Statistically, in 2014, Romania produced 21 million tons of cereals - the 3rd most important crop in the country (after the 2004 record - 24 million tons). It has been a good time for the big agribusinesses, those which have silos and can afford to wait until next year when the prices will be higher. It has been a good year for exports, Romania ranking, this fall, 3rd in EU as exporter of cereals outside the EU (first place at grain maize). Briefly, it has been a good year for those with financial resources and good equipment for harvesting.
But for the small farmers, those who have the large majority of agricultural lands, 2014 has been a year just like the others. Statistics speak for themselves.
Let us see the latest report EU farm economics overview, based on data from 2011 - a year not so different from 2014 in regards to the total crop.
‘’In line with the general increasing trend seen in the EU, FNVA per AWU rose by roughly 72 % between 2009 and 2011, to EUR 5,300, but is less than EUR 2,600 in 50% of farms in the EU-2’’. Where FNVA is farm net value added (remunerates the fixed factors of production - labour, land and capital - whether they are external or family factors), AWU is annual work unit, and EU-2 is Romania and Bulgaria. The average (FNVA/AWU) for EU-27 was EUR 18,000 in 2011, an incredible level for a Romanian farmer for many years to come.
The report also comes with an alternative measure of agricultural income - the remuneration of family labour, as a high proportion of work in the agricultural sector is carried out by family members. This is expressed per family work unit (FWU) and is calculated by deducting from FNVA the costs of wages, rent and interest paid, and the opportunity costs of own land and capital. In the EU-27, the highest remuneration of family labour per FWU was in Denmark - approx. EUR 50,000, and in the EU-10, the highest remuneration was in Slovakia - almost EUR 20,000. Slovakia is an atypical case - just to mention that the average farm size there is 546 ha. An appropriate example could be Poland, with an average income of EUR 5,600. Anyway, Romania is still on the last place, with FWU almost at the same size with FNVA, signifying that most of the Romanian family farms are so-called ‘’survival farms’’. The southern and western regions of Bulgaria (with EUR 1,927 and EUR 2,605, respectively) and the southern region of Romania (EUR 2,930) have especially low levels of remuneration of family labour per FWU.
The partnerships are more ‘’European’’
Despite this, the incomes in the EU-2 are quite ’’European’’ when it comes to partnerships, a form of organisation where the profits cover the production factors brought into the holding by a number of partners (at least half of whom participate in the farm work as unpaid labour). The equivalent in Romanian is ’’Association – Asociatie’’). Actually, the partnership farms in the EU-2 had significantly higher incomes as FNVA (EUR 189,800) than their counterparts in the EU-15 and EU-N10, and the remuneration for family labour is estimated at over EUR 60,000. A figure that could be the best motivation for young people to enter the agriculture business, by renting land, which is still cheaper compared to the rest of Europe.
They really aren’t making it any more
You do not have to be an analyst to see that land consolidation is the wind of change which is blowing over the Romanian agriculture, helping production increase. You just have to read the news.
In Cluj-Napoca, the Proagro Capital fund announced that, in September, it purchased 125 ha land in the West of the country, now evaluated at almost RON 2 million. Established at the end of 2013, the fund makes acquisitions in the name of its investors and then leases the land, looking for gains both from rent and from the increase in the land price. Remember that, starting this year, EU citizens have the right to personally buy agricultural land in Romania and, in time, this will mean a natural increase of the price. “Buy land, they’re not making it anymore”, as Mark Twain once said.
Also this year, two important local fertilizer distributors and cereal traders, Brisegroup and Biochem, decided to establish financial divisions focused on non-banking loans for farmers. It is a notable step in a market where, until now, just one group bet on non-banking loans for farmers - Agricover, starting 7 years ago. After all, the average liabilities of Romanian farms (EUR 778) is a sign of poor state of financing, and not a sign of health.
For Brisegroup, 2014 was quite a dynamic year, acquiring 40% of a small Italian fertilizer distributor, as a local business publication informed in August 2014. A small step, but a notable one for a Romanian company.
So, a lesson for Romanian agriculture is that it is good to be bigger. And when you are “too big” for a sustainable growth ... just declare bankruptcy.
In 2014, the tenant of Insula Mare a Brailei (57,000 ha), the TCE 3 Brazi group, declared bankruptcy, not having paid debts of several million Euros to the state, according to media reports.
In the agricultural sector, this was not the only case of a heavy player that declared bankruptcy in 2014 - notable are the cases of meat processor Elit Cugir and the local largest producer and processor of pork, Marex Braila. These are big companies which have reported even profits and it could be hard to explain the bankruptcy. But this is another story, related to the controversial insolvency law.
