Romania - A Strategy for the Transition in Agriculture (Vol. 4 of 5) : Marketing and Input Distribution

DRAFT CONFIDENTIAL 12432 VOL.4 ROMANIA A STRATEGY FOR THE TRANSITION IN AGRICULTURE Working Papers Volume 4 of 5: MARKETING AND INPUT DISTRIBUTION 1993 JOINT ROMANIAN-INTERNATIONAL AGRICULTURAL STRATEGY TEAM THE WORLD BANK IN COOPERATION WITH EC-PHARE, EBRD, USAID, AND THE FRENCH AND GERMAN GOVERNMENTS ROMANIA: A STRATEGY FOR THE TRANSITION IN AGRICULTURE ROMANIAN TEAM MEMBERS Ministry of Agriculture and Food: Ministry of Trade: Lapusan Alexandru, Secretary of State VAlceanu Simona lonescu Lucian Berinde Mihai Popescu Delia DrAginescu Cornel Prof. Davidescu David Tudose Constantin Mischie Gheorghe Bu4tiuc lulian Panturu Stefan Gronski SAndel Dr. Buciuman Eugen Mureqan Mariana Abramescu Nicolae Ministry of Water, Forestry and Environmental Dan Aurel Protection: Alexandrescu Bogdan Diaconu Virgil Cretu Ion Ministry of Labor and Social Protection: Mitrache Ilie DrAgAtoiu Adina Dumitrescu Enache Agricultural Bank: TArlbull Stefan Dobrescu Emilian Mierloiu Nicolae National Commission of Statistics: Matei Rodica Scarlat Stefan Moisa Mihail Romanian Development Agency: Nill Ion Anca Sfetcovici Ru4inaru Ion A%ricultural University Bucharest: Dr. 'Tirlea Stan Prof. Bilteanu Gheorghe Zichil Viorel Prof. Toma Dragoq Bobe Dumitru Prof. Popovici Valentin Protopopescu Barbu Agricultural University Clui: Rfpeanu Savel Prof. Alexandru Bogdan Dinu Eugen Academy of Economic Studies: Nicolae Horia Prof. Zahiu Letitia Mitrache Stefan Prof. Duhdneanu Marcel Fantu Gheorghe Manole Victor Comoiu Nicolae FrAill Gheorghe Gavrilijh Gheorghe Institute of Agrarian Economy: Creangi Liviu Prof. Dumitru Dumitru Mdrculescu Dumitru Popescu Marin Dumitru Ion Balcan Constantin Mateescu Aurelian Dociu Bara Simona Gheorghiu Sorin Florian Violeta MihAescu 0. Aurel E§anu Cristina Neacqu Virgil Toader Sabina Davidoiu Viorel Patache Radu Ontanu Gheorghe Mihai Dumitru Ministry of Finance: Toderoiu Filon Marinescu Gheorghe Berindei Anca Stan loana Gavrilescu Dinu Gheorghiu Liliana Sima Valeriu Stavir Dumitru Scutaru Cornelia Pavel Adrian Dr. Belli Nicolae National Privatization Agency: Rusali Mirela Ciolacu Stefan Serbinescu Camelia Schraider Albert Moldovan Minodora Institute of Agricultural Economics and Rural SEMROM: Sociology* SivulescuoIon Sibideanu Petre Institute of Pedology and Agrochemistry. Cocianu Radu Riut Cornel Laz5r Traian UNISEM: Popa Liviu Gheor! Ilarion Zorci Constantin AVIROM: Institute of Food Chemistry: Marin Gheorghe Dr. Popescu Ovidiu COMTIM Timisoara: I.B.NA.: Cirpan Florentin Dr. Mini5or Paul Federation of Private Romanian Farmers: Burlacu Gheorghe Radu Marin INTERNATIONAL TEAM MEMBERS Gottfried Ablasser, task manager Gabor Hunya, macroeconomist-public finance Richard Burcroff II, adviser Morris E. Morkre, trade regime and trade Johanna E. Welzenbach, staff assistant prospects Ascanio Graziosi, PHARE coordinator A. Allan Schmid, public investment program Mike Hicks, EBRD coordinator management James G. Snell, USAID coordinator Lynn Engstrand, agri-business Per Ronnas, rural and village development Richard L. J. Lacroix, agro-industry David A. Kideckel, social impact analysis Nicholas Mahoney, privatization, foreign trade James Beebe, state farms institutions Gabriele Crespi Reghizzi, general legal Frangois Chartrain, enterprise reform framework Franz Donhauser, marketing-state systems Raymond Colombel, public administration James Ernest Cooper, marketing-private sector Christian B. M. Tourne, land reform legal Hans Steinbichler, marketing-fruit and vegetables framework Bj6rn Genberg, cooperatives John Leatherdale, land reform Charles H. Antholt, agriculturalist David Brian Argyle, rural banking Willem M. Zijp, agricultural knowledge and Bruno De Gasperis, rural financial markets information system Ulrich Koester, economist-price policy Jonathan Martyn Beeny, mechanization Hasan Gencaga, economist-prices and William Edward Clayton, fertilizers agricultural performance Alexander Grobman, input distribution Kundhavi Kadiresan, economist-support policy Michael R. Dicks, environment assessment Petra Pissulla, macroeconomist Helmar K. Ochs, animal husbandry and nutrition Tjaart Schillhorn Van Veen, animal health WEIGHTS AND MEASURES m 1 meter 1.1 yards km 1 kilometer .6 mile m2 1 square meter 1.2 square yards ha 1 hectare 2.5 acres 1 1 liter 1 quart kg 1 kilogram 2.2 pounds t 1 ton 1,000 kg Acronyms and Abbreviations AFC Agriculture and Food International Consultants AM Aide-Memoire AS Agricultural Societies ASAS Academy for Agricultural and Forestry Science BA Banca Agricola Bancoop Cooperative Bank BATMA Basa de Aprovizionare Tecnica e Material Agricola CAP Cooperative for Agricultural Production CC Commercial Company CEC Casa de Economii si Consemnatiuni Centrocoop Uniunea Centrala a Cooperativelor de Consum CO Certificate of Ownership CRIMM Foundation for Medium and Small Enterprises DGAA General Department for Agriculture and Food DSSAT crop-modeling program EBRD European Bank for Reconstruction and Development EC-PHARE European Community/Economic Assistance for the Restructuring of Poland, Hungary and Romania EFTA European Free Trade Association FA Farmers' Associations Federalcoop Cooperative Union FE foreign exchange GOR Government of Romania GTZ Gesellschaft fur Technische Zusammenarbeit ICSITMUA Agricultural Engineering Research Institute K20 potash MAF Ministry of Agriculture and Food MECU million European Currency Units MEF Ministry of Economy and Finance MOI Ministry of Industry N Nitrogen NAP National Agency for Privatization NBR National Bank of Romania ONGCC National Office for Geodesy, Cadastre and Cartography PAM Policy Analysis Matrix PAU Policy Advisory Unit of EC-PHARE at MAF PFESP Private Farmer and Enterprise Support Project PMU Program Management Unit of EC-PHARE at MAF POF Private Ownership Fund RA Regie Autonome RBFT Romanian Bank for Foreign Trade RCB Romanian Commercial Bank RCGF Rural Credit Guarantee Fund RDA Romanian Development Agency RDB Romanian Development Bank SCAPA Societa Comerciala de Aprovisionare a Productorilor Agricoli SOF State Ownership Fund UCECOM Central Union of Handicrafts Cooperatives of Romania UTB tractor manufacturer ROMANIA A STRATEGY FOR THE TRANSITION IN AGRICULTURE WORKING PAPERS Volume I Economics Page Macroeconomics, by G. Hunya and P. Pissulla Sector Performance, by H. Gencaga Prices, by U. Koester and H. Gencaga Subsidies, by K. Kadiresan The Financial Sector, by D. Argyle and B. De Gasperis Trade, by M. Morkre Public Investment, by A. Schmid Volume 2 Government, Land and Social Issues Land Reform, by J. Leatherdale Land Laws, by C. Tourne Cooperatives, by B. Genberg The Ministry of Agriculture, by R. Colombel Social Impact of Transition, by D. Kideckel Social/Human Resources, by P. Ronnas The Environment, by M. Dicks Volume 3 Enterprise Reform and Privatization Legal Framework, by G. Crespi-Reghizzi Privatization, by N. Mahoney Enterprise Reform, by F. Chartrain Agroindustries, by L. Engstrand Private Sector Development, by R. Lacroix Romcereal, by R. Lacroix State Farms, by J. Beebe Volume 4 Marketing and Input Distribution Marketing, by J. Cooper 1 Agricultural Marketing, by F. Donhauser 43 Marketing of Fresh Fruit and Vegetables by H. Steinbichler and K. Poppeller 69 Input Distribution, by A. Grobman 121 Volume 5 Technical Issues Crop Production, by C. Antholt Livestock Production, by H. Ochs and T. Schillhorn Van Veen Mechanization, by J. Beeny Fertilizer Issues, by W. Clayton The Agricultural Knowledge System, by W. Zijp The findings, interpretations and conclusions expressed in these papers are entirely those of the authors and should not be attributed in any manner to the World Bank or Romanian government, nor to the other organizations and agencies which sponsored the work of the Joint Romanian-International Agricultural Strategy Team. ROMANIA A STRATEGY FOR THE TRANSITION IN AGRICULTURE WORKING PAPER PRIVATE SECTOR AGRICULTURAL MARKETING JAMES E. COOPER APRIL 1993 JOINT ROMANIAN-INTERNATIONAL AGRICULTURAL STRATEGY TEAM THE WORLD BANK, IN COOPERATION WITH EC-PHARE, EBRD, USAID, AND THE FRENCH AND GERMAN GOVERNMENTS 1 ROMANIA PRIVATE SECTOR AGRICULTURAL MARKETING JAMES E. COOPER TABLE OF CONTENTS Page Summary 5 Recommendations 7 1. Background 14 2. Market Structure and Private Sector 15 Production, Supply and Demand 19 3. Market Channels 24 Retailer Marketing 25 4. Commodity Overview 27 Appendices A. Distribution Systems for Major Agricultural Commodities 31 B. Population of Romania by Judet 35 C. Production of Major Crops by Judet 36 D. The Structure of Agricultural Organizations 41 ROMANIA PRIVATE SECTOR AGRICULTURAL MARKETING James E. Cooper Nr. Preston, U.K. SUMMARY Agriculture production marketing and processing, as well as the supply of farm inputs and services, continues to be dominated by the former state institutions. The government keeps control of the production structure to ensure protection for consumers, who have been protected from the full effect of price increases in a number of ways. Subsidies have been applied to agricultural inputs, but their availability, particularly of fertilizers and animal feeds, has been limited. Prices of inputs have remained static but costs have increased, mainly through devaluation, which has resulted in an increase in subsidies although there has been an increase in farm gate prices. Even where inputs are available, the lack of organization, finance, credit and transport precludes the private sector from taking advantage of these supplies. The former state institutions were converted into regies autonomes or commercial companies, which are supposed to operate as self-sustained, profit-generating units. However, their (and the private sector's) activities are subject to an abundant variety of price and margin controls, restrictions in procurement and distribution, and other policy interventions. In this situation, these state-controlled enterprises cannot live without subsidies or without consuming their equity, and probably could not survive even if they performed efficiently. The future role of the government in agricultural marketing and processing must be to withdraw from active participation and to confine itself to setting the framework for effective competition. In the early stages, state-operated enterprises are justified in markets where few private enterprises operate, but they must not prevent the emergence of private initiative and should be exposed to private competition on an equal basis, without being able to rely on government support or intervention to maintain their dominance. In the medium and long terms, the private sector, if allowed to function, will be efficient and will render the state enterprises redundant and restrict them to areas where the principles of a market economy do not work. Consumption subsidies are not the best way of solving a problem, as subsidies, particularly on food, tend to be poorly-targeted and to benefit the rich as much as, even more than, the poor, and to distort choices and undermine competition. The continuation of the privatization process, the urgent promotion of competition in service functions, and the creation of new marketing facilities will complement the incentive framework by providing an enabling environment for sectoral growth. This also will assist the incentive framework at the farm level to be exploited in an efficient way. At present, there is COOPER 6 PRIVATE SECTOR MARKETING a lack of balance between the new agricultural structure, set up in place of the old system, and still-existing old structures in other economic branches. The ratio of people to land in both the producer associations and the individual private farms still is too high for significant income growth. The uncertainty over titles to land has inhibited many of the new breed of smallholders from maximizing their potential profit. Virtually all those entitled to former cooperative land hold interim titles to it. The interim title, however, does not specify precisely where each holding is; only that it is within a certain community. Landholders may not be willing to cultivate the land to its full potential for fear that the harvest may be claimed by others who claim equal right to the land. Many landholders are "passive farmers", who live in urban areas, rarely if ever visiting the farms on which their lands are situated, and who take little interest in the development of agriculture or the people who rely on it for a living. Because they are retired or have other employment, many of these claimants would prefer to sell or lease their lands, and informal land transactions are beginning to take place in the absence of the required legislation. Associations and individual farmers indicate a willingness to make use of agricultural credit, particularly for machinery and inputs, where they feel it would result in economic gains. There is doubt, particularly with small individual farmers, that they would have access to credit, since they lack experience in credit applications and the best way to utilize credit should they get it. Little assistance is offered in the rural areas for farmers to develop their knowledge in, or have access to, the facilities that credit, banking and savings can offer them. Farmers will only be able to maintain economic viability only by improving their production methods, increasing their output and reducing costs. The convenient access to financial services and assistance in developing their knowledge in such matters is of immediate concern to farmers. Land preparation and seeding are mechanized almost completely. However, the nation's tractor fleet has declined or become obsolete, the majority of those remaining being owned by former state farms or Agromecs. Few tractors and implements are owned by the private sector and great reliance is still placed on the state-owned commercial Agromec companies' fleets. The supply of seed, fertilizer and other inputs, including their physical procurement and the hire of mechanization services, is being organized through the state-owned marketing and agro-industry companies (sometimes called integrators). Payment usually is by supplying part of the resultant crop at prices below those of the free market. This lack of independence in both production and marketing processes acts as a distinct disincentive to the private sector. Market information is not readily available to farmers on a national, integrated basis. Economic incentives to newly-independent farming households have now replaced administrative edicts and technical instructions. There is a lack of inter-relationship between the needs of the farmers on the one hand and what the public sector structure can offer on the other. Information collected by the Ministry of Agriculture is kept confidential and not used in the interest of , Figures suggest these represent approximately 35% of all land titles. Source: MAF COOPER 7 PRIVATE SECTOR MARKETING market transparency. The weekly report published by the Ministry of Trade and Tourism in its business journal2 is meant primarily for the benefit of urban buyers, and no special efforts are made to pass the same information back to farmers and traders. Prices and records collected from smallholder markets for each judet by the National Commission for Statistics are distributed to other government offices -- not to the farmers, their associations, or to chambers of commerce and other related institutions. The import and export of a number of agricultural commodities still is restricted or unduly taxed, which affects domestic competition, prices, terms and balances of trade. Future trade relations constitute an essential policy ingredient in view of the favorable agricultural resource base and successful past performances. Foreign trade systems and mechanisms specific to the private sector of a market economy are meant to ensure economic stability, liberalization of trade, and enhancement of access to domestic and foreign markets. The channels of distribution from pre-revolution 1989 remain the central backbone to the marketing structure that exists today, even though much of the farmland is now in private hands. Independent private business is starting to compete with the state sector but it is of critical importance that a new network of marketing channels be built up. It should be able both to channel supply and demand from the enlarged private sector and to facilitate cross-country rather than judet trading between both state and private enterprises. The marketing channels that are used by the primary producers, whether from the state or private sectors, vary according to the products concerned (Appendix A). The actual routing chosen by individual state farms or private farmers can vary similarly according to state direction or personal preference. Many different permutations are possible. However, the increase in activity in the private sector means that there is a gradual shift toward marketing channels favored by the private sector. There exists a double standard in Romania whereby commercial companies, which effectively are owned by the state, are considered as part of the private sector. They are subsidized by government funds, enjoy property and facilities owned by the state, have preferential access to supplies, ease of bureaucratic procedures and information, and operate their accounts on a historic-cost basis. This gives them an unfair advantage over the truly privately-owned businesses, enabling them to sell at lower prices and unrealistic margins. True privatization is essential if the more efficient companies are to be given the chance to secure increased business, on an equal footing, and adapt to the changing pattern of demand. RECOMMENDATIONS The initial enthusiasm generated after the 1989 revolution is eroding in some ways, and the private sector requires the introduction of strategies, policies, recommendations and 2 Jurnalul Afacerilor. COOPER 8 PRIVATE SECTOR MARKETING assistance to recover its original impetus. The large trusts which still monopolize procurement of farm products and their distribution to agro-processing facilities and consumer markets should give way to a more open marketing system. Their transformation into parastatal agencies or joint stock companies will do little to change their monopolistic character. An expansion in the number of market outlets for food at both the retail and wholesale levels is needed urgently in Romania. This would require the development of wholesale market facilities where farm products can be sold by farmers to retailers. The present system of farmers' markets, to which farmers bring their food directly, is very inefficient in supplying products to urban people. These markets usually are controlled by the state, with state-owned shops occupying prime sites and selling products below real market value. Private retailers are required to pay rents and taxes for stalls to compete alongside the state outlets, and, therefore, sell at higher prices to operate profitably. The creation of these markets also should assist in the emergence of wholesalers and dealers who do not presently exist in the marketing channels. These should set themselves up as intermediaries between buyers and sellers after the establishment of these markets/auctions and begin to identify profitable opportunities. The experience gained from involvement in these markets will greatly assist any emergent wholesalers in further ambitions (like participating as commission agents) and be beneficial to the state-owned distribution centers in the cities, which only are able to trade directly with farmers in their own locality. Romcereal, the regie autonome, is the agency through which all state farm (and former CAP) production is channelled. Due to the lack of inputs, mechanization and finance in the private sector, Romcereal continues to handle private sector crops by way of payment for these services at a below-free-market-equivalent price. Due to its virtual monopoly situation, Romcereal attracts crops from other private sector producers who have little alternative but to sell to it. Market prices fluctuate throughout the season and usually are at their lowest immediately after harvest. Farmers who have accepted loans in the form of services, etc., from Romcereal are required to repay with their crops this low price. Other private sector producers sell in this period, not only because of cashflow problems but due to lack of storage space. The laws of supply and demand operate more severely in these periods of exaggerated oversupply. There is insufficient justification for the immediate withdrawal of Romcereal, as it does perform an important role which could not be readily replaced. A suggestion would be to retain a number of the central (Judet) headquarters, but make available to the private sector its rural operational facilities and stores, possibly including joint ventures initially. Romcereal has started to rent out a number of its surplus stores to the private sector, but present policy dictates that they may not offer more than 15% of total capacity. Private traders have started to emerge, many operating solely on the domestic market (although some have set themselves up as potential importers and participate in import tenders). Prices are negotiated on the market and substantial variations exist between