2012-04-30 16:05:19 - Recently published research from Business Monitor International, "Romania Agribusiness Report Q2 2012", is now available at Fast Market Research

BMI View: On the back of a bumper grains harvest in 2011/12 expected to provide livestock and dairy producers with cheap feed in 2012, elevated grain stocks encouraging farmers to take advantage of high global prices on export markets and the lifting of a ban on pork exports to the EU, certain sections of the Romanian agricultural industry have started 2012 on a high. However, freezing temperatures and dry ground are threatening crops, and poor investment management is holding the industry back. Over the longer term, we hold a relatively positive outlook on the Romanian consumer, largely on the back of a large population and low base effects.

Key Forecasts

* Milk consumption growth to 2016: 9.6% to reach 5.5mn tonnes.

We note that milk consumption at 16kg/capita by 2016 will still stand starkly below the European average of 75kg/capita, suggesting much more room for consumption upside.
* Wheat production growth to 2015/16: 18.8% to 8.5mn tonnes. Growth will be buoyed by EU agricultural subsidies, foreign investment and increased plantings in response to higher prices.
* Pork production growth to 2015/16: 11.5% to 507,000 tonnes. The lifting of a ban on pork exports to the EU poses upside risks to an already healthy growth outlook.
* 2012 GDP growth: 1.4% (down from 2.1% in 2011)
* 2012 consumer price inflation: 3.1% (down from 5.8% in 2011)


Full Report Details at
- www.fastmr.com/prod/359590_romania_agribusiness_report_q2_2012.a ..


Key Industry Developments

Valeriu Tabara was replaced as Romania's minister of agriculture by Stelian Fuia in February 2012. Like Tabara's appointment before him, Fuia's has caused considerable controversy owing to his advocacy of genetically modified organisms. He has worked for various agribusiness firms producing seeds and pesticides, but his longest tenure was with GM crop giant Monsanto and, like his predecessor, he is perceived to be pro-biotech. This has already made him a target of ire for Romanian GM critics, who asked the prime minister to revoke his nomination 'considering his long career within Monsanto.'

In February 2012 Romanian dairy producer Covalact opened a EUR1.1mn logistics centre in Sfantu Gheorghe. The firm also plans to spend a further EUR4mn over the coming years to boost capacity and launch new products. However, in December 2011 Israeli dairy producer Tnuva pulled out of the country having invested EUR60mn in its business there. Tnuva intended to use Romania as one of its initial launch pads for international expansion. Tnuva wanted to establish a complete system from milk production through distribution under the Tnuva and Yoplait labels. So while Covalact's investment should be celebrated and its timing deined to be more fortuitous than Tnuva's, it is nevertheless dwarved by the Israeli company's original investment and ambition; and the demise of Tnuva's Romanian story perhaps points to a business environment that is still marked with pitfalls for the potential foreign investor.

Romania was cleared to start pork exports to the EU as of January 1 2012. The ban was initially implemented due to the country's controlling of Classical Swine Fever. However, according to Radu Roatis, president of the National Medical Veterinary and for Food Safety Authority (ANSVSA), the decision to overturn it was unanimous among member states. The last outbreak of Classical Swine Fever was recored in Timis County, Romania in 2007 at farms belonging to US firm Smithfield. 50,000 pigs were killed at the farms. Romania is still not yet considered free of the disease. 'Lifting the commercial barrier imposed on Romania because of the swine pest might bring between EUR600mn and EUR1bn in the first year, according to the estimate made by the representatives of the Romanian meat processing industry,' said Roatis.

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