*an updated version of the presentation “A 20-year search for coherence in agricultural policies from Romania”
presented on 2009 and published in Jan. 2010 in the volume “Romania dupa douazeci de ani” coord. by R. Murea, V.
Boari, N. Vlas , edited by European Institute Publisher House
Authors: D. Cioloş, L.Luca, D.Giurca
A 20 (+2)..‐year search for coherence in agricultural policies from Romania*
Dijon, 20th-21st October 2011
RURAL’EST‐SFER CONFERENCE 20 YEARS OF FARMING AND RURAL TRANSITION IN EASTERN
EUROPE: WHAT HAVE WE LEARNED?
Main topic
A retrospective analysis of agricultural policies in the past 20 years
Reflection themes for the future national agricultural policy
...in the context of CAP post-2013
Romanian agricultural sector – the dynamics of the past 20 years
1989 Agriculture in GDP – 13.7% Population occupied in
agriculture – 27.5% Net agri-food exporter –
surplus 153 mil. USD 14.7 mil. ha of agricultural
land, out of which:on 28% - intensive
commercial agriculture: 411 State Agricultural
Farms with an average of 5000 ha
on 58% - extensive agriculture: 3776 Cooperative
Farms with an average of 2557 ha
2009 Agriculture in GDP – 6.7% Population occupied in
agriculture – 29.8% Net agri-food importer –
deficit 2141 mil. Euro 14.7 mil. ha of agricultural
land, out of which : 9.8 mil. ha eligible for CAP
support:12,000 farms -
intensive commercial agriculture (5.1 mil. ha)
1 million farms – extensive subsistence farming (3 mil. ha)
2 mil. ha uncultivated land
Farms structure
Farms structure
1,6861,766
300
705 10
710
650
4,180
2,018
924
333
5,168
251230
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
< 1 ha 1- 5 ha 5 - 10 ha 10 - 20 ha 20 - 30 ha 30 - 50 ha 50 - 100
ha
>100 ha
0
1,000
2,000
3,000
4,000
5,000
6,000
No. of farms(thousands)Surface thousands ha
Source –based on data processing of Farm Structure Survey -2007, NIS
According to provisional data on Agricultural Census NIS in 2010 :
•13.29 million ha are cultivated by 3.85 million farmers (14% less as compared with 2002)
•Average area farm is 3.45 ha as compared to 3.1 ha in 2002
The structure of farms eligible for SAPS - 2010
Large farms (1000 ha) - 1.1% of the total farms work efficiently around 52% of the total area eligible for payments
Small farms between 1-10 ha (around 1 million) - 93.5% of the total farms practice an extensive farming on 32% of the area eligible for support
Source: General Directorate of Agricultural Policy , MARD, according to data provided by PIAA
Wheat – area, yields, total production – dependent on weather
2154
,3
1460
,8 2281
,6
2412
,1
2480
,8
1781
,7 2408
,3
2019
,8
1675
,4
1940
,2 2546
,3
2297
,5
1735
,2
2295
,9
2476
2012
,6
1975
2110
,3
2148
,8
2018
,9
5473
,1
3206
,4
5314
,1
6135
,3 7666
,6
3143
,8
7156
,2
5181
,8
4661
,4
4434
,4
7735
,1
4421
2479
,1
7812
,4
7340
,7
5526
,2
3044
,5
7181
5202
,5
5720
,7
2541
21952329
2544
3090
1765
2971
2530
2782
2286
3038
1924
1429
3403
29652746
1541
3403
2421
2833
0
500
1000
1500
2000
2500
3000
3500
4000
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010*
Kg
/ha
GRÂUDINAMICA SUPRAFEŢEI CULTIVATE, A PRODUCŢIEI TOTALE ŞI A PRODUCŢIEI MEDII LA HECTAR
Suprafaţa cultivată (mii ha) Producţia totală (mii t) Producţie medie (kg/ha)
Source: General Directorate for Agricultural Policies, MADR,based on NIS and MADR data
The budget spent in agriculture and “the return”
from trade
1990-1999 expressed in USD and 2000-2009 expressed in Euro
Source: own calculation based on NIS data and annual average exchange rate
20 years of metamorphosis in agriculture
Transition decade – towards market economy (the ’90s):Wide objective, hesitant actions: the “stop and
go” reformsEU integration decade (after 2000):
Shaped objective, actions imposed by the objective, slow implementation: “EU accession preparation” stage (2000-2006) “EU integration difficulties” (after 2007)
Defining elements* of the Romanian agricultural policies in the last two decades
Governments Structural policy
Price and tariff policy
Financial support Strategic vision
1990-1992 Land reform implementation
Low consumer prices, low protection
Consumer and state farm subsidies
Agriculture as social “buffer”
1993-1996 Development of integrators
Control of chains and protectionism
Support to production of industrial type
Reaching food self-sufficiency
1997-2000 Privatization of industrial agriculture
Internal and external liberalization
Orientation towards small farms, through the voucher scheme
Promoting the family farm
2001-2004 Running the EU Sapard Program
Stimulative prices, low protection
Support to production commercialization
Development of large farms
2005-2006 Farmer Program Getting closer to the EU price level
Double support, for investments and production
Development of family farm
2007-2009
2010 - 2011
First NRDP measuresNRDP measures adjusted
Common Market Organization
According to CAP, plus state aidNo old state aid support – just few measures
Accommodation to CAP institutions
* on a selective basis - those with the strongest impact
Volume and structure of subsidies in the decade of
reforms
Source: based on our processing of MAFRD data series
Volume and structure of subsidies in the decade of
accession
Source: based on our processing of MAFRD data series
The ’90s – the decade of reforms1990 – 1992
Radical land reformObjective – restoring agricultural land
ownership rights:Land reform – 1991 (in a first phase, restitution in kind
to former owners from 1945 within the limit of 10 ha and, later on, distribution of land to persons who didn’t own land but worked in cooperative farms or wanted to become farmers, from the land surplus
Effects: In 1992 over 4 mil. persons replaced the 5000
cooperative farms – radical change in the structure of agriculture towards a dual one: self-consumption and market oriented (major land fragmentation)
