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Romania Report Shows Food Prices Up Significantly

07 January 2011

ROMANIA - The Romanian government's austerity measures, which will see public sector wages slashed by 25 per cent and sales tax raised to 24 per cent, are expected to hit domestic demand for commodities in 2011, says

Expectations are that demand for pork and beef, which are likely to be left off the shopping list by some cash-strapped consumers, will be seriously affected. At the same time, wheat demand will also suffer. Soaring prices have led the country's farmers to export much of their product - at the expense of the Romanian consumer. Expensive exports are making up some of the shortfall, but many consumers will be forced to cut bread consumption over what will be a tough year for many Romanians.

Key Report Views

  • In 2010, with state aid for the poultry industry removed in line with EU accession conditions, production to fall again to 283,000 tonnes, down 2.5 per cent y-o-y. Pork production to fall slightly to 444,000 tonnes, beef to drop 6.9 per cent to 175,000 tonnes.
  • The report forecasts pork consumption in 2010 of 388,000, down 6.3 per cent, as austerity measures take their toll, with a further reduction to 382,000 expected in 2011. Beef consumption is expected to fall to 151,000 tonnes in 2010, and to 142,000 in 2011.
  • Although strong growth is expected in Romanian rice production over the medium term, output disappointed somewhat in 2009/10. Estimated production that year is 61,600 tonnes (down 27,000 tonnes on our previous report).
  • For 2010/11, wheat output is expected to come in at 5.77mn tonnes, up 10.8 per cent y-o-y. The following year, output is expected to recover to 6.63mn tonnes, as steeply rising wheat prices encourage an increase in planted area.
  • Milk production in 2010 to come in at 5.23mn tonnes, down 1.3 per cent y-o-y due to slackening demand and diminishing consumer confidence in the quality of Romanian dairy.

Industry Developments

Valeriu Tabara replaced Mihail Dumitru as Romanian Minister of Agriculture in September 2010. Tabara's appointment is highly controversial due to his known advocacy of GM crops. The minister has already clashed with Environment Minister Laszlo Borbely over Borbely's proposed five-year moratorium on GMOs in Romania. Tabara has made it clear he opposes the move. We will be watching the debate closely, as a ban on the crops poses some risk to our forecasts.

Bread prices in Romania are soaring and expected to rise further over the coming months. Although Romanian wheat production far exceeds domestic consumption, Russia's export ban has caused wheat prices to soar, leading farmers to send wheat abroad. The country is buying in wheat at even higher prices and the price of flour has shot up 60per cent since June. Bread and milling companies have been unable to raise prices enough to cover their costs and at least 700 have reportedly gone out of business in recent months.

The European Commission is considering relaxing the rules on feeding animals to animals. The EC said it was awaiting the results of tests from the European Food Safety Authority on tolerable levels of animal feed. The right results could put meat back on the menu as feed. The proposals, should they be implemented, will have positive effects for the livestock industry across the EU. At a time when feed costs are starting to rise in response to soaring grain prices, allowing certain types of animal feed should help to push margins back in the right direction.

TheCropSite News Desk

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