prices realized in different regions. Trading is informal; the main sellers are smallholder farmers who sell to other smallholder farmers, state farms and occasionally to regies autonomes and agro-processors. COOPER 9 PRIVATE SECTOR MARKETING This system is terribly disorganized and without assistance will lack the development required and evolve inefficiently over a prolonged period of time. A formal market is needed to fill the current vacuum. First, true physical markets must be supported to encourage an increase in the number of wholesale traders. In the cases of cereals and livestock the possibility of auction sales should be examined. Developed in strategic areas, the private trading influence will radiate and attract potential buyers and sellers in each vicinity. The introduction of collection centers to feed these markets would aid efficiency and assistance to the private farmers. Development of these collection centers around the targeted markets also should be part of the assistance package. The agro-processing industry never has recovered from the abolition of the CAPs. Fruit and vegetables in particular have suffered, and the current high prices are a reflection of the shortage of production at the farm level. The creation of new markets and collection points in areas of supply will help stimulate production by making potential buyers and market information more accessible. The absence of formal wholesale grain markets precludes animal feed mills from procuring from distant sources, and increases the reliance on and monopoly situation of Romcereal. The establishment of these new markets would assist the grain (and livestock) trade in getting over this problem and encourage the development of a new group of private traders to replace the monopoly portion of Romcereal eventually. Private. wholesale markets, with supporting collection centers where feasible, are an urgent requirement for many commodities and ensure that the market is able to procure and sell supplies at realistic prices. Establishing a sustainable, efficient core for marketing the primary products will have a "knock- on" effect in, and require recognition and similar improvements of, other sectors that may be adversely affecting agricultural development. The introduction of an improved market information system to provide farmers, consumers and other interested parties with up-to-date price and market information for both export and domestic markets is necessary. Since market transparency is a key requisite for effective competition, the publication of data, prices and developments both inter- and intra-judet must play an important role. Considerable effort also should be spent building reliable and comprehensive statistics on agricultural production prices, markets and marketing developments throughout the country. Having created an efficient market information system to provide such data it is imperative that farmers be given regular provision and access to such information. The transport fleet is very old and profitability in the state-owned domestic fleet does not allow reinvestment in new vehicles. There is, therefore, an increasing demand for private transport and many opportunities offer themselves to entrepreneurs from the private sector and to users of the dwindling state transport system. These opportunities are restricted by the lack of suitable vehicles available for purchase with local currency. What is not always apparent is the fact that in the development of the marketing structure, particularly in agriculture, the transporter often has been the forerunner of the dealer. This is the case in Western Europe, where transporters of hay, straw, lime, fruit and vegetables expanded operations into the buying and selling of goods. They became producers, wholesalers, processors, packagers, storers, COOPER 10 PRIVATE SECTOR MARKETING produce merchants, market traders, importers, exporters and agricultural contractors; any number of the various links involved in both the vertical and horizontal chains. Any study for assistance to the agricultural sector should take into account the benefits an efficient private transport policy can bring. The legal framework of a free market economy requires incontestable titles to property. Until such titles are issued, a market in land, and the formal consolidation of fragmented smallholdings, cannot develop. A land market should be established as soon as possible, and the stipulation that land cannot be used as collateral for credit should be lifted. At the same time, it is essential to pass land lease legislation. This will enable urban claimants to rent their land to resident farmers who are anxious to expand their operations and acquire the benefits associated with economies of scale. At present, unless they form farming associations, the younger and more ambitious farmers are held back by restrictions created by the land law in identifying and transferring titles or farming rights. Sound tenancy legislation also will create additional room for credits, as tenancy rights can serve as collateral. At the same time, leasing land at the stage where credit or available capital is in short supply, with interest rates at a high level and expected to increase further, is a better alternative than buying. In the interests of private sector growth, the acceleration of the issue of titles to land requires urgent consideration, as does permission for the use of land, whether owned or leased, as security for loans. Informal land transactions already are beginning to take place in the absence of the required legislation, and further expansion of such deals would not be in the long-term interests of private sector farmers. There is much state-owned land and areas belonging to state farms that are not being used. This land is often of high quality, strategically situated near areas of high demand, and has suitable infrastructural benefits, including buildings, roads, transport facilities, machinery and skilled labor, that are under-utilized. Examples can be found -- around Bucharest alone, hundreds of hectares of greenhouses, sheds equipped for growing specialized high-value crops such as mushrooms, with processing and packaging facilities, stand idle. There are similar cases throughout Romania and there exists, among a number of state farm managers, the willingness to lease, rent or form joint venture agreements with the private sector. This is a waste of good productive capability and opportunity and requires further study to identify, quantify and formulate proposals as to how the private sector can become involved beneficially. Improvement and expansion of the rural banking system are necessary, and access to finance and seasonal credit is essential for items such as machinery, equipment hire and agricultural inputs -- the existing agricultural credit system is not geared to the needs of private farming and eventually-privatized agricultural industries. Until now the CAPs, state farms, and agro-industry have been predetermined clients of the central banking system, and loan decisions have been administrative matters rather than individual credit judgments. It is a system which has to be reviewed both in its structure and its methods. The existing financial institutions involved in agricultural lending have some of the network of branches that are required, but should be sustained and completed in a development plan to a satisfactory system. Development of an agricultural credit system for the producer societies is an important instrument with which COOPER 11 PRIVATE SECTOR MARKETING to achieve working financial markets in the rural areas and to support agricultural and agri- business development. The promotion of rural savings and credit schemes is of major importance for the development of the private sector in a rural economy. Rural savings and credit schemes principally should be established as commercial activities of an independent rural banking system. Allied to the introduction of improved financial institutions, savings and credit facilities should have a program of training for the farmers in their utilization. A degree of ignorance, fear and unwillingness to proceed with their applications rests with the private farmer. This is understandable, as, until 1990, such facilities did not exist for them and they are entering into transactions about which they have little or no knowledge or experience. Commercial private farmers urgently need technical assistance in many areas of their work, such as extension service and a vocational training system. At present, no government- supported extension services are available for individual farmers. The organization of mechanization services hardly exists, due to the bias toward large-scale primary,production, and training in easily-accessible book-keeping and audit systems for primary producers does not exist at all. Many of the private individual producers and members of farming associations were employed formally by the CAPs as mechanics and/or tractor drivers, with experience at repairing and operating farm machinery. A large proportion of the equipment belonging to the Agromecs either is under-utilized or cannot be used due to outstanding repairs (the same situation applies to state farms). If this machinery, the tractors in particular, were controlled by the private sector, it would be utilized more fully. There would be incentive to work longer hours if the machinery were being hired and repairs were treated with greater urgency than that shown by Agromec employees. It therefore would be beneficial if the machinery were open for hire or lease by the private sector, from Agromec (and where appropriate the state farms), to enable private farmers to complete their own land preparation and other tasks requiring mechanical equipment. It also is possible that individuals wish to become private agricultural contractors but cannot afford or locate machinery, equipment or spares. If a suitable hire or leasing agreement could be produced between such individuals and Agromec (or the state farms), many individuals would accept the opportunity. Possibly, payment could be on a delayed basis, via loans or credit if the machinery could be used as collateral, or through the existing Romcereal credit schemes in the initial stages. This would give contractors time to create suitable cashflow. The loan would have to take into account the replacement costs for spares and fuel for a full season. Leasing would give Agromec the opportunity to reduce its agricultural contracting activities, its number of depots, staff and overheads, and would allow it to offer a more efficient central service for repair and distribution of spare parts. This in turn would open opportunities to the private sector, increase alternatives for farmers and provide greater utilization of existing facilities in a manner similar to the proposals outlined for Romcereal. COOPER 12 PRIVATE SECTOR MARKETING Machinery is hired on credit, through the monopoly corporations of Romcereal and Semrom, at low prices fixed by the Ministry of Agriculture. The revenue Agromec. receives is low due to these fixed prices, so it hardly is able to meet running costs or make provision for replacements. The few existing private tractors are used primarily for more lucrative transport services. For the leasing scheme to work, the government must not operate on fixed prices, margins or subsidies, but must allow the market to dictate rates of hire and contract services. It must allow Agromec to charge prices for spare parts and repair services, to enable it to make a profit. As with transport, experience in developing countries has shown that agricultural contractors achieve vertical and horizontal integration, becoming, for example, machinery dealers, spare part suppliers, farmer producers, or transporters, creating agricultural and domestic vehicle maintenance workshops, and marketing other agricultural inputs and services. Companies should seek to restore old export trading links and develop their own export marketing skills. Their roles in the past were relatively passive as regards such markets, but their survival now, particularly those that have been privatized, depends on active stances -- backed by government-to-government-contact, by training in marketing skills and by attention to quality control. The flow of a number of agricultural commodities out of (and into) the country is still restricted or unduly taxed. It is important to know what the effects of such a trade regime are on domestic competition, prices, terms, the balance of trade and its effect on the private sector, etc. The general objectives in the field of foreign trade should be: * Export promotion * Ensuring effective competitive conditions for domestic production * Achievement of increased opportunities for overseas trade on the basis of market economy principles and mechanisms of international trading rules for free market economies To assist the private sector in achieving these objectives, there should be a progressive liberalization of exports through the gradual elimination of any of the goods that are presently prohibited. Steps should be taken so that export credits can be guaranteed and insured, participation of private businesses in international fairs and exhibitions is possible, and foreign exchange earned by private exporters can be retained by those exporters. The government should assist and encourage the development of market institutions in agriculture, and encouragement should be offered in the formation of associations between homogenous trades and organizations for the provision of links between private companies and related educational establishments. Non-governmental associative organizations should be created to allow integration by products (or classes of products) and to protect the private producers' incomes in their relations with the processing industry (farm producers' associations by products or classes of products). Research and consulting services should be introduced for private landowners, who could take advantage of expert advice on access to credits, production orientation, and the use of marketing, farming techniques, improved yields, etc. The organization of Chambers of Farm Trade, Mutual Credit, and other specific institutions for farmers would also prove of benefit. One particular unit that deserves encouragement is the COOPER 13 PRIVATE SECTOR MARKETING Chamber of Commerce. It is financed by the private sector, autonomous, possessed of offices in each judet which are linked with but independent from the Bucharest headquarters office (which is referred to as the National Chamber). Each judet office has a trade registry, as does the National Chamber, which also interacts with foreign chambers of commerce and companies. At present, the farmers' associations appear to have very limited scopes as producer organizations and encouragement should be offered to expand their activities. Because they are forms of collaboration between independent farms, associations provide farmers with access to economies of scale, and can avoid the inefficiency of individual marketing and provision of mechanization and services. The major weakness of the small agricultural producer is in marketing, and this weak position is further compounded by the perishability of most agricultural products, making marketing an important area for joint activity. In the expectation that the trend toward smaller associations and individual private farms will continue, assistance should be directed at the development of supply and marketing services geared to these types of farming operations. The most important of these needs are marketing of produce, provision of credit, input distribution, agro-processing and mechanization services. The groups of farmers often are too small to become viable service entities, so they should seek, through neighboring groups, to pool resources for the purpose of developing and improving their services. They also may find it expedient to amalgamate with other groups/associations or to seek actively to enlarge their membership. In order to develop satisfactorily into profitable, efficient enterprises, assistance will be required to train groups in the basic skills required for marketing, management, administration, etc. There is an obvious requirement for the government to spell out clearly what is meant by a free-market private sector. There are enterprises, which are state-owned or have varying degrees of state financial control, which operate as commercial companies and are considered to be within the private sector. This situation requires immediate clarification, as these enterprises enjoy the benefits of both state and private sectors, operating under double standards which could lead to unfair advantages over bona fide private operators. This tendency for government support to be allocated to state entities through manipulation of the system (and to the disadvantage of the private entrepreneur) should cease. Interference, through prices, subsidies and control over margins, continues despite fixed market prices having been officially abolished. Farm input prices continue to prevail; price premia are available on selective farm outputs with margin controls and price targeting for raw materials and processed output being operated at the processing level. Supply and demand must be allowed to operate and be equated by price in a free economy. An early introduction of market-based pricing for major crops and livestock products is required and such an economy demands a marked reduction in government interference in all aspects of commercial economic life. A privatization program of agricultural trade and related industries should be accelerated and expanded to reduce the state monopolies' control of input supply, services, processing and marketing -- to be adapted to the needs of private farming and to encourage private investors. COOPER 14 PRIVATE SECTOR MARKETING The government should enforce competition, prevent monopolies and remove any existing barriers to the entry of new competition, both foreign and domestic. Emphasis should be given to the break-up of large-scale units in the service sectors to promote competition in the private sector. To this end there should be an early introduction of a competition law to play a positive role in decentralizing the agricultural industry and assuring open entry to the rapidly emerging private sector. The problems facing the country in the transition to a free, liberalized market economy are enormous and cannot be covered in a single, short mission. Further detailed studies will be required, embracing the various sectors that constitute the private marketing spectrum of Romanian agriculture. 1. BACKGROUND 1.01 Prior to the four decades of communism, private trading was similar to that found throughout Europe, with farmers selling their produce through local markets -- to dealer/wholesalers, to small agro-industries, and wherever their free choice dictated. A commodity exchange for cereals was based in Bucharest, and many local markets were conducted by auction. The older generation of the country's inhabitants can recall the situation which existed at that time, when Romania was known as the "bread basket of Europe" because of its preeminence as a regional grain trader. 1.02 Almost all private business was halted after the Second World War, as the communist influence on agriculture increased and introduced state-owned and directed systems to control everyday life. These triggered the virtual disappearance of private farming, private markets, private wholesalers, private agro-industries and a free market economy. Central dictates controlled prices, production by crop, and market outlets of the harvested crops (domestic or export). Marketing basically was the distribution of goods between various state organizations linking production from state-owned farms to state-owned shops or through state-controlled export transactions. Marketing was not a function of individuals, but that of coordinators of central planning, who paid little attention to market information systems unless supplies were affecting demand as dictated by political requirements. The only exceptions to the state- controlled patterns of marketing and distribution were small retail markets in the towns and informal rural farmers' markets, mainly in Transylvania. 1.03 Romania, therefore, now has a marketing structure in the agricultural sector that has resulted from 40 years of central planning rather than from the recent efforts of private enterprise. Channels of distribution for the most part continue to be those imposed by central direction. These channels were intended to service an industry dominated by state organizations and which received government support. COOPER 15 PRIVATE SECTOR MARKETING 1.04 The government now looks to the emerging private agricultural sector to provide a major impetus for economic expansion, employment, innovation and growth during the transition. Three and a half years of liberalization have left clear and irreversible marks in the economy, and more so in the minds of the people. However, the acceleration of transition, a declared objective of government, would imply liberalizing prices of strategic food commodities -- a delicate issue with respect to lower-income urban consumers. The declared will to switch to a market economy is manifested in setting the framework and the infrastructural basis for a competitive economy of decentralized decision makers. However, the current environment is not sufficiently supportive to growth in the private sector and improvements are urgently required. 