Increased trading costs on the entire chainNew owners due to the lack of resources – autarchic
type of agricultureMajor decrease of production
The ’90s – the decade of reforms
1993-1996Prudent approach of the free market challenges – interruption of reforms and strong state intervention Objectives: stabilizing agricultural markets, ensuring food security, privatization, restructuring agricultural researchEffects: Increased “duality in agriculture” through:
Creation of organizations with monopoly in the procurement of raw materials and services for agriculture, and with monopsony in the “collection” of products.
Subsidy and access to credit were granted through state controlled chains -“integrators”, using a combination of fixed prices and “queuing”- major competitive disadvantage for traders outside this system, especially for the private ones.
Main agricultural product chains – meat, milk and wheat – operated on the basis of fixed prices (regardless the season or country region, following the centralized economy model), whilst the rest of the chains were operating on the basis of the free market – strong market distortions
These political instruments excluded from the support schemes the small producers – who continued to practice an autarchic farmingLand market – nonoperationalDespite dedicated support, competitiveness of the so-called “integrators” erodedDecline in production
The ’90s – the decade of reforms
1997- 2000 Impending reform – shy liberalization and structural reforms
Objectives: liberalization of (fixed) prices, of tariff barriers, improvement of land market operation, speeding-up privatization, restructuring or liquidation of agricultural state farms, of those downstream (cereal storage) and upstream (mechanization, certified seeds production services), “equal conditions” for all agricultural producers (vouchers)
Effects: Financial support for agriculture (one of the highest in Eastern Europe, as global
amount) is spread to all producers, with no structural policy vision, but rather following an election-driven reasoning
State farms, with low profitability, are hindered by this massive liberalization policy, some of them go bankrupt, others are privatized at a very low market value, caused by the debts accumulated and low profitability
Privatization is made following a doubtful market logic - to some “agricultural specialist managers” or occasional “investors”, with capital from other sectors of the economy
Vertical integration occurs in certain sectors (some agricultural production units become the owners of agri-food processing units)
Sector competitiveness continues to be modest1999 – certitude regarding the status of candidate state to EU
accession – begins to influence the manner of approach in agricultural policy
The years 2000 – the decade of accession2001-2004
Towards the European model
Objective: preparing the accession to EU through adoption of the acquis communautaire, obtaining the status of market economy, supporting the commercial farms, consolidating farms
Effects: Finalizing the privatization process for agricultural farms with state
capital The first clarification regulated by law was to define the agricultural
exploitation (with the purpose to formally differentiate market oriented farms from households producing mainly for self-consumption) – in order to set the grounds for the financial support in agriculture dedicated to market oriented farms, to increase their competitiveness
The first agricultural and rural development structural program (SAPARD) is launched under the pressure of the European Commission
Towards the end of the period – an obvious structural change: no. of farms decreased with 5% in 2005 as compared to 2002 and the average size increased from 1.7 ha to 2.15 ha
The size of big farms increased – deeper gap between very big farms and small exploitation
Unblocking of land market and agricultural land trading
The years 2000 – the decade of accession2005-2006
Objective: EU accession, increase in competitiveness, CAP compatibility
Effects:First signs of a structural policy, through credit
programs for investments granted to market oriented family farms
Attention is being given to facilitate average size farmers’ access to bank loans for production and investments
The national strategic vision is diluted in the multi-annual European programs for supporting agricultural and rural development
The public policies to guide and support agriculture are overshadowed by the institutional construction efforts to manage the European funds for agriculture
Fulfillment of conditions to become a EU member state
The years 2000 – the decade of accession2007-2010 - accession’s success, integration’s difficulties
The success of accession, the difficulties of integration Objective:
increase in competitiveness on the single marketimplementation of the Common Agricultural Policyabsorption of European funds
Effects:The institutions compulsory to CAP management are getting
trained and develop “on the go”Farmers and producers learn “on the go” the news rules of the
CAP gameCompetitiveness decreases, the fight with the competition is
becoming more fierce on the milk, meat, finished products market
It emerges a need to elaborate a strategic projection on medium and long term for developing agriculture
Active implication in the CAP future cannot be done unless Romania knows what it wants, what and how it can do it
Opportunities from the “future’s reserve”
Coherent actions from the framework of the “Strategy for the development of Romanian agriculture on medium and long term”
Why a strategy for agriculture (why another one*)? Because: It has to be embraced by the entire political class It has to have continuity in implementation It has to provide the predictable framework in order to act European
in the national interest What will be the orientation?
