Romania Agribusiness Report Q2 2010

Romania remains a poor country, but with EU accession and growing foreign investment the country's consumer markets are gradually beginning to resemble those of the West. As we have noted in past reports, Romanians are becoming increasingly concerned about their health. That concern has come to a head with the likely introduction by the Agriculture Ministry of a 'junk food tax' some time in H110.

Noting that one in two Romanians are classed as 'overweight', and that obesity has doubled in the country within the past two years, the ministry says it is determined to push forward with what will be one of the most comprehensive taxes ever imposed on junk food. The tax could place a levy of 20% on foods high in fat, salt, additives and sugar. Products such as fizzy drinks and confectionary are likely to be among those hit.

While we have been forecasting sugar consumption in Romania to fall for some time, the latest move is likely to boost the rate of decline and we have adjusted our forecasts accordingly. This year, we are forecasting consumption to drop 0.9% to 558,000 tonnes before slipping to 552,000 tonnes in 2011. By 2014, we expect production to drop to 543,000 tonnes. Developments in the Romanian sugar industry, as well as those in a number of other key agricultural sectors, come under the microscope in Our Romania Agribusiness Q210 report.

We see a lot of room for expansion in Romanian rice production. According to the agriculture ministry, the country has between 3mn and 5mn hectares of unused arable land. In 2010, we are now forecasting production to increase again to 89,600 tonnes, up 23.6% year-on-year. By 2014 we forecast production to hit 161,000 tonnes, up 122% over our five-year forecast period from 2009. Investment from Western European nations will continue to be the key driver of growth, as companies from these countries increasingly seek to take advantage of Romania's flat terrain, water abundance and warm weather. Romanian corn output is also expected to grow. In early 2009 Japan began importing corn from Romania for the first time in 11 years. Japan is the world's largest corn importer, bringing in nearly 10.7mn tonnes for food in 2008. Although the quantities of the resumed imports were fairly humble, we view this as a positive step for Romanian production moving forward.

Gradually increased investment and professionalism in the grain-growing industry, growing export markets such as Japan, gradual consolidation of small farms into more efficient production units, a growing livestock sector, and a slowly improving economy which provides a larger consumer base for a wider range of finished food products, are some of the factors that should help push up corn production in the medium term. We forecast that corn production will reach 8.2mn tonnes in 2010 and 9.3mn tonnes by 2014, up 18.0% since 2009.

source: officialwire