2. MARKET STRUCTURE AND PRIVATE SECTOR 2.01 There are three principal forms of agricultural organization in Romania: 1. Private family farms which represent small property. 2. Farm associations, which operate as agricultural companies with juridical person status, that have no commercial character, or family associations (with or without juridical person status) which represent medium-sized property in this branch. 3. Commercial companies, originating in the former state or collective farms, which represent large property. 2.02 From this data it will be noted that, although the number of state farms has remained static since 1989, the total area held by these farms has dropped from 3.0 million ha to 1.9 million ha.3 In turn, the average size of state farms has declined from 7,200 ha to 4,700 ha. As of the end of 1992, more than 4,000 agricultural societies, and more than 11,000 associations, had been formed -- and private farms numbered two million. 2.03 It appears that, in the short term, associations and societies are a realistic alternative to farms being held individually. Taking into account that the completion of the land reform will require considerable time, it is expected that the numbers of associations and societies will increase further and that they will remain in existence for some time. However, farmers are reluctant to invest in their associations and as the land reform gains impetus this reluctance may increase, particularly if the restrictions on size of holding and sale and lease of land are lifted. The only form of farm organization almost all the new landowners know is that based on joint production. They would benefit if they could expand into trading, services and marketing. 2.04 One significant pattern already emerging is the formation of family associations. These associations, which tend to include close neighbors as well as family members, average 172 ha, 3 Any discrepancies in the totals are due to rounding up. COOPER 16 PRIVATE SECTOR MARKETING Table A: Romania, Land Ownership Structure at the End of 1992 Agricultural surface % Arable surface % (thousands of ha) (thousands of ha) Total 14,790 100.0 9,357 100.0 Public and private 4,392 29.7 1,891 20.0 state sector of which Commercial 1,883 12.9 1,449 15.0 Companies Mayoralties 2,174 14.7 202 2.0 Private sector 10,398 70.3 7,466 80.0 of which Private 9,797 66.2 6,969 75.0 households and family associations Farming 601 4.1 497 5.0 associations with legal personalities Source: MAF a size that will permit operations of sufficient scale to be cost effective. Due to their "domestic" connections, members have greater confidence investing in these associations and would benefit from expansion into other activities. If this should transpire, in some instances, the producer associations could be expected to evolve into more traditional cooperatives serving the supply and marketing needs of their members. 2.05 The access to machinery services, credit, inputs and markets further encourage individual farmers to join associations. During this period of transition in the agricultural sector, the ability to market their crops is a particularly important issue for private producers. Almost all farmers will have concern about prices and marketing, areas in which the development of marketing associations can be beneficial. All of the new farmer organizations need specific assistance and training to develop and operate successfully in a free market economy. COOPER 17 PRIVATE SECTOR MARKETING Table B: Production Per Crop 1989-92 Economic Indicators.. Unit Quantity 1989 1990 1991 1992* Agricultural output value % 100.0 87.1 87.9 88.7 Grains, total thousand tons 18,379.3 17,173.5 10,306.6 12,288.5 of which wheat & rye thousand tons 7,935.2 7,370.0 5,558.0 3,227.8 barley & two-row barley thousand tons 3,436.3 2,670.6 2,050.6 1,677.6 maize thousand tons 6,761.8 6,809.6 10,487.3 6,828.2 sunflower thousand tons 655.8 556.2 612.0 774.0 soybeans thousand tons 303.9 141.2 178.6 .126.1 sugar beets thousand tons 6,771.1 3,227.7 4,703.6 2,874.9 potatoes - total thousand tons 4,420.3 3,185.6 1,827.8 2,601.6 vegetables - total thousand tons 3,726.6 2,357.5 2,213.6 2,532.8 fruits - total thousand tons 1,580.2 1,453.0 1,164.7 1,167.6 grapes - total thousand tons 914.5 954.0 848.5 905.4 meat (total live weight) thousand tons 2,186.0 2,420.0 2,367.0 2,180.0 of which beef meat thousand tons 439.0 633.0 634.1 438.0 pork meat thousand tons 1,023.0 1,010.0 1,069.1 1,035.0 sheep and goat meat thousand tons 216.0 203.0 173.2 211.0 poultry meat thousand tons 484.0 552.0 474.4 492.0 milk - total thousand hi 45,254.0 44,229.0 46,098.0 47,502.0 of which cow and buffalo milk thousand hi 41,194.0 40,311.0 41,823.0 42,764.0 eggs - total million pieces 7,040.0 8,077.0 7,177.0 6,146.0 * Estimated Source: MAF 2.06 At present,1he associations appear to have very limited scopes as producer organizations, so there is great potential for a broader area of activity. This includes the possibility that several associations may wish to organize joint activities for the procurement of agricultural inputs, marketing of products or provision of services. There also is some indication that their associations are interested eventually in organizing on national and regional scales. When sufficiently developed, consideration could be given to providing these services to non-members, albeit not at such preferential terms as for members. 2.07 The previously-practiced labor specialization meant that all-round experience needed for individual farming was lost. Thus many landowners/workers are unable to farm effectively. COOPER 18 PRIVATE SECTOR MARKETING Table C: Production Per Capita for Main Products Products Unit 1989 1990 1991 1992* grains - total kg 793.9 740.0 832.7 539.9 of which wheat & rye kg 342.7 317.2 289.8 141.8 corn kg 292.1 292.7 452.8 300.0 sunflower kg 28.3 24.0 26.3 34.1 sugar beets kg 292.5 140.9 202.8 126.8 potatoes - total kg 190.9 137.0 80.3 114.3 vegetables - total kg 161.0 101.3 95.5 110.6 grapes - total kg 39.5 41.1 36.6 39.5 meat - total kg 82.5 95.9 87.3 90.7 of which beef kg 18.9 27.2 27.3 20.2 pork kg 44.2 43.5 46.1 47.5 '-eep and goat kg 9.3 8.7 7.5 7.2 poultry kg 20.9 23.8 20.5 15.8 milk - total liters 195.5 190.1 198.8 205.6 of which cow milk liters 177.9 173.7 180.4 185.8 eggs pieces 304 347 310 239 * Estimated Source: MAF Half of these people are over 50 years of age and hesitant to take the risk of individual farming, and a substantial number of them are women with husbands employed outside agriculture. COOPER 19 PRIVATE SECTOR MARKETING Table D: Main Food Products Consumption Per Capita Products Unit 1989 1990 1991 meat and meat products kg 50.2 61.4 54.4 milk and milk products liter 135.9 140.1 163.3 (butter excluded) sugar and sugar products kg 24.7 27.3 26.4 vegetables and vegetable products kg 135.6 110.8 88.5 potatoes kg 71.7 59.4 48.0 eggs pieces 229 246 241 wheat expressed in flour equivalent kg 157.3 158.5 145.3 Source: MAF Production, Supply and Demand 2.08 The transfer of land to smallholders has affected the mix of farm production. There was a marked reduction in grains (apart from maize) between 1989 and 1992 year-end. 2.09 Meat and milk production have remained fairly stable. However, fruit and vegetable production have dropped. The decline in production of sugar beets and potatoes has been dramatic. The effect these production declines have had on production for the main products is detailed in Table C. 2.10 Consumption per capita (in Table D) reflects the changes in the availability of some of the main food products, with potatoes, vegetables and vegetable products showing the greatest reduction. 2.11 Production details for 1991 of maize, wheat, barley, potatoes and cattle counts per judet are included in Appendix C. As with consumption per capita, the change in production has had an even more dramatic effect on the output of processed food. Every item except canned meat, which had a slightly increased output, has shown a decrease. Table E shows the effect these changes have had and how certain items have experienced serious problems, which is reflected in the difficult situation with which the agro-processing industry is now confronted. 2.12 Many smallholders appear to be adopting a safety-first strategy, guaranteeing their own needs by growing a diversified mix of crops for their own consumption before worrying about market production. This strategy has been reinforced by the lack of tax payments on the part OOPER 20 PRIVATE SECTOR MARKETING Table E: Processed Food Output Products Unit 1989 1990 1991 1992 bread thousand tons 2,600.3 2,600.0 2,297.8 2,380.0 pastes thousand tons 83.3 54.1 48.4 30.8 canned vegetables thousand tons 257.4 147.1 108.9 93.2 canned fruits thousand tons 971.1 698.1 44.8 32.8 tomato paste thousand tons 31.1 18.4 17.6 30.2 sugar thousand tons 482.2 322.5 308.8 357.1 sugar products thousand tons 288.8 181.4 119.2 77.5 edible oil thousand tons 248.2 269.4 235.6 216.1 meat - total thousand tons 757.7 995.4 824.1 579.9 of which beef thousand tons 196.1 295.7 219.2 115.7 pork thousand tons 426.0 518.4 479.2 356.4 sheep thousand tons 30.6 20.7 4.3 1.8 poultry thousand tons 102.1 158.4 110.2 94.9 poultry meat thousand tons 267.6 350.8 235.0 160.0 products canned meat thousand tons 37.5 47.7 41.6 45.3 milk thousand hl 5,563.4 5,194.4 3,903.2 3,636.0 milk fresh thousand hl 2,719.5 4,304.2 2,657.0 1,466.9 products powder milk thousand tons 24.5 29.3 18.9 10.2 butter thousand tons 44.9 32.8 22.7 20.3 cheese thousand tons 77.0 91.0 67.4 45.7 Source: MAF COOPER 21 PRIVATE SECTOR MARKETING Table F: Total Forecasted Production of the Main Agricultural Products Produce Unit 1993 1994 1995 1996 cereals - total thousand tons 18493.3 18640 19710 20260 of which wheat and rye thousand tons 6164 6160 6380 6600 barley and thousand tons 2459 2780 2850 2920 two-row barley maize thousand tons 9280 9100 9880 10140 sunflower seed thousand tons 968 960 960 900 soybean thousand tons 175 300 300 300 sugar beets thousand tons 4122 6250 6375 6500 potatoes - total thousand tons 3079 3750 3800 3875 vegetables - total thousand tons 1328 1330 1330 1330 grapes - total thousand tons 1257 1284 1296 1320 meat - total live weight thousand tons 1803 2100 2200 2300 of which I beef thousand tons 398 410 430 450 pork thousand tons 972 1,000 1200 1300 sheepmeat thousand tons 120 120 125 130 poultry meat thousand tons 313 350 400 450 milk - total thousand 47188 49935 52840 56896 of which hectoliters cow milk* thousand 44506 46740 49140 52675 hectoliters eggs - total thousand 6673 7150 7650 8100 pieces * including consumption by calves Source: MAF COOPER 22 PRIVATE SECTOR MARKETING Table G: Production Per Capita of the Main Products Products Unit 1993 1994 1995 1996 cereals - total kg 811.1 817.5 864.5 888.6 of which wheat and rye kg 270.4 270.2 279.8 289.5 maize kg 407.0 309.0 433.3 444.7 sunflower seed kg 42.5 42.1 42.1 42.1 sugar beets kg 180.8 274.1 279.6 285.0 potatoes - total kg 135.0 164.5 166.7 169.9 vegetables - total kg 132.7 133.6 135.4 138.2 fruit - total kg 58.2 58.3 58.3 58.3 grapes - total kg 55.1 56.3 56.8 57.9 meat - total kg 79.0 82.5 96.5 102.1 of which beef kg 17.5 17.9 18.9 19.7 pork kg 42.6 43.9 52.6 57.0 sheep and goat kg 5.3 5.3 5.5 5.7 poultry kg 13.7 15.4 17.5 19.7 milk - total liters 207.0 219.0 231.7 249.5 of which cow milk liters 195.2 205.0 215.5 231.0 eggs pieces 292.7 313.6 334.4 355.3 Source: MAF of private agricultural producers. There is a redistribution of food consumption away from urban consumers to the smallholders, exacerbating the differential in favor of smallholders, who have always eaten better, even in the worst years. The steady drift of labor, particularly the young, to the urban centers (10% of the total population now resides in Bucharest) has been at least temporarily reversed. Appendix D illustrates the population of Romania by judet. COOPER 23 PRIVATE SECTOR MARKETING Table H: Forecasted Production of Processed Foods 1993-96 Product Unit 1993 1994 1995 1996 bread thousand tons 2500 2500 2500 2500 pastes thousand tons 45 50 55 60 canned vegetables thousand tons 100 150 175 200 canned fruit thousand tons 35 40 45 50 tomato sauce thousand tons 30 30 40 50 sugar thousand tons 390 590 610 630 sweets thousand tons 80 90 100 110 vegetable oil thousand tons 370 390 400 400 edible oil thousand tons 260 280 300 300 meat - total thousand tons 681 748 784 816 of which beef thousand tons 149 151 157 162 pork thousand tons 405 461 484 487 poultry thousand tons 113 119 126 147 sheep thousand tons 14 17 17 20 meat preparations thousand tons 180 185 185 190 canned meat thousand tons 130 32 33 35 milk powder thousand tons 20 20.5 21 22 butter thousand tons 25 25 25.5 26 cheese thousand tons 75 75 75 81 milk thousand hl 4000 4100 4200 4300 fresh milk derivatives thousand hl 2500 2600 2700 2800 Source: MAF 2.13 Reduction in production also can be attributed to land formerly cropped by the CAPs but no longer utilized by its new owners and passive farmers. The privatization of agriculture has meant that farmers can respond to profit incentives and to relative prices, however distorted these might be. They are now capable of shifting production into more profitable crops or COOPER 24 PRIVATE.SECTOR MARKETING converting products whose prices are regulated into unregulated final commodities. In commodities like milk and butter, price controls mean milk is largely unavailable in private markets. Farmers convert milk and butter into cheese, which is in plentiful supply. Butter is imported, due to the shortage, and as it does not fall into the same category as Romanian butter, the price is not controlled and is more than four times that of equivalent domestic products. 2.14 The government has prepared production forecasts for the main agricultural products for the years 1993-96, as well as related per capita and processed food estimates (Tables F-H). The production forecasts indicate substantial increases over the four years. Such production increases are unlikely unless macroeconomic conditions improve dramatically, it is possible for producers to obtain much more adequate inputs at prices close to international levels, and they are able to market their production at much more favorable terms of trade than at present. 2.15 The level of demand of the population before 1990 was not determined in the market place; it was a function of state planning. It was calculated that each person required a certain amount of each crop or product. The actual levels of consumption varied according to the size of harvest, which invariably was less than the targeted levels of nutrition. Information and statistics point to the fact that export commitments took priority over domestic requirements in years of poorer-than-expected harvest. Domestic trade policy since the revolution has changed radically. The emphasis now is on feeding the nation rather than on the generation of agricultural exports. The bans on exports of a number of agricultural commodities and export quotas, together with the freeing of imports, has emphasized that the domestic consumer now is at the forefront of government thinking. 3. MARKET CHANNELS 3.01 The marketing channels used by primary producers vary among products (Appendix A). The actual routing chosen also can vary by personal preference. Under the communist regime, agricultural marketing and supply were totally integrated and controlled by the Ministry of Agriculture, and the farmers had little choice by which to indulge their preferences. Inputs were supplied by the Division of Material Inputs through distribution centers in each judet, and seeds were supplied from the seed monopoly Semrom. Output then was marketed by state monopolies (such as Romcereal), often vertically integrated from purchase at farmgate to ownership at retail outlets. Machinery services traditionally were provided by state enterprises, which owned almost all tractors, seeders, combines and harvesters not owned by state farms. 3.02 Agricultural marketing in Romania still is characterized by a price regime and by the infrastructures -- both physical and managerial -- which were built up over more than 40 years of central planning. Agricultural marketing (and processing), as well as the supply of farm inputs and services, still are dominated by the former institutions. Their (and the private sector's) activities are subject to a large number and variety of price and margin controls, restrictions in procurement and distribution, and other policy interventions. State-controlled COOPER 25 PRIVATE SECTOR MARKETING enterprises cannot live without subsidies, though at the same time and under the same circumstances, private initiative has little chance to emerge. 3.03 Smallholders increasingly are aware of opportunities to engage in marketing activities. In addition, there is a growing realization by the state sector that trade with the private sector is necessary. Examples of this are the increasing purchases from farmers by Romcereal and attempts by state slaughterers to entice more trade from the private sector by offering additional financial inducements. What is required is a comprehensive marketing structure that facilitates physical trade among a multiplicity of buyers and sellers, that enables prices to be formed as a function of supply and demand, and that allows the development of market transparency. 3.04 An improved marketing structure is particularly important for the private farming sector, which has expanded appreciably as a result of the dissolution of the CAPs, though it still only is getting very restricted opportunities for the sale of produce. All of these market participants also require a mechanism for price formation and information about marketing opportunities, and a more formal functioning of the market is required so that trade can be conducted efficiently. The creation of a market information system that reports prices, and eventually provides timely statistics, will give extra impetus to the development of marketing by private producers. Retail Marketing 3.05 Many farmers in or close to the urban and village markets are becoming their own retailers, renting stalls where available and selling their produce direct to consumers. In many cases, particularly in the smaller towns, many farmers do not enter the "market area" itself but prefer to set up their stalls around the perimeter wall. These markets have been developed by the municipalities. Often, they lack shelter and other necessary facilities, yet relatively high fees and rents are charged for occupancy. Transport and storage facilities generally are not available. 3.06 There is no wholesale system in Romania. This situation creates a very limiting factor on the efficient collection, storage and transportation of products. It is one reason why a large majority of the tractors available in the country are occupied in distribution duties instead of the preparation and cultivation of land. Without a wholesale system, supplies. to the urban consumer are erratic and unreliable, quality is adversely affected, and prices are subject to volatility and variation between markets and regions. 3.07 In the more sophisticated markets, the private sector competes against the state shops and the two are situated alongside one another in the same premises. Most of these markets include unsheltered areas which are occupied by the private retailers, whereas in every case the state shops are under cover, usually with necessary facilities such as power points and cold storage. The reason for this is that, because the markets are owned by the state and municipality, the state shops are given preferential treatment. Further, they were in situ before the revolution, and private sector retailers find it more economical to pay the lower rates for the uncovered stalls. COOPER 26 PRIVATE SECTOR MARKETING 3.08 The retailing of storable main products, such as potatoes, carrots, leaf vegetables, and fruits, faces tremendous problems in the large urban areas because of oversized coldstores, which by no means fulfill modern sanitary standards and cannot be operated economically. These coldstores should supply the local retailers, but organization, packaging, and presentation of the products are bad on all operational trading levels. Due to the oversized units and high running costs, these coldstores must be kept full to prove economic. As this is not the case, the cooling system is switched off and is thus unreliable for private sector. Charges for cold storage are high, so many private retailers now use them to store high-value, non-perishable, non- agricultural items. 3.09 The state shops sell at fixed, controlled, subsidized prices which in many cases are at levels uneconomic to the private retailer. The state shops display posters advertising the fact that they operate on the 30% margin system, 30% being the differential between the producer and consumer prices operated by the state system. Despite the lower prices, superior facilities and more comfortable surroundings the state shops can offer, private retailers, alongside their premises, prove more popular and compete with them successfully. Consumers prefer the range, quality and service private retailers offer, and are prepared to pay what little extra price may be involved. The private sector also requires assistance and education about its function in the system, and on the importance of concentrating on high-quality products to compete successfully with the state shops (and one another). 