General objective on long term of the sectorWhat will be the instruments?
The one allowed by the European frameworkSpecific to the ideological & politic vision of the “Power”:☺,☺,☺,☺,☺,☺,
☺…☺… What the objectives might be? Almost the same …
Making the best use of the agricultural production’s potentialEnsuring a decent standard of living for the rural populationEnsuring the welfare at decent costs for the consumerMaintaining and making the best use of the agro-rural landscape
*Since the 1990 until now over 20 strategic documents were elaborated regarding the development of the agricultural and rural sector
Some reflection topics – 2009-2011
Land policy: continue the process of concentration and consolidation of land for increasing productivity in agriculture
Fiscal policy in agriculture:Reduction and elimination of “grey and black markets” for
the traded agricultural productionOrganizing markets
Socio-professional policy: Agricultural status as professionStimulation of multi-activity in the rural areaAdequate social, health and pension policy to take over part
of the purely social role of the current agricultural policies Policy to develop agricultural infrastructure for
production and collection-trading Irrigation system, services in agriculture, collection-trading
centers for primary production
Land policy: parcel concentration
Coercive / incentive measures for stimulating parcel concentration through the land market (tax on the agricultural land, notary taxes, succession policy, redefining the life annuity)In 2010-2011 – few legislative
proposals….but no finality….no political willigness
Measures to stimulate a voluntary regrouping of parcels/households (legal framework for productive associations, family associations, succession policy)The new Civil Code…provide some
clarity….but not enough…..
Fiscal policy in agriculture
Reversed taxing on the agri-food chain, compulsory accounting for all producers who trade all or part of their production on the organized marketSuccess in 2011 only for cereals …..still
need approval for meat, fruits and vegetables……
Differentiate/progressive taxing by agricultural production sector / type of agricultural exploitationNot political willingness for this type of
measure
Socio-professional policy in agriculture
Separate subsistence production from market oriented production. Define the professional status of the agricultural producer as liberal/independent activity; establish the calculation procedure for the contribution to the pension fund and health insurance fundNo action …..
State involvement in stetting-up the pension and health insurance funds in agriculture. Incentive measures for early retirement and for setting-up of young farmers in agricultural entrepreneurship activity, individually or as an associateNo action …..
Policy for developing infrastructure and agricultural services
Irrigation system based on economic profitability: basic infrastructure ensured by the state; maintenance of the basic infrastructure and the secondary structure in the responsibility of the water users associations; preferential credit policy for private investments in the irrigation system and in the system for collection-trading of primary agricultural productionRedesign of some measures from NRDF, assessing the
economic viability of irrigation systems, looking for public/private partnership for investment in basic infrastructure….Canal Siret Baragan
Developing the association/cooperative system for services in agriculture and for collection/trading of production. Stimulate local authorities/collectivities to set-up and maintain ambulant markets for the direct producers or for associated traders; stimulate the contract of « weekly costs » between companies’ syndicates and agricultural producers’ associations Still no action
Are still those objectives in line with CAP – reform?
The convergence of DP will have a slight positive impact but the intensity of support will remain for a long period of time high between MS …
The simplified scheme for small farmers – may complement the national policies and as well some measures from Pillar 2
Capping of direct payment might affect the structure of competitive farms…
Instead of conclusions
Romania must have a coherent vision on medium and long term in line with CAP reform:What it wants, what it can do and how can it do
itTo be active in the decision making of the future
CAP, acting European for its national interest
THANK YOU!