Romanian farmers struggle as costs soar

The agriculture ministry has forecast a wheat crop of five million tonnes this year, around two million lower than in 1997. That decline will have an impact on the wheat supply, even though that level of output should be sufficient to cover domestic consumption.

Data of the Agriculture Economic Research Institute (IEA) reveal that with a crop yield of 2,500 kg of wheat per hectare – this year’s likely figure – the price for 1998/1999 wheat should be about 1,300 lei per kg.

That estimate is a minimum and takes into account steep price rises for inputs, such as a 50 per cent increase in fuel pricesand envisages a profit rate of four per cent. Going below that threshold would mean losses for farmers.

But matters appear to be more complicated. Some wheat producers are demanding higher prices, of around 1,500 lei per kg, while traders were offered lower prices as they were almost unable to sell last year’s wheat. The best price for last year’s top quality wheat was only 1,000 lei per kg.

Several meetings have taken place between farmers and processing companies but they produced no results.

The President of the National Association of Milling and Bakeries said a level of 1,300 lei per kg would mean the demise of bakeries. The same applies to farmers if the price remains at current market levels of about 800 lei per kg.

Officials of the Milling and Bakers’ Employers’ Association (Rompan) said they can offer no more than 900 lei per kg, with prices beyond that implying more expensive bread for hard-pressed consumers. Farmers’ representatives say 900 lei is unacceptable.

Putting acquisition pricesat 1,300 lei per kg would put an additional 300 lei on the price of bread. Bakers would add to that interest payments on credits for buying and storage of wheat.

The IEA says farmers’ demands amounted to compensation for constant rises in their costs in recent years, poor financial resources, high interest rates, lack of modern equipment and insufficient subsidies from the state.

Another issue to be tackled is the lack of funds to acquire the wheat crop from producers. In 1997, funds amounted to 1.2 trillion lei from the agriculture ministry and 500 billion from local banks.

This year’s budget made no provision for such allocations, leaving bakers no option but to resort to bank loans.

Tight budget constraints have also eliminated from the 1998 budget allocations in the agriculture ministry’s budget to subsidise storage. Last year, farmers claimed 120 billion lei in subsidies to cover part of their storage costs.

The wheat acquisition price will probably be in line with a reference price on theinternational market. The Romanian market will be influenced this year by the absence of a big buyer, such as state grain trader Romcereal, a major buyer in recent years but now dismantled and replaced by ANPA – the National Agency for Agricultural Goods.

In the absence of a minimum guaranteed wheat price and a body to monitor and act on the local wheat market, farmers can only look forward to severe difficulties.

A minimum guaranteed wheat price, long promised, might be a solution. But this year’s budget envisages no allocations for that. Nor does it provide for the setting up of a planned wheat fund.

Autumn sowing will depend on reaching a balance between prices offered by traders and farmers’ demands against the backdrop of a local market struggling to cope with various problems and declining international wheat prices.