3.10 Distribution channels, the connections between various marketplaces, vary by commodity as shown in Appendix A. The marketplaces are many and varied, and, not surprisingly, certain regions produce and market more of particular products than others, as indicated in Appendix C. It is interesting to note that regies autonomes increasingly are utilizing small private markets. Romcereal also operates in small markets and uses them to make purchases and to gather market information for the benefit of its head office. These markets are organized to the extent of having fixed venues and fixed market days. However, trading is conducted on an ad hoc basis between individual buyers and sellers, without the assistance of market agents. A greater degree of organization will be required in the future as the turnover in the markets increases, perhaps with the introduction of auctioneers and orderly marketing. The smallholder markets are already significant in the private trading of livestock and cereals, but for other commodities they are not yet of significance in Romania. 3.11 The import of main products as well as exotic fruits is handled by private traders. The major problem associated with imports is the acquisition of hard currency with which to pay the foreign trading partners. Export of crops is a major task, not only for the private sector but for state-owned production units, whose aim is to acquire hard currency. Whereas cultivation on the whole meets trading standards, the main problems are still with post-harvest technology, transport storage marketing, and market development. Romania's export activities in the past were led by a "quantity, not quality" strategy and were not coordinated. In some instances, large quantities were delivered at the same time to the same destination, which destroyed price levels. Importing countries are aware that Romania is in a position to produce high-quality products, but these importers are able to take advantage of Romania because of the missing COOPER 27 PRIVATE SECTOR MARKETING coordination of its marketing channels and the poor negotiating position of Romanian exporters. Quality control and improvements in packaging materials and methods also are required. 4. COMMODITY OVERVIEW 4.01 Production of cereals is insufficient to meet even domestic demands, due, as with other crops, to the insufficient use and supply of input pesticides, mechanization capacity and fuel. However, prices do not reflect this shortage and farmers therefore are not encouraged to increase production. Marketing channels (Appendix A) are limited for grain and the regie autonome, Romcereal, still markets the majority of cereals (therefore exerting a strong influence over prices). Romcereal's control over the grain market is at MAF's direction and therefore reflects the government's policies. Romcereal buys cereals from the producers and then sells the commodities to the flour mills and feed mills. 4.02 The aim of controls imposed has been to limit adverse price effects on consumers, at the same time distributing supplies in equal amounts to all communities. The emphasis has been on supplying cities, especially Bucharest, where more than 10% of the population lives (Appendix B) since cities are more vulnerable to shortages than rural communities. Romania needs to import cereals4 and the difference between international grain prices and the prices that Romcereal charges its customers is met by a sbbsidy5 from the state. 4.03 The private-trading cereal markets that were suppressed but not completely destroyed during the communist regime are beginning to return. These do not have the storage capacity of the state-owned silos or the facilities to redistribute commodities to processing markets such as flour mills or feed mills. Prices are negotiated between buyers and sellers on the free market, although the existence of a flour price offered by Romcereal influences the trade. 4.04 Romcereal rents storage space to others, but this space is not sufficient to have any appreciable effect on the market. This causes domestic grain traders to concentrate more on speculative trading in those towns where storage facilities are available. The development of a free market for cereals in Romania is inhibited by the lack of adequate wholesale merchant involvement, the restricted and informal nature of private market trading, government restrictions, and the government's influence on the free flow and pricing of goods. 4.05 The production of fruit averages around 1.4 million tons per annum, 60% of which is apples and plums. Production fell by about 20% in 1991 due to climatic factors, shortages of inputs, and insufficient labor, but there is no shortage of fruit for processors, who take up less than 5% of production. Vegetable production experienced a similar decline but now is increasing as declining income increases the demand for lower-cost products. Unlike fruit, processors take in a higher proportion of vegetables, tomatoes being a significant proportion of 4 45% of wheat requirements for 1992 5 Subsidies were due to be phased out beginning in May 1993. COOPER 28 PRIVATE SECTOR MARKETING production (at around 25%). The marketing channels for both fruit and vegetables is illustrated in Appendix A. 4.06 The fruit and vegetable sector largely is free from state controls. However, the sector suffered initially from a lack of supply resulting from the dissolution of the traditional supplies from the CAPs and from a decline in demand caused by the loss of traditional export markets in the former Eastern Bloc. Processors particularly have been affected and now have to compete on the market for supplies where a reduced output has contributed to a rise in prices. The post- revolution period has brought a serious problem in that the marketing system, a legacy of communism, has been unable to adapt to the problems of state agriculture or to the growth of private farming activities. 4.07 The marketing network is almost the same as existed in communist times. The private retail markets always have existed and they represented the one piece of private enterprise tolerated by the communists. Smallholder workers on the CAPs were allowed to cultivate small parcels of land for their own use and for sale on local small markets. Since the demise of the CAPs, buyers of large quantities in particular have found it difficult to collect from the numerous small-scale producers that have replaced them. Also, the new private farmers have no means of appreciating the full extent of demand for their products. The lack of a market information system, transport vehicles, storage facilities, and suitable wholesale markets compounds these problems. 4.08 In Romania the climate in the central upland areas is most suitable for the growth of grass. The main milk producing areas therefore are on the foothills of the Carpathians. Milk pr-luction has fallen since the revolution (and the demise of the CAPs) in a manner similar to ti other products. The dispersal of the herds formerly held by the CAPs to individual farmers has compounded the problem. The average individual herd size in Romania now is less than two. Smallholders have had difficulty in providing basic maintenance feed for their cattle. One consequence was the slaughter of more animals than usual in 1990 and a decline in the national herd size. A fodder crop program must be implemented to prevent continued decline in the cattle population. 4.09 The state sector is the main organizer of milk distribution, and the system is in need of an urgent overhaul. Farmers are expected to deliver milk to state-owned collection centers, where it is weighed by inaccurate measures, and then are given receipts which promise payment at some future date. The centers do not have cooling facilities and the milk is stored in open containers and subject to contamination. Then it is taken in uninsulated tankers to the dairies, which may require journeys of up to twelve hours. The dairies do not have a central chemical cleaning system, and environmental pollution is widespread. 4.10 Private sector milk production not taken into the state network is used for family, friends' and relations' consumption. Sales are restricted to small-scale private deals with neighboring villages in the main dairy areas, and it is unusual to find supplies reaching the retail markets. Collection centers are specific to particular dairies, which enjoy monopoly status in their areas, COOPER 29 PRIVATE SECTOR MARKETING but they presently operate at less than 50% of capacity. The state sets the price at which the dairies can purchase milk and the price at which they can sell it. The selling price is less than the buying price, the difference being met by subsidies. 4.11 Small farmers now can choose whether or not to sell to the dairies, and indications are that the milk is being used to meet more profitable outlets -- the dairy will be supplied with any balance that is left. The state orders the dairies to use a large proportion of milk for fresh milk sales, as cheese and ice cream are not subject to price controls (production of these commodities provides a higher profit). Butter has a price control, but is in short supply. Quantities are imported to meet this shortage and sold at prices more than four times that of local product. The dairy sector illustrates, therefore, the conflict between the state and private sector. 4.12 The Romanian livestock population (Table I) has shrunk substantially since the 1980s. Since 1989, the number of cattle at the beginning of 1993 had fallen by 38%, that of pigs by 32%, sheep and goats by 12% and poultry by 23%. During the same period total meat output dropped by 17% and milk by 36% (and butter and cheese accordingly). One of the major reasons behind these declines in livestock numbers and production has been severe drought in 1992 and large exports of live animals and meat worth over US$100 million per year, in 1991 and 1992. 4.13 The per capita consumption of livestock products peaked in the late 1980s, when it reached about two-thirds of Western European levels. Demand for livestock produce will remain well below peak levels as real incomes are likely to continue their declining trend, and as producer subsidies (particularly for milk) are expected to be greatly reduced in the months ahead, thereby leading to higher relative prices for livestock products. Buying patterns therefore will continue to slip away from livestock products and toward bread and starchy food. As substantial culling during the past two years has probably bottomed out, significant further declines in consumption levels of livestock products, particularly for the urban poor, can be anticipated for 1993. 4.14 The marketing of livestock in Romania is not as badly placed as that for milk and fruit and horticultural crops. Appendix A shows that two networks exist, for the state and private sectors, and there is an inter-relationship between the two. Private wholesale markets always have existed despite the communist regime, but they are small. However, indications are that their importance is growing and turnover is increasing. As with other agricultural products, livestock markets require formalization, improvement, increases in size and number, and assistance offered for further growth. Likewise, the introduction of collection centers and improved transport facilities in strategic areas will be of benefit. State-owned slaughterhouses indicate a desire to penetrate further into the private sector for livestock procurement in a way similar to that employed by Romcereal for cereals. The livestock industry lends itself particularly to marketing through auction systems, which could be beneficial if introduced into Romania. COOPER 30 PRIVATE SECTOR MARKETING Table I: Cattle and Pig Population and Pork and Beef Production, 1986 to 1991 (Beginning of Year) Year 1986:[ 1987 19881 1989 1990 1991 1991' Cattle (thousand) 6,692 6,703 6,559 6,416 6,291 5,381 4,355 % Female 43 42 42 43 39 39 52 Pigs (thousand) 13,651 14,095 14,328 14,351 11,671 12,003 10,954 Breeding sows % 9 8 8 8 9 8 7 Beef Production2 381 415 382 439 633 680 n/a Pork Production2 1,091 1,118 1,049 1,023 1,010 1,159 n/a Source: Statistical Yearbook End 1991 2 1,000 live weight Appendix A-1: Distribution of Wheat, Maize and Feed Barley V V TATr STATE STATE > ROMCEREAL - FLOUR STATE 0 STATE FARMS (STATE) MILLS BAKERIES SHOPS V V V V PRIVATE STATE HOTELS & GRAIN FEED RESTAURANTS CONSUMERS TRADERS MILLS A A A A PRIVATE PRIVATE LOCAL FARMS & WHOLESALE - PRIVATE - PRIVATE -0- PRIVATE ASSOCIATIONS MARKETS MILLS BAKERIES SHOPS A 31 Appendix A-2: Distribution of Wheat, Maize and Feed Barley STATE STATE 0 STATE * WHOLESALE > STATE FARMS PROCESSORS DISTRIBUTOR SHOPS V STATE DISTRIBUTION CONSUMERS CENTERS PRIVATE PRIVATE FARMS & > RETAIL ASSOCIATIONS MARKETS 32 Appendix A-3: Distribution of Dairy Products STATE FARMS C STATE DAIRY 0 COLLECTION - STATE ' STATE CENTERS DAIRIES SHOPS N S U M *E R PRIVATE PRIVATE FARMS & 3RETAIL S ASSOCIATIONS MARKETS 33 Appendix A-4: Distribution of Livestock and Meat STATE STATE STATE > SLAUGHTER - STATE - WHOLESALE * STATE FARMS HOUSE PROCESSORS DISTRIBUTOR SHOPS I CONSUMERS A RETAIL PRIVATE PRIVATE MARKETS FARMS & WHOLESALE > (STATE & ASSOCIATIONS MARKETS PRIVATE) 34 COOPER 35 PRIVATE SECTOR MARKETING Appendix B: Population of Romania by Judet JUDET 1991 1992 Numbers Breakdown Numbers Breakdown Municipal Bucharest 2,341,776 10.1% 2,394,284 10.3% Prahova 878,597 3.8% 880,465 3.8% Iasi 818,009 3.5% 815,142 3.5% DoIj 775,650 3.5% 776,161 3.3% Bacau 754.560 3.3% 735,197 3.2% Constanta 748,468 3.2% 754,356 3.3% Cluj 736,798 3.2% 744,049 3.2% Suceava 712,143 3.1% 701,339 3.0% Timis 693,953 3.0% 772,426 3.1% Arges 683,354 2.9% 680,056 2.9% Brasov 671,246 2.9% 696,441 3.0% Bihor 660,186 2.8% 660,116 2.8% Galati 653,883 2.8% 649,880 2.8% Mures 624,280 2.7% 621,445 2.7% Neamt 601,711 2.6% 583,150 2.5% Dimbovita 569,126 2.5% 566,509 2.4% Maramures 564,578 2.4% 559,393 2.4% Hunedoara 558,304 2.4% 567,754 2.4% Olt 536,002 2.3% 530,425 2.3% Bazau 526,557 2.3% 521,334 2.2% Arad 500,188 2.2% 508,302 2.2% Teleorman 499,538 2.2% 494,039 2.1% Botosani 483,829 2.1% 464,839 2.0% Sibiu 483,556 2.1% 501,546 2.2% Vaslui 479,186 2.1% 463,675 2.0% Vilcea 437,216 1.9% 430,656 1.9% Alba 423,940 1.8% 424,258 1.8% Salaj 418,758 1.8% 268,776 1.2% Braila 404,577 1.7% 402,946 1.7% Vrancea 400,506 1.7% 394,021 1.7% Caras-Severin 393,571 1.7% 403,235 1.7% Gorj 387,898 1.7% 387,444 1.7% Harghita 360,586 1.6% 361,856 1.6% Calarasi 340,240 1.5% 341,631 1.5% Bistrita-Nasaud 332,481 1.4% 329,259 1.4% Mehedinti 328,928 1.4% 326,816 1.4% Giurgiu 314,816 1.4% 314,945 1.4% Ialomita 306,620 1.3% 303,423 1.3% Satu Mare 272,926 1.2% 416,576 1.8% Tulcea 270,411 1.2% 270,886 1.2% Covasna 236,132 1.0% 237,669 1.0% Total 23,185,084 100% 23,206,720 100% COOPER 36 PRIVATE SECTOR MARKETING Appendix C-1: Romania --Production of Wheat in 1991 by Judet (by order of magnitude) AMOUNTS JUDET (Metric Tons) DISTRIBUTION DoIj 388,363 7.1% Teleorman 374,988 6.9% Timis 366,729 6.7% Olt 320,941 5.9% Constanta 312,173 5.7% Calarasi 261,737 4.8% Arad 235,084 4.3% Braila 219,993 4.0% lalomita 210,956 3.9% Tulcea 196,137 3.6% Galati 194,114 3.5% Bihor 177,891 3.3% Buzau 163,468 3.0% Botosani 156,313 2.9% Vaslui 150,756 2.8% Satu Mare 135,048 2.5% Mures 134,137 2.5% lasi 125,433 2.3% Mehedinti 117,935 2.2% Arges 102,184 1.9% Giurgiu 101,971 1.9% Prahova 91,414 1.7% Cluj 86,082 1.6% Vrancea 77,187 1.4% Alba 72,942 1.3% Bacau 69,306 1.3% Dimbovita 69,050 1.3% Neamt 67,843 1.2% Caras-Severin 49,724 0.9% Suceava 49,198 0.9% Brasov 47,728 0.9% Covasna 46,252 0.8% Salaj 43,678 0.8% Municipal Bucharest 37,556 0.7% Bistrita-Nasaud 36,419 0.7% Hunedoara 35,724 0.7% Harghita 35,488 0.6% Sibiu 34,367 0.6% Vilcea 30,338 0.6% Gorj 24,957 0.5% Maramures 21,552 0.4% TOTAL 5,473,156 100.0% COOPER 37 PRIVATE SECTOR MARKETING Appendix C-2: Romania -- Production of Barley in 1991 by Judet (by order of magnitude) AMOUNT JUDET (Metric Tons) DISTRIBUTION Constanta 232,018 8.7% Timis 214,671 8.1% Calarasi 203,339 7.6% Teleorman 197,147 7.4% Doij 181,760 6.8% Braila 173,536 6.5% Olt 171,134 6.4% lalomita 159,364 6.0% Tulcea 120,834 4.5% Arad 90,259 3.4% Giurgiu 72,195 2.7% Buzau 65,190 2.4% Mures 62,621 2.4% Bihor 58,133 2.2% Mehedinti 57,296 2.2% Satu Mare 52,918 2.0% Prahova 50,291 1.9% Galati 45,108 1.7% Municipal Bucharest 43,448 1.6% lasi 42,434 1.6% Botosani 40,413 1.5% Dimbovita 38,632 1.5% Vaslui 37,186 1.4% Arges 35,673 1.3% Vrancea 26,861 1.0% Alba 26,210 1.0% Neamt 20,012 0.8% Caras-Severin 19,623 0.7% Bacau 17,552 0.7% Brasov 17,346 0.7% Sibiu 16,424 0.6% Cluj 11,203 0.4% Gorj 10,605 0.4% Salaj 10,428 0.4% Bistrita-Nasaud 10,170 0.4% Hunedoara 9,029 0.3% Vilcea 7,720 0.3% Harghita 6,514 0.2% Maramures 3,022 0.1% Covasna 1,771 0.1% Suceava 1,350 0.1% TOTAL 2,661,440 100.0% COOPER 38 PRIVATE SECTOR MARKETING Appendix C-3: ROMANIA -- Production of Maize in 1991 by Judet (by order of magnitude) AMOUNTS JUDET (Metric Tons) DISTRIBUTION DoIj 756,390 7.2% Olt 648,790 6.2% Teleorman 607,995 5.8% Timis 496,929 4.7% lalomita 495,513 4.7% Calarasi 456,635 4.4% Arad 424,058 4.0% Galati 421,634 4.0% Braila 377,584 3.6% Iasi 364,625 3.5% Buzau 352,752 3.4% Constanta 352,083 3.4% Bihor 322,272 3.1% Botosani 298,750 2.8% Giurgiu 294,483 2.8% Prahova 288,835 2.8% Mehedinti 267,297 2.5% Vaslui 253,076 2.4% Dimbovita 244,399 2.3% Tulcea 226,968 2.2% Bacau 224,364 2.1% Vrancea 197,431 1.9% Mures 195,265 1.9% Gorj 191,487 1.8% Satu Mare 179,588 1.7% Arges 177,572 1.7% Vilcea 170,936 1.6% Municipal Bucharest 170,676 1.6% Cluj 159,182 1.5% Neamt 132,573 1.3% Caras-Severin 128,316 1.2% Alba 119,318 1.1% Bistrita-Nasaud 90,707 0.9% Suceava 89,574 0.9% Salaj 75,355 0.7% Hunedoara 68,700 0.7% Sibiu 68,402 0.7% Maramures 65,585 0.6% Brasov 19,095 0.2% Harghita 13,123 0.1% Covasna 9,021 0.1% TOTAL 10,497,338 100.0% COOPER 39 PRIVATE SECTOR MARKETING Appendix C-4: Romania -- Production of Potatoes in 1991 by Judet (by order of magnitude) AMOUNTS JUDET (Metric Tons) DISTRIBUTION Suceava 202,140 10.8% Covasna 135,904 7.3% Brasov 109,329 5.8% Maramures 108,461 5.8% Botosani 107,424 5.7% Harghita 93,893 5.0% Cluj 83,737 4.5% Neamt 81,102 4-.3% Mures 67,468 3.6% lasi 66,040 3.5% Timis 62,690 3.3% Satu Mare 60,674 3.2% Bihor 59,070 3.2% Alba 57,092 3.0% Hunedoara 52,533 2.8% Arad 49,721 2.7% Bistrita-Nasaud 46,648 2.5% Salaj 45,032 2.4% Sibiu 41,101 2.2% Bacau 35,758 1.9% Dimbovita 31,035 1.7% Constanta 30,255 1.6% Prahova 21,861 1.2% Arges 21,771 1.2% Vilcea 18,778 1.0% Gorj 17,995 1.0% Dolj 17,902 1.0% Caras-Severin 16,658 0.9% Tulcea 16,226 0.9% Galati 1 5,040 0.8% Calarasi 13,462 0.7% Mehedinti 11,027 0.6% Olt 10,995 0.6% Vrancea 10,281 0.5% Giurgiu 10,176 0.5% Teleorman 9,513 0.5% Braila 8,987 0.5% lalomita 7,485 0.4% Vaslui 6,762 0.4% Municipal Bucharest 6,065 0.3% Buzau 4,676 0.2% TOTAL 1,872,767 100.0% COOPER 40 PRIVATE SECTOR MARKETING Appendix C-5: Romania -- Cattle Count in 1991 by Judet (by order of magnitude) NUMBERS JUDET (Thousand Head) DISTRIBUTION Suceava 213.7 4.9% Bihor 182.1 4.2% Cluj 159.7 3.7% lasi 148.0 3.4% Timis 147.1 3.4% Arges 146.4 3.4% Mures 146.3 3.4% DoIj 140.6 3.2% Satu Mare 125.7 2.9% Brasov 123.2 2.8% Bacau 120.6 2.8% Arad 118.2 2.7% Botosani 117.6 2.7% Hunedoara 116.5 2.7% Neamt 115.6 2.7% Harghita 115.1 2.7% Vaslui 110.1 2.5% Maramures 109.1 2.5% Galati 108.4 2.5% Alba 102.6 2.4% Vilcea 99.1 2.3% Buzau 98.7 2.3% Teleorman 96.1 2.2% Olt 92.9 2.1% Constanta 91.7 2.1% Prahova 91.6 2.1% Calarasi 88.5 2.0% Dimbovita 88.0 2.0% Bistrita-Nasaud 87.8 2.0% Braila 87.5 2.0% Salaj 83.1 1.9% lalomita 78.8 1.8% Caras-Severin 76.9 1.8% Gorj 76.3 1.8% Tulcea 75.6 1.7% Covasna 74.2 1.7% Vrancea 61.7 1.4% Sibiu 57.8 1.3% Giurgiu 55.0 1.3% Mehedinti 53.2 1.2% Municipal Bucharest 46.6 1.1% TOTAL 4,327.4 100.0% COOPER 41 PRIVATE SECTOR MARKETING Appendix D: The Structure of Agricultural Organization Number Total Area Percent Average I Share Size (thousand (hectares) hectares) Pro-reform 1989 State farms 411 2976 20 7241 Co-operatives 4260 8 685 58 2039 Private farms n/a 3 189 21 TOTAL , 14850 100 Year-end 1990 n/a State farm n/a 2 804 19 Co-operatives n/a 6 526 44 Private farms n/a 5 420 37 TOTAL n/a 14750 100 Year-end 1991 State farms 411 1 919 13 4669 Agricultural Societies 2 250 1 095 7 487 Agricultural Associations 8 338 1 226 8 147 Individual Farms & Agricultural Groups in n/a 7 997 54 Formation Individual Farms 2,000,000 Agricultural Groups 2411 3317 Communal 2561 17 TOTAL 14798 100 April 1992 State Farms 411 1 919 13 4669 Agricultural Societies 3270 1 482 10 453 Agricultural Associations 11 057 1 574 11 142 Individual Farms and Agricultural Groups in n/a 7 262 49 Formation Individual Farms 2,000,000 Agricultural Groups n/a Communal 2561 17 TOTAL (1) 14798 100 Year End 1992 State Farms 411 1 919 13 4669 Agricultural Societies 4050 1 915.9 13 473 Agricultural Associations 11 499 1 791.7 12 156 Individual Farms and Agriculture Groups in n/a 6 610 45 Formation Individual Farms 2,000,000 Agricultural Groups 1 515 Communal _ _2561 17 TOTAL (1) 14798 100 1. Assumed to be the same as at end of 1991. Source: MAF ROMANIA A STRATEGY FOR THE TRANSITION IN AGRICULTURE WORKING PAPER AGRICULTURAL MARKETING FRANZ DONHAUSER APRIL 1993 JOINT ROMANIAN-INTERNATIONAL AGRICULTURAL STRATEGY TEAM THE WORLD BANK, IN COOPERATION WITH EC-PHARE, EBRD, USAID, AND THE FRENCH AND GERMAN GOVERNMENTS 43 ROMANIA AGRICULTURAL MARKETING FRANZ DONHAUSER TABLE OF CONTENTS Page Recommendations 47 1. Introduction 48 2. Agricultural Markets in the Socialist Era 48 3. The Role of Markets in an Economy with Private Ownership of 50 Resources and Decentralized Decision-making 4. The Current Situation on Agricultural Markets 50 5. Policy Recommendations for Agricultural Marketing 56 References 61 Appendices A. The Role of Romcereal in the Grain Market in Romania 62 B. Romcereal Strategy 66 ROMANIA AGRICULTURAL MARKETING Franz Donhauser Berching, Germany RECOMMENDATIONS Three and a half years after the end of socialist rule in Romania, state enterprises continue to dominate agricultural input and product markets. A variety of government interventions distort prices and costs. In order to establish a functioning market economy, the generally highly-inefficient state trading and processing enterprises should be privatized, private sector development should be encouraged, and the government should restrict its role to the provision of the legislative and institutional framework for competition. Several policy measures and public investment decisions have been made in this direction. The complete liberalization of prices and trade margins scheduled for May 1, 1993, is another fundamental and indispensable step in this respect, which, in the interest of vulnerable urban consumer groups, should be accompanied by better-targeted food subsidies to those who actually need them. For the immediate future the following policies are recommended: 1. Continue efforts to establish a framework for competition. The government should continue to enact legislation necessary for a market economy. Standards, grades and measurements should be harmonized with international ones, market transparency should be enhanced by collecting and disseminating relevant information, organizing markets and trade fairs, and promoting institutions for consumer information. 