main strategies of commercial banks (with an increase of about 10 percent in 2011). The volume of loans to companies has higher growth rates than to individuals and financing costs have dropped compared to previous years." 
"Commercial banks compete in agricultural lending and in creating new loan products adapted to agriculture, given that prices are still in line with the 2011 trend. Commercial banks have set up offices and hired staff dedicated to funding European projects." 
"The introduction of a letter of comfort has ensured that the project value takes account of the financial capacity of beneficiaries, which has reduced the risk of projects not being implemented. In terms of guarantees required by commercial banks there have been no significant changes in the percentage of coverage of guarantees of credit exposure, but due to the depreciation value of assets as collateral securities, their value is not the same." 

Dan Florian Petre, agriculture market officer, BRD-Groupe Societe Generale 
"We represent a bank that signed the first partnership with APIA in 2008, targeting financial products for agriculture. We have delivered in recent years, and we continue to deliver, financial products for farmers, to meet their need. I know that the general feeling is that banks are closely competing by launching different products in this segment, but actually their claim is limited to the safest level of financing, that of pre-financing subsidies or European funds." 
"Farmers should take note of a product that can be used all along the process and that covers their needs. For instance, we have a financial product with a maturity of 10 years and a grace period of 9 months, in order to cover the seasons of the agriculture cycle." 

Weeding out the biggest problems 

Technical challenges, lack of proper subsidies, tax evasion, lack of state help and the fragmentation of agricultural land are among the main problems dogging Romanian agriculture. Currently, of the 10 million hectares of Romanian arable land only 600,000 hectares are irrigated and the amount of fertilizer per hectare in Romania is 6-10 times lower than in the EU. In addition, there is a lack of storage space around the country. 

Laurentiu Baciu, president of the Romanian Agriculture Producers’ League (LAPAR) 
"We are currently facing the largest disaster in the last 50 years in Romanian agriculture, with production equaling the same vales as 50 years ago. Some of the causes that I can indentify are the lack of irrigation, lack of proper subsidies, tax evasion, inaction from state authorities and ministries when it comes to finding basic solutions for farmers and the fragmentation of agricultural land." 
"Currently 54 percent of Romania’s agricultural surfaces are holdings of up to 1.7 ha. The added value is obtained from the 46 percent which are productive in agriculture. We have the lowest subsidies in Europe and expect others to decide for us." 

Gheorghe Sin, professor and president of the ASAS (the Academy of Agricultural and Forestry Sciences) 
"Given the context of several crises - financial, economic, environmental and food - plain solutions are needed from politicians. Even if agriculture has been invoked many times in rhetorical speeches, it seems that, in fact, it hasn’t attracted too much attention from the political sphere." 
"The local potential of this segment, which could feed a population two or three times the size of Romania’s, is not being used and we should analyze several aspects: the lack of efficiency of subsidies, the banks which are not acting according to partnership principles and ineffective lobbying by those in favor of GMOs." 

Dorel Benu, president of the Romanian Payment and Intervention Agency in Agriculture (APIA) 
"Our most urgent need is to find a more coherent and organized system for our dialog partners. Currently, we are in discussions, individually, with over 1 million farmers. Another downside of our work process is the lack of the cadastre for agriculture land." 
"Also, farmers are complaining that the diesel subsidy is too small." 

Veronica Toncea, general director, Guarantee Fund for Rural Credit: 
"Currently agriculture vulnerabilities include the excessive division of land plots, which has caused a high percentage of self-consumption, and the elderly farming population due to young people emigrating. In Romania farmers between 50 and 70 years old own over 2.3 million ha, meaning 24.3 percent of the total agricultural area." 
"Low profitability has caused the decapitalization of the sector and was the main factor in the stagnation of agricultural production." 
"Other problems are the lack of a land cadastre, the underdeveloped agricultural production marketing chain, lack of irrigation facilities, lack of state support for energy and water and tax evasion caused by the dual tax system (individual farmers, VAT excluded, corporate-VAT included)." 
"Another problem is the nonexistent marketing structure to integrate farmers, processors and traders in strategic alliances, with effects on produce (the diversity of producers has raised issues in providing the appropriate volume of standardized products to market requirements)." 

The future of agriculture: GMO and biotechnology? 

One of the most contention topics regarding agricultural development in Romania, and, to a wider degree, in Europe, is the cultivating of genetically modified organisms (GMO) and how this could boost the growth of this strategic industry. This year’s Romanian Agribusiness Forum, organized by The Diplomat - Bucharest in partnership with some of the most significant and biggest companies, financial institutions, state authorities decision-makers and scientists operating in this field, tried to identify the pros and cons of genetically modified crops and address the most troubling aspects of this sector. 

Achim Irimescu, state secretary at the Ministry of Agriculture and Rural Development 
"At European level, we sense that there is no interest in cultivating genetically modified crops. Romania is among the few countries in Europe that appears to be open to this segment. I suggest we let the scientists confirm whether or not it is safe to cultivate GMOs, rather than throw ourselves into emotional debates." 
"On the other hand, Romania imports 45 million tons of soya beans each year and I find it rather weird to fight against cultivating this locally but, in the meantime, import such an amount." 
"I don’t think that the position of the Ministry of Environment will affect the introduction of GMOs." 

Toma Dinu, PhD Professor at the University of Agronomic Sciences and Veterinary Medicine, Bucharest (USAMV Bucuresti) 
"Romania is dependent on agricultural imports. The good thing is that exports have also increased. Mostly, we exports grains, seeds and tobacco, and the numbers of imports and exports dramatically changed for instance in 2000, when GM soya started to be cultivated, and again in 2007, when GM soya was forbidden in local farming." 
"Between 2002 and 2011 Romania exported agricultural products worth a total of USD 20.2 billion. Meat production in Romania is a goal but it is limited to satisfying vegetable protein needs. In 2011 Romania imported feed and soybean cakes worth USD 340 million. Quantities imported exceed 600,000 tons (420,000 tons of soybean cake and 186,000 tons of feed, especially premixed feed). To encourage the production of meat the domestic production of vegetable protein must also be stimulated." 
"In the last decade (2002-2011) in Romania agrifood imports far exceeded exports and the accumulated deficit of the period is USD 16.7 billion of which USD 11.8 billion involved EU member states." 

Doru Pamfil, professor and president of the Commission of Biotechnology of ASAS, rector of the Agricultural University in Cluj-Napoca 
"The present century belongs to biotechnology, as, according to forecasts and scientific studies, 50 percent of the global culture production will be based on biotechnology by 2050. Worldwide food production is also expected to double by that year, in order to be able to feed the estimated global population of 9 billion." 
"Biotechnology, by definition, plans to address the issues of food security and safety issues. Even so, it seems that currently, biotechnologies are better applied in industries, especially in bio fuel, pharmaceuticals and medicine, than the food industry." 
"We should ask a question in the future: whether we want cheaper fuel or food. Currently, European regulations are pushing towards a target of 20 percent bio fuel of the total production. By 2015 more than 50 percent of global production, food, feed and feedstock will be biotechnologically processed, not necessarily GM. It is clear that for the future we must bend more to biotechnology, to establish our priorities."

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