2. Invest in human capital formation. General education and vocational training should include lessons on the principles of a market economy and on basic techniques of business administration. Agricultural extension must make farmers aware of new options on input and product markets. Management training is of high priority. 3. Encourage private initiative. Private initiative should be encouraged with various measures and the government should not interfere in marketing. 4. Increase efficiency in state enterprises and remove them from privileged positions. If subsidies for farm inputs and produce are paid, they also should be made available through private enterprises. State enterprises should calculate their charges realistically and streamline their activities. It is recommended that state enterprises as a whole, or their facilities, be privatized. Also during transition, they should be managed like private concerns and deal with private sector suppliers and clients uniformly. DONHAUSER 48 AGRICULTURALMARKETING 1. INTRODUCTION .1.01 Romania's agriculture presently is far from meeting production targets adequate to fulfill the national agricultural policy objectives. The changes in the political system following the end of the socialist era in December 1989, generally referred to as "The Revolution," caused disruptions in the utilization of the country's resources for agricultural production and exacerbated the food supply problems already experienced during the latter socialist years. In 1992, domestic agricultural output for major products was in the range of 40-70% of the 1989 level. A drought in the major production zones and the partial breakdown of the irrigation infrastructure contributed to a record low cereal production. Compared to 1989, the value of agricultural exports decreased by 31 % while imports nearly doubled -- thus contributing to the foreign trade deficit. 1.02 Food supply shortages and concomitant soaring food prices are less of a problem for consumers in rural areas, where easy access to small plots of land for subsistence production and/or close relations to agricultural producers generally exist. They are, however, a serious problem for average-income urban dwellers, who spend more than 50% of their incomes feeding their families. 1.03 In such a situation, food price increases are socially explosive, and it is readily comprehensible why the Romanian government keeps a keen eye on agricultural production and markets and on urban food prices. Increasing domestic agricultural production is an uncontested policy objective. Conflicting ideas prevail in government and administration on the policy measures to adopt in order to reach this objective. Command economy concepts from the past are on one side, and market economy ideas are on the other. 1.04 It was evident that all Romanian officials contacted understand that the World Bank favors a market economy approach to solve the present problems. The mission's explicit objective was to support the government in formulating policies to foster the transition to a market economy in the agricultural sector. It seems, though, that the majority of responsible people see no alternative to building a market economy, even if the concepts of how market mechanisms function are not well understood. _2, AGRICULTURAL MARKETS IN THE SOCIALIST ERA 2.01 During the socialist era, the whole chain of activities spanning from agricultural production to the retail sales point of finished food products was in state hands. Some 365 state farms with an average 4,460 ha, and 3,784 cooperative farms (CAP) averaging about 2,100 ha, controlled close to 90% of the most productive lands and all of .the irrigated areas. The remainder was cultivated by roughly 1 million private farm households operating plots of the DONHAUSER, 49 AGRICULTURAL MARKETING maximum-tolerated 10 ha, mainly in marginal grazing land. This small private sector contributed 36% of crop and 69% of livestock output in 1989. 2.02 With the exception of a part of the output from the private farms and the output processed and marketed through facilities run by state. farms and CAPs, state trading and processing companies procured agricultural raw materials or live animals at the farm gate for further processing and/or distribution. ' Processing was carried out in large-scale, state-owned factories. State-owned trading companies (Interprindere de Comercialisare cu Ridicata), of which there existed one per judet to organize foodstuff distribution, got their supplies in bulk from the producers or processors to break it down for retailing in a network of shops (see diagram below). state importgr - farms e c vertically integrated process. t - o and trading chain a n directl toubnc c nr wasolr tedfo te eal19s,baueteifxbesae CAPs ve 0 -state i s trading s1 - u state t processing s e Private - iprocurement h r , farms o s s 2.03 Apart from this official food chain, the marketing of farm products by private farmers directly to urban consumers was tolerated from the early 1960s, because the inflexible state trading system proved increasingly incapable of supplying well-off urban consumers with "high- value" food specialties, in particular with fresh products like fruit, out-of-season vegetables, dairy products and flowers. These commodities were sold on urban farmers'. markets from the producers directly to the consumers. I 2.04 The spatial pattern of the agricultural processing industry was determined heavily by political criteria, rather than by sound principles of spatial economics. Each of the judets was supposed to attain a certain level of autarky and to have all the major types of processing facilities within its confines. 2.05 Since a central economic plan governed the utilization of resources and the composition of the production mix in the food chain as well as in the rest of the economy, prices had no function in the allocation of resources. Prices were set according to what the administration thought to be reasonable, and cost of production did not necessarily play a decisive role. Food prices were controlled and in some cases heavily subsidized. With increasing shortages from the mid-1980s, food considered strategic was rationed and, in the case of fresh liquid milk, only available for urban dwellers who lined up for hours in the early morning. DONHAUSER 50 AGRICULTURAL MARKETING 3. THE ROLE OF MARKETS IN AN ECONOMY WITH PRIVATE OWNERSHIP OF RESOURCES AND DECENTRALIZED DECISION-MAKING 3.01 Markets are, as the name suggests, a central element in a market economy with private ownership of productive resources. Markets are not necessarily physical locations where supply and demand meet to determine prices for commodities and services. Agricultural marketing can be defined as the performance of all business activities by which agricultural raw materials and/or processed products are made available for ultimate use. These activities comprise technical functions like assembling, sorting, cleaning, processing, storage and transport, and also economic and commercial functions such as buying, selling, pricing, financing and sales promotion. Prices for a defined product at a given place and time, which are formed on markets, sanction the economic activities of the past by determining the level of profit or loss. At the same time, they constitute an important signal for the type and extent of future economic activities and, thus, for the allocation of scarce resources. 3.02 In a dynamic perspective the marketing process sets signals for future demand and supply. Of equal importance are the effects of human capital formation and of capital accumulation, which are prerequisites for innovation, investment and technical and economic efficiency in marketing. 3.03 There is ample evidence all over the world that state interference in agricultural marketing generally does not improve marketing efficiency. Marketing functions are best performed by private enterprises. State enterprises are not flexible enough to react quickly. to price differentials indicating emerging supply and demand fluctuations. However, the government has an important role to play in setting the framework for competition. 3.04 Marketing efficiency is synonymous to the minimization of the margin between the producer and the consumer price. Technical efficiency means that in a given economic setting a technology is applied which minimizes the cost for performing the marketing functions. Economic efficiency means that a level of competition prevails which in the medium and long run removes unduly high profits and only permits profits at a level which is comparable to other investment opportunities in the economy. 4. THE CURRENT SITUATION - AGRICULTURAL MARKETS IN ROMANIA 4.01 The Romanian economy is in a state of transition from command to market economy. More than 40 years of central planning built a legacy of physical infrastructures and managerial attitudes, although three and a half years of liberalization have left clear and irreversible marks in the economy and (even more so) in the minds of the people. Private initiative, in the past DONHAUSER 51 AGRICULTURAL MARKETING only tolerated in direct foodstuff sales from the producer to the consumer, is gaining ground, though still impeded by state interference and policy interventions. 4.02 Policy interventions in March 1993 into markets for agricultural and food products and agricultural inputs and services continued to be pervasive. Interventions related to wheat, barley, rye, oats, rice and grain legumes included: * Controlled panterritorial and panseasonal producer price at the farm gate * Romcereal margin for transaction to be approved by MAF * Romcereal supply to state flour/feed/oil mills only * Import monopoly with Romcereal * Ban on exports Interventions related to wheat flour and standard wheat bread included: * Controlled price of standard-type wheat bread * Production quota for subsidized bread * Subsidy to state bakeries only * Flour import monopoly with Romcereal * Ban on flour exports Interventions related to oilseeds and vegetable oil included: * Controlled panterritorial and panseasonal producer price at the farm gate for sunflower seeds and soya * Controlled margin for Romcereal transaction * Rationed domestic supply to one liter per head per month at controlled prices through state shops * Export ban Interventions related to pigmeats, beef, poultry and mutton included: * Premiums to producers for animals delivered to state slaughterhouses (all other interventions, viz., fixed producer price, controlled retail margin, consumer subsidy, abolished in September 1992) * Ban on livestock exports * Licensed meat exports Interventions related to milk included: * Controlled producer price for milk at collection point * Controlled consumer prices for fresh milk (1.8% fat), butter and milk powder * Production quota and subsidies for dairies on price controlled products DONHAUSER 52 AGRICULTURAL MARKETING Interventions related to fruit and vegetables included: * Maximum mark-up of 45% on farm gate price for fruit and vegetables traded through state channels Interventions related to concentrate feed included: * Controlled prices for grain and by-products from internal sources * Controlled margin and ex-feed mill prices * Mark-up for final distribution limited to 30% * Subsidization of imported components Interventions related to fertilizers and pesticides included: * Subsidized ex-factory prices * Implicit subsidization of distribution through state channels Interventions related to seed included: * Subsidy on seed production * Implicit subsidization of distribution Interventions related to mechanization included: * Subsidized fuel cost * Implicit subsidy by underrating real cost of service Finally, interventions related to credit included an interest rate subsidy for credits provided by Banca Agricola. 4.03 High food prices in urban areas and in the capital city in particular are a source of social unrest and a threat to political stability. This is one reason why the government employs measures to keep food prices low and provides incentives for increased agricultural production. The government tries to resolve the inherent conflict using subsidies on agricultural inputs on one side and on agricultural raw materials and food on the other. In 1992, total subsidies in agriculture totalled more than 294 billion lei, about 23.5% of the agricultural GDP and 5% of the total GDP. However, agricultural product prices are considerably below international parity levels, so it is difficult to assess the net price effect of the policy measures for the producers. Subsidized farm inputs like fertilizer and animal feed are not equally available for the producers in general. It is, rather, the state farms which are given preferential treatment with supplies. 4.04 Food subsidies amounted to over 157 billion lei in 1992, which represented 9.6% of the total government budget. The money was spent on commodities which are considered strategic, DONHAUSER 53 AGRICULTURAL MARKETING namely bread, sugar, meat, edible oil, fresh milk, butter and powdered milk. In order to reduce the huge burden on the budget, the food subsidies were reduced in terms of relative price share, and, for some items, removed completely during the course of past year. By May 1, 1993, the government planned to abolish the subsidization of the remaining commodities and prices are supposed to be determined by the free market. 4.05 Although many Romanian and foreign observers consider "revolution" too strong a term for the events of December 1989, fundamental changes have since occurred at the farm level whereas the institutional changes in agricultural marketing were less important. By the end of 1992, all the former agricultural production cooperatives were dissolved, and the land controlled by them was in the hands of private households and family associations and, to a minor extent, of farming associations with legal personalities. Some of the state farms lost land to former owners, but, in general, they kept their resources and organizations and now are functioning as commercial societies with state capital. More than two-thirds of the agricultural land is now with the private sector and the major part of it in family associations, where the members hold titles to a certain number of hectares within a large plot which is communally cultivated. But the decision on how to use the crop yield is left to the individual families. This new production structure has a strong bearing on primary marketing. A significant proportion of farm produce is now offered in small quantities; bulking is an important first step in commercialization. Likewise, the decision on time and quantity of sale is left to a multitude of individuals and, in order to get hold of the farmers' produce, the state marketing companies need to provide incentives rather than issue public ordinances. 4.06 The supply of farm inputs like seeds, fertilizers, agro-chemicals and seasonal credit is heavily concentrated with Romcereal, the state procurement and trading agency for cereals and grain legumes, which finances the supply of inputs and services and distributes inputs in order to contract the sale of a part of the expected yield. Romcereal has the juridical status of a "regie autonome". As such, it is supposed to act as a self-sustained economic unit. However, it receives budgetary support if it can not make ends meet. Losses as incurred during the 1992 season are bridged with credits and are supposed to be compensated by profits expected in the ongoing 1993 season. Romcereal assumed the role of channelling farm inputs on credit to the producers only after the revolution, when it faced difficulties in procuring produce since the production units were now free to bypass the state procurement agency and to sell to any private person, trader or processing factory offering the most favorable conditions. In the 1992 farming season, the seasonal agricultural credit administered by Romcereal represented around 80% of the total seasonal agricultural credit made available to the Romanian farm sector. Romcereal physically moved most of the seeds and pesticides, and a significant part of the fertilizer consumed, to the farm gate. Since the repayment was to be made in kind at official producer prices at harvest time, Romcereal contracted around 22% of the domestic grain and grain legume production and purchased another 4% (Tables A and B). Five billion lei of the requisite financial means for these activities was provided by the Banca Agricola at the heavily-subsidized interest rate of 15% and Romcereal claimed nearly all of the agricultural credit passed through this credit institute. The rest of the required funds, 110 billion lei, had to be procured at DONHAUSER 54 AGRICULTURAL MARKETING commercial terms with interest rates of roughly 70%. 4.07 State farms in general, and farmers' associations and private farmers occasionally, have their own machinery and equipment for their operations. For the majority of agricultural producers, mechanical services are provided by Agromec stations which have taken over the equipment from the former cooperatives. As a part of the credit package, Romcereal and other so-called "integrators," such as the state processing factories or the national seed producer, Semrom, finance the mechanical services and receive in-kind repayment at harvest time. There are very few private suppliers of mechanical services. This may be due partly to the non- availability of loans for private individuals to invest in farm machinery, but mainly to the unrealistically low Agromec charges, which leave private entrepreneurs no margin for profit if they are to compete in price with the Agromec stations. However, the fact that Agromec charges are too low to accumulate funds for reinvestment entails that the process of decapitalization in agriculture is going on and postpones the reinvestment problem to the future. 4.08 In primary farm produce marketing, four channels play a role in Romania: 1. Direct sales from producers to final consumers at urban retail markets and at the farm gate. The relevance of this market outlet has increased significantly during past years, since it gives producers a chance to benefit from high free-market food prices. Consumers prefer to hold storable foodstuffs instead of cash in times of high inflation. 2. Sales on rural markets. Rural trading places have emerged during the past few years, under the supervision of local authorities. Since no figures about number of markets, turnover or prices were available at the aggregate level, it is difficult to assess the relevance of this institution. However, it is an efficient means of primary produce bulking, and promises to have some potential for facilitating the flow of commodities to and from rural areas. 3. State procurement agencies. Romcereal, in the case of cereals and grain legumes, and specialized state traders for fruits and vegetables, continue to play dominant roles in the markets in which they operate. 4. Processing units like flour, oil and feed mills get a part of their supply directly from producers, while the rest is procured through Romcereal. Slaughterhouses procure live animals from large-scale livestock production units on the basis of contracts, or buy from private farmers. Contradictory information was obtained as to whether the state farms and the state-owned processing companies are free to determine to whom to sell their products. Private traders claimed that they normally could not get products from state suppliers, whereas managers in the public sector claimed that they could sell their products to anybody and, thus, make use of the most favorable opportunity. A privileged role is assigned to the state marketing and processing DONHAUSER 55. AGRICULTURAL MARKETING enterprises by channeling input and producer price subsidies through them (but not through private enterprises). Romcereal uses subsidized farm inputs to contract a share of the crop yield. State slaughterhouses find it easy to offer livestock producers a comparatively attractive price, since at the current official price of 400 lei per kilogram of live pig, they get 175 lei reimbursed from the government budget as a so-called "premium," which is intended to encourage producers to supply the market. The subsidy for baking the standard wheat bread is paid to state bakeries only. Most of the heavily-subsidized concentrate feed is supplied to state farms. 4.09 The agricultural processing industry almost exclusively is in the hands of the state as far as large-scale units are concerned. In a detailed study of 217 plants in the meat, dairy, fruit and vegetable, edible oil, and animal feed sectors a team of consultants drew the following picture: the technical status is generally poor; buildings are decaying; hygiene is poor; spoilage rates are high; product quality is not up to modern standards; key decisions are made by the state, which ordains supplies and output, input and output prices, and distribution. Profits sometimes are overstated and insufficient to allow for capital renewal; only 34 companies are likely to be of interest to private investors, whereas the rest will require varying degrees of support in order to survive in a market economy. 4.10 In the recent past, private joint-venture bakeries, a dairy, a brewery and a meat processing plant have started to operate. Small-capacity private flour mills offer services all over the country now, and there is a tradition in artisan production of various types of cheese, butter and fresh dairy products for home consumption and for direct sales to consumers. 4.11 In the wholesale distribution of finished food commodities from internal sources, the state-owned companies also continue to play dominant roles. They have contractual arrangements with processors as well as the necessary storage and transport facilities. Since the whole series of services from the producer to the consumer is supposed to be covered by the official maximum trade margin of 30% for most of the products, it is not surprising to find private wholesalers dealing only with "high value" foodstuffs, e.g., processed meat products, and with import trade. The present policy interventions in the domestic food markets keep private initiative out, prevent investment and keep the internal food trade chain from becoming more efficient. Hence, the liberalization of prices and the removal of regulations of trade margins are necessary and indispensable steps toward a genuine market economy. 4.12 Privatization has made considerable progress in retail trade. Since entry barriers are low, traders start off with petty trade, mostly of imported foodstuffs or other consumer articles from a small table or just a large bag on urban sidewalks. Of 1,672 retail shops belonging to food processing factories, around 20% are leased out to the staff, who run them independently. Also, an important percentage of the food shops in Bucharest, which used to be under the Ministry of Commerce, are now under private management. 4.13 A large number of enterprises is said to operate in food import trade which is not subject to restricted trade margins. In February 1993 the National Trade Register Office had in its files DONHAUSER 56 AGRICULTURAL MARKETING close to 193,000 state and private companies all over the country, declaring import and export as, one of their fields of activity. Even if only a small part deals with food imports at all, or at an important scale, the figure supports the view held by insiders that there is strong competition in the food import trade and the former state monopoly companies are confronted by an active private sector. 4.14 Since the intensity of competition primarily is determined by the number of independent participants in the market, the situation in this respect must be analyzed separately for the various markets and levels of the marketing chain. The farm input markets are dominated by Romcereal, which is given privileged access to credit. Private competitors have no chance to enter the market, since fertilizer and other heavily subsidized farm inputs are channelled only through the integrators. A similar situation prevails in the agro-industry sector, where private enterprises would have to compete with state-controlled enterprises underrating their actual cost, and thus, "dumping" their services on the market. Only in market niches without controlled prices has private initiative started to emerge. At the primary sales level, the state traders and processors now face limited competition from private households procuring their own stock, from an emerging private trade, and from the producers' preference in a time of high inflation to hold tangible assets instead of cash. Strong competition between private and state enterprises is said to prevail in import trade. And equally high is competition at the retail level, which is indicated by a reasonable number of retail sales outlets and by only slight price differences, generally, for comparable commodities in Bucharest. 5. POLICY. RECOMMENDATIONS FOR AGRICULTURAL MARKETING 5.01 Currently, state enterprises play dominant roles in virtually all the agricultural input and product markets. For the future, it is recommended that the state withdraw gradually from active participation and confine its role to setting the framework for effective competition. Limited and well-defined interventions conforming to market principles should be made only when fundamental social objectives are endangered. Experience all over the world-indicates that the basic marketing functions generally are carried out effectively by the private sector, whereas inflexibility, bureaucratic restrictions and lack of incentives for high performance make state enterprises poor players in market economies. 5.02 It will take a few years for the private sector to build up adequate capacities and skills to assume the functions now carried out by state-owned commercial enterprises. In this transitional period, it is important that the private sector be given a fair chance to emerge and to take over state-owned enterprises and facilities. A strategy to increase efficiency in agricultural marketing should not put much effort on trying to revive the public sector. Instead, obstacles to private initiative should be removed. The current 'social unrest inherent in laying off thousands of employees from public enterprises gradually will be discharged when a growing, dynamic private sector is ready to absorb these employees into better positions. The DONHAUSER 57 AGRICULTURAL MARKETING key to an efficient agricultural marketing system lies with the private sector and the authorities should do everything possible to provide a framework for private initiative and to remove barriers to market entry. Economic efficiency is linked closely to a non-distortive price policy. The practice of administering pan-territorial and pan-seasonal prices needs to be abandoned in order to establish a cost-minimizing spatial production pattern and to induce private investment in storage. In strict economic terms, only price interventions levelling-out irregular price fluctuations are justified. 5.03 A role of eminent importance will be left uncontested to the public authorities, namely the role of providing the legislative and institutional framework for, competition. This involves: * Relevant legislation to assure fair competition and to prevent individuals or enterprises from accumulating power in markets to the detriment of competition * Relevant legislation to assure honest practices in day-to-day market transactions * Efforts to improve market transparency by enforcing legal measurement, standards and grades and by collecting, processing and publishing up-to-date market information 5.04 The government already has undertaken steps that give evidence of its determination to establish a market economy: * The privatization of arable land has progressed to a considerable extent even if present land tenure arrangements are far from being final or perfect * A body of relevant laws is enacted, as, for example, Law 15/1990, on the Protection of Competition, which gives economic agents sufficient scope for operation in a market economy * Investment in markets, i.e., physical locations where supply and demand meet, is in preparation * Projects to build up market intelligence units and management consulting services are about to be started; agricultural and rural development projects are components which will promote agricultural marketing * National standards for agricultural products and consumer goods, in general, are being harmonized with international ones * Inspection of markets and processing enterprises was reorganized at the national and judet levels in order to protect the legitimate interests of consumers 5.05 However, the most relevant step with respect to agricultural marketing will be the liberalization of prices and the removal of regulations on trade margins for both agricultural products and inputs scheduled for May 1, 1993. This will remove the distortions which presently exist and set signals for economic resource allocation in future. The liberalization of trade will render the activities of the financial guard redundant and contribute to reduce government inspection to the minimum necessary. High product prices, which indicate scarcity, cannot effectively be decreased by ministerial order. Instead, temporary high profits should be allowed, which, in a competitive setting, will stimulate production and bring profits back to a DONHAUSER 58 AGRICULTURAL MARKETING reasonable level. It has to be emphasized that the benefits of price liberalization will be realized only in a competitive environment, or when, in the absence of barriers to entry, free prices will stimulate the rapid development of a private marketing sector. 5.06 There is some justified concern for urban consumers in low income brackets whose food security is likely to suffer when food prices are determined by the forces of supply and demand. However, the present untargeted subsidization of key food items incurs a high budgetary cost and unnecessarily benefits consumer groups with higher incomes and individuals with privileged positions in the distribution network. It should be replaced by schemes which better target the food subsidies to those who actually need them. 5.07 Immediate action should be taken to increase the efficiency of agricultural marketing in general, and of state enterprises in the industry in particular: * Continue to establish a framework for competition * Invest in human capital formation * Encourage private initiative * Maintain the operations of state enterprises for a transitional period without impeding the emergence of the private sector 5.08 The framework for competition consists basically of an adequate body of laws governing market transactions, of public interventions aiming at establishing market transparency, and of infrastructures for markets. Legislation should, as unmistakably as possible, determine the scope and limits of acceptable commercial behavior in business in order to give economic agents certainty about their legal positions. Above all it must make sure that individual enterprises cannot build up power which endangers fair competition. 5.09 It is recommended that the national Institute for Standardization continue revising standards, grades and measurements for the domestic market and harmonizing them with Western European ones. The Territory and Market Survey Department of the Consumers' Protection Office is in charge of inspecting obedience to the legal requirements by economic agents. Well-defined and enforced standards, grades, measurements and rules for price tagging facilitate market transparency and are basic preconditions for efficiency in marketing. In order to establish a sufficiently high level of transparency, the authorities should systematically collect and process data about prices, supply and demand at regional markets and publicize it in papers, radio and television. 5.10 Since in a command economy markets were not required, there now is an obvious lack of market infrastructure. Local authorities need to be sensitized to the relevance of markets and encouraged to organize physical rural markets as institutions for primary agricultural marketing from producers to bulking traders. There already are periodic markets functioning in rural areas. In the Calarasi district, five markets are operating. Since no information could be obtained for the whole country, it is proposed to study the present system of rural periodic DONHAUSER 59 AGRICULTURAL MARKETING markets in order to understand its present relevance and to identify its scope for promoting private market structures. It is assumed that rural periodic markets have a high potential to create competition in primary commercialization and to transmit signals to and from producers. For a start, open spaces on the outskirts of towns will do, and financial means should not be a hindrance in getting periodic markets started. Rather, public investment should be delayed until there is proof of the adequate timing and location and, thus, the good prospects of a new rural market. However, private entities should be free to develop market facilities at will. 5.11 It is recommended to organize regional trade fairs which serve to inform producers, consumers and the various intermediaries about domestic supply and demand, to encourage initiative and to strengthen internal economic interlinkages. Besides market surveys, consumer information is another responsibility of the governmental Consumers' Protection Office. The office should actively encourage and support volunteer consumers associations to articulate consumer interest, to provide a countervailing power to the producers, and to complement the government's endeavors in the fields of consumer protection and information. 5.12 Since a market economy is constituted of decentralized decisions of independent economic agents, the frequency of wrong decisions and, thus, misallocation of resources is inversely correlated with the competence of the economic agents. The legacy of over 40 years of command economy makes human capital formation a pressing responsibility for government action. Basic education in schools should include lessons on the principles of a market economy. Curricula for vocational training must include basic accounting and book-keeping. Teachers need to be trained to teach these subjects. 5.13 Agricultural extension must react to the new options farmers have in marketing. They need to be informed about how markets function, availabilities of input supplies, opportunities to market products, and options to join efforts in association with other farmers, so that they can disseminate this information to farmers. In order to improve management performance in state enterprises, training seminars should be organized focusing on various issues of business administration and marketing. Even if it is likely that some of the trained managers sooner or later will take opportunities in the private sector, the economy will benefit from the improved managerial skills. 5.14 A bundle of measures is proposed from investment into market facilities, the improvement of market transparency and services to modifications of relevant legislation (see mission contribution on marketing-private sector). Equally important is the government's strong determination to non-interference and to letting the market forces work. Unacceptable social effects should be counteracted with well-targeted measures instead of with indiscriminate subsidies which are expensive and distort economic signals. 5.15 Even though the state gradually should phase out active participation in agricultural marketing, there are some specific recommendations for state enterprises aimed at increasing the efficiency of operations during the transition and at removing its privileges compared to the DONHAUSER 60 AGRICULTURAL MARKETING private sector. One, the general need for management training, was mentioned above. In addition, the following measures should be considered: * At present, subsidies for both agricultural inputs and products are channelled through state enterprises enjoying the status of "integrator." Private enterprises are not eligible to pass subsidies to producers and are, thus, in a disadvantage. This discrimination against the private sector has to be stopped if the subsidization of agricultural inputs and products continues. * The gross underrating of capital consumed in state enterprises accumulates a capital renewal problem in the medium term and presently keeps private initiative out. In order to stop this tacit decapitalization and invite private capital instead, state enterprises should charge realistic prices for their services and accept the challenge of competition from private enterprises. * There are only a few state enterprises in agricultural marketing which are attractive for private investors. There is no reason why this situation should improve if privatization is delayed, though these enterprises will continue to be a burden on the public budget. For this reason, the enterprises or their facilities should be privatized to staff or management or other interested parties either by selling them or by hiring them out. * State enterprises should analyze the cost and benefit of their various functions and services with the perspective of concentrating on core activities and encouraging private enterprises to take over specified services on contract. Produce bulking, and wholesale and retail marketing, are areas where private initiative could contribute to higher efficiency in the short run. Scarce economic assets, e.g., means of transport, are likely to be utilized more efficiently under private than state management. * As long as they operate, state enterprises should behave like profit- maximizing economic units. They should not have to implement food security policies or other social policies confusing the legitimate objectives of an economic concern. In order to operate efficiently, they need the freedom to determine their own product mix, to minimize costs of production, and to maximize benefit in choosing the most profitable market channels. * Since flexibility largely is an issue of size, state enterprises such as Romcereal should be broken down into independent regional sub-units in order to be able to react quickly to local market situations. DONHAUSER 61. AGRICULTURAL MARKETING References "A Study of Agro-processing Plants in Romania: Interim Report,". Agriculture and Food Consulting, September 1992. Ministry of Agriculture and Food, Nitional Institute of Economic Research (Agriculture and Food Industry), "Present Status of Development, Objectives, Directions and Means of Action for Continuing the Reform in Agricultural and Food Sector" Bucharest, January 1993. World Bank. 1993. "Romania: Agricultural Prices, Subsidies ind Marketing Review.", Report No. 11350-RO. January 28. Romcereal, Romcereal Strategy, Nr. R.C. 40/627/1993 DONHAUSER 62 AGRICULTURAL MARKETING Appendix A: The Role of Romcereal in the Grain Market in Romania Romcereal was set up by a government decision in January 1991 with the objectives of contracting, storing and distributing cereals from domestic production and managing the state reserve cereals stock. Romcereal was given the juridical status of a "regie autonome" since it exercises functions which are deemed to be vital for the society. As a regie autonome, Romcereal is supposed to operate as a self-sustained economic unit covering cost of operation but not generating profit. The mandate of Romcereal covers food and feed grains (wheat, rye, triticale, barley, maize, oats), oil seeds (sunflower seeds, rape seed, castor beans, hemp) and grain legumes (peas, soybeans, different types of beans). Romcereal dominates the domestic market for grains and oilseeds. (Table A compares the most important grains and oilseeds with the market share held by the state procurement agency.) Roughly a third of the 1992 domestic production of wheat, rye and barley production was contracted to Romcereal due to the supply of credited inputs (Table A). Knowing that producers retain food grain for home consumption and feed for their own livestock and only quantities in excess of these are commercialized, there is little scope left for other market participants. Romcereal management estimates their market share to be between 80 and 90% in the case of wheat, rye and barley. Table A: Crop Purchases by Romcereal and National Production, Romania, 1992 Romcereal purchases National production Contracted Free market Total -------------------------------------- 1,000 tons --------------------------------- Wheat and rye 1222.7 220.0 1442.7 3227.8 Barley 522.5 92.5 615.0 1677.6 Maize 973.2 172.0 1154.2 6828.2 Sunflower seeds 472.5 174.6 647.1 774.0 Soybeans 50.0 - 50.0 126.1 Sources: Romcereal, Ministry of Agriculture and Food Romcereal has branch offices in every judet. A permanent staff of 15,000 is employed across the country. In 670 different locations grain purchasing and storage facilities are maintained, of which 328 are collection points for produce, 128 are grain silos and 213 warehouses. Depending on the structure of agricultural production, there are up to 30 grain purchasing stations in a single district. These stations are used for input distribution. DONHAUSER 63 AGRICULTURAL MARKETING Total storage capacity for grains is 10.4 million tons and 3.7 million tons for maize cobs, of which, in 1992, 136,000 tons and 22,800 tons, respectively, were leased out to private individuals or enterprises. Even in the best grain growing areas the utilization of the storage capacity hardly exceeded 60% after the 1992 harvest. The transport capacity in spring 1993 was as follows: * 291 trucks with capacity of eight tons * 290 trailers with capacity of five tons * 712 tractors * 1,005 trailers for tractors with capacity of five tons * 214 railway wagons * 75 locomotives Trucks and tractors mainly are used for collecting produce and for internal transport. Transport over long distances usually is carried out on the railway. Romcereal buys produce at official prices approved by the Ministry of Agriculture and Food. These prices are uniform all over the country and, in principle, also over the season. Adjustments may be made at any time for inflation or for inducing sales from producers. The official prices are genuine farm gate prices. Romcereal either collects the produce directly at the farms or producers supplying the grains to the purchasing points are entitled to get their transport expenses reimbursed. On the average, 1,200 lei were paid per ton in the 1992 season. After the 1992 harvest the official price for wheat was 40 lei per kg, whereas in the limited open market prices up to 70 lei were paid. Hence, it is not surprising to find that Romcereal succeeded mainly in buying grains contracted by the supply of inputs. In contrast, the free market purchases shown in Table A represent just a sixth of the total turnover in quantity terms. It can be assumed that only producers with immediate cash needs resorted to Romcereal in the absence of marketing alternatives. The observation that many producers stored grains after the 1992 harvest made policy-makers increase the official purchasing prices in March 1993 in order to induce sales. The price of wheat was increased to 70 lei per kg and Romcereal receives a "premium" of 30 lei directly from the state budget. Romcereal's success in the procurement of the domestic grain production is directly linked to its role as the dominant supplier of farm inputs. While during the socialist era state and collective farms were practically the only grain producers and had no choice apart from selling to the state procurement and processing organizations, private producers and state farms now have the freedom to sell to any individual or institution offering the most favorable price. Romcereal engages heavily in the supply of seasonal farm inputs on credit, thus contracting the sale of crops at harvest time. DONHAUSER 64 AGRICULTURAL MARKETING Table B shows the seasonal farm credit activities of Romcereal, for the 1992-93 agricultural season by March 20, 1993.. The state grain procurement agency finances mechanical services provided by the Agromec stations. It also finances and even handles seeds supplied by Semrom, the parastatal seed producer, and fertilizers and agro-chemicals provided by factories and the Ministry of Agriculture distribution network, respectively. Table B: Farm Inputs, Provided by Romcereal for the 1992-93 Agricultural Season by March 20, 1993, Romania Credit Purpose: Amount: 1,000 lei Mechanical services 27,593,436 Fertilizers 3,749,318 Seeds 13,933,281 Pesticides 1,361,558 Miscellaneous costs 3,733,925 Total 50,360,568 Physical inputs (items): Tons Herbicides 4,406 Insecticides/Fungicides 2,473 Chemical fertilizers 283,000 Seeds 140,000 Fuel 100,000 Source: Romcereal This activity is financed by means of credits provided by the Banca Agricola and commercial banks. In 1992, the Banca Agricola credit was obtained for an annual interest charge of 15%, while the average interest on commercial bank loans was around 70%. A Romcereal field staff of more than one thousand persons prepares contracts with individual producers or producers' associations. Corresponding inputs and services are provided. The suppliers get their bills settled as soon as the agricultural producers have confirmed the receipt of the quantitatively specified input or service. In the distribution of inputs such as seeds and agro-chemicals, Romcereal plays an active role by making them available through all its purchasing points spread over the country. DONHAUSER 65 AGRICULTURAL MARKETING Repayment of the credit at harvest time is only accepted in kind with the produce being valued with the official producer prices approved by the Ministry of Agriculfure and Food. Romcereal is by far the,most important -institution in agricultural input supply. In 1991-92 the seasonal agricultural credit administered by Romcereal represented an estimated 80% of the total seasonal credit made available to the Romanian farm sector. For Banca Agricola, state grain procurement is the major cooperating institution .channelling credit to the producers. The turnover of finance for Romcereal (and sources of short-term finance during the past two agricultural seasons) increased from 1990-91 to 1991-92 (Table C). Credit from Banca Agricola, which provides credit at a subsidized annual interest rate of only 15%, declined, and Romcereal had to procure most of the required credit- for financing its operations in the commercial market at interest of up to 70%. These sharply-increased financing costs caused actual transaction costs to exceed by far the commission for grain handling of 8,000 lei per ton approved by the Ministry of Agriculture and Food for 1992-93. For the ongoing 1993-94 season Romcereal proposed to increase the commission to 12,210 lei. Table C: Turnover and Sources.of Finance for Romcereal (in billion lei) ._ 1990/91 191991/92 Total turnover 47 138 Seasonal credit (total received) 24 115 from Banca Agricola 6.3 4.9 Source: Romcereal Romcereal sells the produce to agricultural processing enterprises, such as flour and feed mills, and breweries, at prices negotiated between the Ministry of Finance and the respective clients. Managers of private enterprises said they normally are not supplied by Romcereal. but preference is given to state enterprises. DONHAUSER 66 AGRICULTURAL MARKETING Appendix B: Romcereal Strategy ROMCEREAL R.A. NR. R.C. 40/627/1993 Ion Burtea, General Manager 1. ROMCEREAL ACTIVITY 1989-90 Romcereal "regie autonome" was set up through Government Decision No. 15 issued on January 10, 1991. Its activity has been modified lately through Government Decisions No. 115, issued on March 5, 1991, and No. 628, issued on October 2, 1992. The main aim of Romcereal is contracting, collection, storage and distribution of cereals, oil-producing and seed-leguminous plants, consumer funds as needed, and creation, custody and management (administration) of the state reserve cereal stocks. Up to the creation of Romcereal and especially before December 1989, the cereal, oil plant and seed-leguminous plant state fund was realized through the obligation of all agricultural producers, and mainly of the former big agricultural state enterprises (IAS) and production agricultural cooperatives (CAP), to deliver the whole crop to collecting centers and silos. Due to the reorganization of the former IAS into agricultural commercial societies and also of the former CAP according to the implementation of the Law 19/1991, and the reconstitution and the setting up of smallholder property rights, obligations to deliver crops to the state disappeared. In these conditions, Romcereal had to find other ways of collecting the cereal, oil plant and seed-leguminous plant quantities necessary to the urban population and other needs (animal food, raw materials for the beer, spirit and starch industries). In order to perform its activity, in 1991 Romcereal adopted the following measures: 1. Romcereal offered credits with low interest and money in advance for mechanical works, seeds, fertilizers and pesticides supply for cereals, seed-leguminous plants and oilseeds contracted with Romcereal. 2. Romcereal assured direct input through the country branches, i.e., through the collecting centers and silos. Romcereal supplies seeds, fertilizers, pesticides, agricultural tools, fuel and other necessary materials to the production process. These aims were realized using agricultural experts hired by Romcereal at the village level who assured free technical assistance to the producers. 3. Romcereal provided storage, conditioning and custody facilities for cereals kept by the agricultural producers for their own needs. 4. Romcereal provided and paid for transport from the field or from producers to the collecting centers for all the cereals, oilseeds and seed-leguminous plants used for creating the reserve. Romcereal carries out these services for the agricultural producers without any commission in order to help the increase of agricultural output, reimbursement of services will be paid only in agricultural output. In 1992, from a total output of about twelve million tons of cereals, oilseeds and leguminous plants, Romcereal collected 3.2 million tons, i.e., 26.6% of the output produced in the whole country (25% of the total needs for the consumption fund). DONHAUSER 67 AGRICULTURAL MARKETING ROMCEREAL R.A. NR. R.C. 40/627/1993 Ion Burtea, General Manager 2. PROSPECTIVE GOALS The collection by Romcereal of as large as possible a quantity of cereals, oilseeds and seed-leguminous plants requires adopting new support measures for agricultural producers, mainly for the private ones, in order to increase agricultural output. Taking into consideration the Common Market experience (mainly the French), the North American experience (mainly the Canadian one in agricultural policy for cereals, oilseeds and seed-leguminous plants) and taking into consideration the concrete conditions of our country, Romcereal proposes to adopt the following measures: 1. Romcereal will collect, store, prepare and distribute cereals, oilseeds and seed- leguminous plants, according to the social order, on the basis of direct contracts concluded with agricultural producers, as well as on the basis of acquisition at market prices, and cereals exchange. 2. Romcereal sub-branches will associate with the farmers in each area in order to cultivate the land and achieve joint activities for agricultural output increase (culture structure, crop rotation, fertilizers, and pesticide use), as well as for the storage, conservation and sale of the quantities of every associate. 3. Romcereal and the boards of the agricultural producers associations will work for a development strategy for cereals, oilseeds and seed-leguminous plants, for storage and conservation, as well as price and marketing policies in this field. 4. Romcereal will provide credits at low interest and advance funds for mechanical works, seeds, fertilizers and pesticides for the cereals, oilseed and seed-leguminous plants in accordance with the Ministry of Agriculture and Food strategy of supporting and encouraging agricultural farmers. 5. Romcereal will provide seeds, pesticides, fertilizers and other materials necessary to the production process to contracting farmers through the collecting centers and silos. 6. Romcereal will collect, store, prepare, and distribute to the private farmers some quantities of cereal seeds, oilseeds and leguminous seeds collected from the authorized farmers and from the Elite fields. 7. Romcereal will provide storage, conditioning, custody, and transfer throughout the country of the products kept at the dealers of agricultural producers. At their request and on their own behalf, Romcereal can buy or sell all these quantities. According to agreements between the two parties, product reception can be guarantees to third parties. 8. Romcereal will provide and pay for transport from the field or from producer to the collecting centers for all the quantities of cereals, seed-leguminous plants and oilseed plants undertaken at the seed or consumption fund. 9. At the request of producers, Romcereal will supply tractors and agricultural machinery from the domestic market. If farmers cannot pay in advance, Romcereal will pay on their behalf with reimbursement in crop form. If tractors, agricultural equipment, and machinery are supplied by Romcereal, credits will be reimbursed only in crop form. DONHAUSER 68 AGRICULTURAL MARKETING ROMCEREAL R.A. NR. R.C. 40/627/1993 Ion Burtea, General Manager 10. Romcereal will provide the storage, conditioning and custody in the collecting centers and silos of all cereals for consumption and seeds kept by the farmers for their own needs, asking for different negotiable tariffs according to the product and its quality. 11. Romcereal will provide services for the farmers without any commission, for the increase of the agricultural output; the reimbursement will be made in crop form. ROMANIA - A STRATEGY FOR THE TRANSITION IN AGRICULTURE WORKING PAPER MARKETING OF FRESH FRUIT AND VEGETABLES HANS STEINBICHLER APRIL 1993 JOINT ROMANIAN-INTERNATIONAL AGRICULTURAL STRATEGY TEAM THE WORLD BANK, IN COOPERATION WITH EC-PHARE, EBRD, USAID, AND THE FRENCH AND GERMAN GOVERNMENTS 69 ROMANIA MARKETING OF FRESH FRUIT AND VEGETABLES HANS STEINBICHLER TABLE OF CONTENTS Page 1. The Existing Agricultural Situation in Romania 75 Past Horticulture Production 75 Inputs and Product Marketing Systems 76 Wholesaling, Storage and Retailing 76 Transport and Distribution 78 Transport Companies in Romania 79 Calendar of Horticultural Production 80 Romania's Horticultural Exports 81 Image of Romania's Products on the Market 82 Romania's Competition in Export Markets 83 2. Recommendations on the Development of an Organizational Structure 83 for the Marketing of Horticultural Products Suggested Legal Framework 84 Specific Aspects of Horticultural Production and Marketing Policies 85 Export Market Strategies 86 Improvements of the Transport Infrastructure 87 3. Recommendations on Handling 88 Underground Vegetables (Potatoes, Onions) 88 Leafy (Lettuce, Cabbage, Green Onions), Stem (Asparagus) and 90 Flower (Cauliflower) Vegetables Fruit Vegetables: Immature Fruit Vegetables (Peas, Beans, 92 Cucumbers), Mature Fruit Vegetables (Tomatoes, Melons) Pome Fruits (Apples, Pears) and Stone Fruits (Apricots, Sweet 93 Cherries, Peaches, Plums) Small Fruits (Table Grapes and Strawberries) 95 4. Training Programs 98 Structure of a Comprehensive Training Program 99 Target Groups 99 Training Team 101 Type of Training and Topics 101 Implementation Schedule and Further Development 102 5. Privatization Through the Establishment of Joint Ventures; 103 Ideas and Policy Recommendations 6. Investment Suggestions 104 Appendices A. Research and Development Institute for Turning to Account of Horticultural 106 Products B. General Austrian Import Regulations for Horticultural Products 108 LIST OF FIGURES 1. Marketing Channels: Fresh Fruit and Vegetables in Romania 109 2. Organizational Framework for Romania's Horticultural Administration 110 LIST OF TABLES 1. Total Fruit Production in Romania 1980-92 111 2. Total Vegetable Production in Romania 1980-92 112 3. Total Production of Canned Vegetables and Fruits 1989-92 113 4. Calendar for Fruits Grown in Romania 114 5. Main Harvesting Periods of Fruits During the Year 115 6. Percentage of Fruits Grown in Romania's Main Production Regions 115 7. Calendar for Vegetables Grown in Romania 116 8. Main Harvesting Periods of Vegetables During the Year 118 9. Percentage of Vegetables Grown in Romania's Main Production Regions 118 10. General Outline of Competition 119 ROMANIA MARKETING OF FRESH FRUIT AND VEGETABLES Hans Steinbichler Karl Poppeller Freshconsult, Salzburg 1 THE EXISTING AGRICULTURAL SITUATION IN ROMANIA 1.01 Agricultural development is very much related to the political history of Romania. By far, the greatest change took place in 1945, when agricultural collectivization was started. Even though collectivization was initiated in 1945, it was not finalized until 1962. By then more than 90% of arable land was owned by state collective farms (combinates). Past Horticultural Production 1.02 A broad range of agricultural production and industries were formed during the 1970s and in the first half of the 1980s, especially with the help of Western European experts, in particular Dutch, German and French. Although collectivization stymied the participation of the private sector in agricultural and horticultural production, from a technical point of view the Romanian collective farms were very well equipped. And Romania had a leading position in marketing, including the export of its agricultural and horticultural products, mostly, of course, to the former Soviet Union. 1.03 Current production levels of fruits and vegetables are sharply below the peak levels of 1985. Production dropped in both 1988 and 1987, with 1987 production one-quarter to one-third below the peak 1985 production. After some recovery, production again plummeted in 1990 and 1991 to levels that were 40-60% of the 1985 production. The revolution of 1989 accounts for a significant part of the decline in 1989 and 1990. During that time, state-owned farms, marketing organizations, and marketing channels including the packing houses, and coldstores were destroyed. 1.04 During collectivization, private farmers and families had to give up their land and their livestock to state-owned organizations and were integrated into the production system as employees and workers. When giving land and/or livestock to authorities, the farmers were handed over a confirmation, which showed the former ownership of the collectivized goods. The land reform in 1990 was based on Law 18 and gave the land back to 6.2 million owners, but at a maximum of ten hectares each. After the revolution, these people or their heirs got back what they originally gave to the state. Of course, this process is ongoing, and is one of the major reasons why production figures dropped tremendously. STEINBICHLER 76 FRESH FRUIT/VEGETABLES 1.05 From the point of view of maintaining complete and efficient fruit and vegetable production, it would have been much better to initiate the privatization process of the large and competitive production units first. However, the emotions of the population led in another direction. The reasons for production declines in 1990 and 1991 can be classified into two categories: Internal reasons: * The structure of marketing channels and production units * Lack of machinery sufficient for the new production units * Slow progress in land reform (which means that people still do not know which land they own or what they can do with it) External reasons: * The Gulf War * The collapse of the former Soviet Union, its division into various republics, and the disastrous economic situation in the republics 1.06 As a result, in spite of having huge growing areas of outstanding quality, Romania presently is not in a position to fulfill even local *market demands for agricultural products, which has led during the last years to imports of even cereals, potatoes and animal products. Inputs and Product Marketing Systems 1.07 The distribution of agricultural inputs is mainly carried out by producers themselves and by state owned marketing organizations and traders. The change from a pre-1989 system of many. large farms, few medium-sized farms, and very few small farms to a system after the revolution in which there are many small farms, more and more medium-sized farms and only a very few big farms has brought,a dramatic change in the marketing channels as well. The acquisition of sowing and planting material, of agricultural machinery, and, of course, credit, has become very difficult and is associated with the drop in quantity and quality of production. 1.08 Input supply conditions, are getting better slowly due to the formation of private farm organizations of medium-sized farms and even bigger farms. These voluntary federations are making a positive contribution to the opening of marketing channels. Wholesaling, Storage and Retailing 1.09 The marketing of horticultural products can be classified into three major areas: 1. Local marketing. 2. Marketing of exported products. 3. Marketing of imported products. STEINBICHLER 77 FRESH FRUIT/VEGETABLES 1.10 Whereas the internal markets mainly are supplied by small and medium farms, these two categories do not directly export products but supply wholesalers and in the future will supply the wholesale market of Bucharest. Big farms, of course, are in position to supply local markets (farmers' markets), wholesalers, and export markets (Figure 1). 1.11 The local marketing of fresh perishable goods, especially of fruits, vegetables and milk products, increasingly is carried out by private enterprises. They avoid the former marketing channels, which still exist, and bring their products directly to the points of sale, that is, to the consumers. This approach is viable only where consuming centers (bigger towns) are near production areas. Private farmers, for instance, have to pay 300 lei (plus another 200 lei for a market scale) to the state-owned market organizations to sell their products at the Bucharest market. 1.12 Especially in Bucharest, the markets have changed their functions by renting out stands and shops to private traders and producers. This development also is taking place slowly in other major towns of Romania. This type of direct selling by producers is possible without modem storage or transport systems. However, it is geared to the seasons, because of the lack of storage capacity. 1.13 Local distribution of storable main products such as potatoes, carrots, red beets, cabbage, apples and grapes confronts tremendous problems. Coldstore warehouses are oversized, they are not sanitary, and they are uneconomical to operate. These coldstores were built to supply the retailing shops in Bucharest and other major towns in Romania especially during the winter seasons. They are equipped with quite highly sophisticated refrigeration machinery from the former Eastern German Republic. The layout of the coldstores is of average Western European standards and they are in principle in a much better condition than those in other Eastern European countries. But for approximately five years repairs or maintenance have been totally neglected. Only about 20% of the storage capacity in Bucharest is used presently for cold storage. Available space is very often rented out to forwarding companies or transport companies or even trading organizations, who store normal dry cargo in the facilities. 1.14 The coldstores, originally state-owned and presently under the process of privatization (at least step by step), supplied retail shops in certain districts of the major towns. These shops were directly owned by the coldstores and the shops were forced to buy their products from them. This situation has already changed in that shops are at least partially free to buy products wherever they like and half of them are already privatized or completely liberalized in their trade. The coldstores in their supply function are still bound to price fixing, which is done every month by a commission. The price charged for cold storage "officially" depends on the production/demand relationship. One of the biggest cold stores in Bucharest is run by a company called Fortuna S.A. Their average gross margin ias 16% last year, which is intended to cover costs. 1.15 The equipment of the coldstores (the packaging material and the handling equipment) is in very poor condition. The harvesting bins (two-cubic-meter iron-framed wooden containers) STEINBICHLER 78 FRESH FRUIT/VEGETABLES are rusty, very often partially broken, and in a bad overall shape. The main products are quite often stored for a long period of time, which sometimes results in completely rotten products. The overall sanitary conditions are bad and made worse by the exhaust of diesel-engine-operated forklifts inside the coldstores. Of course, the financial means are very poor and no improvements in the physical facilities have been made for quite some time. 1.16 Retailing of agricultural products is very poorly developed. During the past three years efforts were made by retailers to become independent from the wholesalers and the coldstores. The packaging and presentation of the products is very poor and the understanding of proper handling and manipulation of the products is lacking. Transport and Distribution 1.17 The main activities of transportation of agricultural products were established to fulfill the requirements of the local and export markets. The major tasks were: * To assure all participants in the agricultural economy (state-owned companies, agro- industry, private farms and private farmers' organizations) with the supply of all necessary inputs for their activities * To deliver and distribute agricultural products to the domestic and the export markets 1.18 These two philosophies, in spite of being correct, are difficult to fulfill at the present time. Especially with agricultural products, organization of transport is of utmost importance. For example, transportation needs related to wheat used for local bread production include: * Transport from the field to storage facilities (dry stores) * Transport from storage to wheat mills * Transport from wheat mills to bakery processing plants * Transport from bakeries to bread or general food shops 1.19 With fresh horticultural products the transport necessities are much more sophisticated. The present system for local supply completely neglects pre-cooling or refrigerated transportation. Transportation is carried out by non-refrigerated, sometimes not even ventilated, trucks. These trucks carry between eight and twenty tons of produce and carry the goods either to storage facilities or directly to shops or markets. Within Romania, transport periods are a maximum of fourteen hours. But even this short period of time can cause damage to highly perishable products like berries. 1.20 Railcars are not used for transportation of products for use in Romania, but are used for export, especially to the former Soviet republics. The structure of Romanian transport companies and their equipment follows. 1.21 Exports of horticultural products are mostly done in refrigerated trucks or insulated railcars. The refrigerated railcar organization in Romania is called "S.C. Transfrigotren S.A.," STEINBICHLER 79 FRESH FRUIT/VEGETABLES which is a partner of Interfrigo (Basel, Switzerland), the subsidiary of Intercontainer responsible for refrigerated rail transportation in Europe. Still, these exports are not coordinated with the commercial part of export marketing, though this situation is improving due to private engagement. 1.22 Water transportation is used a lot for bulk products. The only port in Romania which can operate containers is Constanta, at the Black Sea, but port facilities and operations are unreliable. Presently it would be too much of a risk to export horticultural products in reefer containers. Anyway, Zim Line, the state-owned Israeli shipping line, is the only line offering (theoretically) a reefer container service from Constanta to the Near East and Northern Europe. 1.23 Container shipments are possible from the following ports along the Danube River: Turnu-Severin, Giurgiu and Braila. The service, however, is not very reliable and needs Western-style organization and management. Transport Companies in Romania 1.24 Truck transport in the agricultural field is structured and organized as follows: * Ninety companies called Agrotransport S.A. (shareholding companies), all over the country, which have a total of almost 11,000 lorries and work for their customers mainly in the agricultural sector, both for state and private farms or individual farmers * Two companies specialized in transportation of fruits and vegetables, which are located in Bucharest and which hold more than 250 vehicles * One transport company called Pantransport S.A., specialized in the transportation of bread, in roughly 130 trucks with special equipment * Four companies specialized in international transportation of agricultural goods, mostly perishables, one in each major city - Bucharest, Oradea, Craiova, and Timisoara. Together they hold 720 refrigerated trailers, out of which 280 are imported (Volvo and Mercedes). These companies are capable of transporting freight to any destination in Europe, the Middle East or Asia. 1.25 There are, however, trading companies involved in the agriculture and food industries which have their own transport means. Approximately 19,000 vehicles are owned by these companies, out of which 11,750 are involved in the food sector. Some transports are made with trailers. 1.26 Some of the transport vehicles formerly owned by CAPs and AEIs now belong to agricultural associations and private farmers. To these machines, croppers, tractors and other means of transport have to be added 2,500-3,000 bought since 1990. 1.27 The total park of transport means involved in transportation of agricultural goods is approximately 31,00 vehicles. Of course, not all of them are up-to-date or in perfect condition, but it is estimated that 65-70% of the entire fleet operates continuously. STEINBICHLER .80 FRESH FRUIT/VEGETABLES 1.28 There is only one transport company -- Transfrigotren S.A. -- under the authority of the Ministry of Agriculture and Food, which is specialized in domestic and international transport of agricultural goods (mainly cereals, vegetables and fruits). This company owns 240 thermo- insulated and refrigerated wagons (vans). These vans have freezing systems attached and can be rented both by the state and by private commercial companies for domestic and for export purposes (they are not equipped with containers). Some state companies own a total of 50 engines with power ranging from 104 to 1,250 hp, and 560 vans which are used for transporting their own production (especially grains and fodder) or for exporting products. 1.29 The potential shipping capacity of state and private companies includes: * 69 roll on/roll off with a maximum power of 300 hp (self-propelled) * 59 ships without engines * 137 technical and service ships * 43 fishing ships * 12 transoceanic transport ships Freight capacities of these vessels vary from 100 up to 20,000 tons. Calendar of Horticultural Production 1.30 The Research and Development Institute for Turning to Account of Horticultural Products in Bucharest was very cooperative in developing the calendar for fruits, vegetables and processed fruits and vegetables in Romania. Such a calendar previously was not in existence. For the present report, this calendar also is the basis for developing alternative market strategies in export markets and, of course, also for the competition analysis. In order to do this, it is necessary to obtain detailed knowledge of which quantities and qualities are available during which periods of the year. 1.31 Compared with other Eastern European countries, research activities with respect to horticultural products in Romania, are quite highly-developed. Research activities are led by the Agricultural Academy of Science in Bucharest. Again, almost all the research institutes concentrate on the production technology of flowers, fruits and vegetables, potatoes and wine. The major institutes include: Name of Institute Location Research and Development Institute for Turning to Account of Horticultural Products (ECDVPH) Bucharest Research Institute for Production of Flowers and Vegetables Vidra STEINBICHLER 81 FRESH FRUIT/VEGETABLES Research Institute for Production of Potatoes Brasov Research Institute for the Production of Fruits:and Vegetables Pitesti Research Institute for Vineyards Valea Calugareasca 1.32 Calendars for fruit and vegetable production in Romania are included in three tables showing the growing periods during the year, the main harvesting periods during the year, and the percentage of fruits grown in the major production regions. Fruit production starts quite late during the year and has its first peak with cherries and strawberries in June, the next in July with stone fruits, and the overall peak in September and October with plums, grapes, apples, pears and nuts. The major fruit production areas are Arges and Vilcea (located near Pitesti), and Maramures (located in the very north near Bistrita). 1.33 The 1992 production of vegetables was more than four times the production of fruit. This also explains why the statistical material about vegetables is much more detailed than that on fruits. Vegetables also have longer harvesting periods, as the three tables for the calendar for vegetables grown in Romania show (Tables 7-9). The production of crops and vegetables is divided naturally into different types, namely early, middle and late. With some vegetables, greenhouse production (cucumbers, tomatoes, lettuce, melons, etc.) and plastic-protected production (tomatoes, cauliflower, cabbage, onions, melons) also is carried out. 1.34 In particular, the green house technologies are quite sophisticated and well-managed. Around Bucharest, approximately forty hectares of greenhouses are in operation and are in positions to produce high-quality products. Both quality and quantity can be improved; suggestions will be found in sections three and four. Most greenhouses are equipped with Dutch technology and take advantage of nearby heating plants. Some of the greenhouses already do flower tests and production on a small scale basis, which at least is a sign of beginning diversification. 1.35 Using the greenhouses, the production period for vegetables can be extended tremendously, and therefore Romania has the chance to reach off-season markets after having satisfied the local demand. The major vegetable-growing areas are Ilfov, Timis, Teleorman and Arad. Romania's Horticultural Exports 1.36 Exports are mainly carried out by trading companies -- increasingly privately-owned. Exports of fresh fruits and vegetables is a major task, not only of private but also state-owned production units, with the aim of acquiring hard currency. The major research center for post- harvest handling, canning, storage design and marketing in Bucharest is participating in a STEINBICHLER 82 FRESH FRUIT/VEGETABLES working group to meet EC trading standards for fruits and vegetables, so there already are ongoing negotiations and efforts underway to reach the Western European export markets. 1.37 Cultivation of horticultural products already meets international standards partially -- the main problems are with harvesting. Post-harvest operations in the wider sense (including transport and storage as well as packaging, stuffing, pre-cooling) are still neglected. Romania's export activities in the past have concentrated on quantity and not quality. In addition, efforts have been poorly coordinated, which in some cases has destroyed price levels. Large quantities very often were shipped to destinations without contracts or even contacts with importers at these markets. 1.38 The major task for Romania's production in the past was to meet Western European standards. This emphasis is a great help for developing new export marketing strategies, but to date not many have been carried out. Products mostly are shipped into Western Europe to Austria and Germany, to Eastern European countries, but not to the Near and Middle East nor the northern African countries. This means that new marketing activities can be created from scratch (and therefore on a highly professional basis). Image of Romania's Products on the Market 1.39 Basically, importers are aware that Romania is in a position to produce high quality products, but they take advantage of the missing coordination and the weak negotiation position of Romanian exporters. It is very common for five to ten truck loads of apples to arrive at the same time at the wholesale market in Vienna without any notice. In turn, the truck drivers simply attempt to sell the products as quickly as possible. With this missing export strategy and coordination, the price level for Romanian products, even if they arrive in good condition, is very, very low. In principal, Romania has to face the following prejudice in Austria and Germany: * Romanian truck drivers (not even organized companies) try to sell almost at any price and always arrive with large quantities * The quality of the product ranges between excellent and bad * The refrigeration equipment of the trucks very often is not regulated correctly, so products suffer temperature abuses * Very bad packaging material results in smashed boxes and rotten products * The cooling chain from the farm to the point of distribution is not secured * The age of the products cannot be documented at the point of arrival 1.40 The following detailed answers were given to by interviewees with respect to single items: STEINBICHLER 83 FRESH FRUIT/VEGETABLES Tomatoes: Mainly exported from Romania to Germany and Austria during June and July, arriving in mixed quality. Taste is good but grading and sorting is badly done. In general, tomatoes from greenhouses are not exported in larger quantities because of the local market demand. Cucumbers -- greenhouse production: Arrival quality in 1993 in March and April was very good, but, again, lack of sorting caused low prices. Kohlrabi: In general, product arrives in very good condition. Apples: Exported during the peak harvesting seasons in September and October in large uncoordinated quantities. Again, the quality is good. Improvements certainly are necessary with respect to packaging, sorting, grading and coloring. Romania's Competition in Export Markets 1.41 As already mentioned, the importance of Romanian exports of fresh fruits, vegetables, and, later on, flowers will increase because of the hard currency which exports to Western European countries provide. There is a demand for imports, especially tropical products, on the other side. The demand for exotic.fruits is high, but traders face the problem that barter trades hardly are accepted anymore by foreign partners from Israel, Turkey, Greece and Italy. In general, Romania has to compete in Western Europe, especially with Egypt, Greece, Hungary, Italy, Spain, and of course with the local countries themselves as soon as the season begins in these growing areas. 1.42 Table 10 shows where in Western Europe Romania has to compete with which countries in which product categories. Export opportunities to Austria are very good for apricots and moderate for cucumbers, lettuce, tomatoes, plums, and grapes. To the EC, export opportunities are good for cucumbers, cauliflower, beans, and cherries, and moderate for lettuce, tomatoes, peas, peaches, grapes, strawberries, and apricots. 2. RECOMMENDATIONS ON THE DEVELOPMENT OF AN ORGANIZATIONAL STRUCTURE FOR THE MARKETING OF HORTICULTURAL PRODUCTS 2.01 Romania's agriculture in general, and horticultural production and marketing specifically, is expected to evolve into larger, privately-owned production marketing units. These changes will facilitate the competitiveness of Romania's fruits and vegetables on the local and international markets. STEINBICHLER 84 FRESH FRUITIVIGETABLES Suggested Legal Framework 2.02 This year Romania is expecting a 25% increase in production (compared with 1992), due to the facts that the land reform is underway and that private farmers' associations and market associations have been formed. Since Romania has very good environmental conditions and natural resources for growing fruits and vegetables including productive soil, good general climatic conditions with relatively little air and water pollution, very soon it could face the problem of over-production. Therefore a general policy decision has to be made and a legal framework elaborated to: * Make quality production more attractive than quantity production * Make local production internationally competitive *. Make producers and traders aware of international competition * To set out import rules, * To set export quality standards2 2.03 An organizational framework should encompass three operational levels: 1. The production level. 2. -. The wholesaling level.. 3. The retailing level. 2.04 . The organizational structure -should give all participants of horticultural production and trade a certain kind of security for the feeling that they can influence the branch they are in through a democratic negotiating position. In particular, Romania's agriculture presently needs help from state. institutions (like the Ministry of Agriculture and Food and research organizations). 2.05 The policy suggestion therefore is that a new institution be founded between the state authorities and the private (and also state-owned)'production and marketing units, in which the interests of all operational parties (e.g., the Ministry of Agriculture and Food, research and training centers, wholesale markets, organizations of wholesalers, retailing associations, private farmers associations, the Chamber of Agriculture, the Chamber of Commerce, the Ministry of Trade, etc.) are represented. Such an institution has to operate independently from state Appendix B gives an example of how import regulations are set out in Austria, which also could.be a pattern for Romania. These Austrian regulations do not hinder privatization or free market patterns and are, in comparison to EC regulations, much more liberalized. 2 Quality standards presently are not in existence in Romania in spite of the fact that several research institutes in Romania are working on this together with the commission in Brussels and Geneva. The people who carry out the quality control either at the point of production or at the borders are not trained and therefore do not know about quality standards and the effects of bad-quality arrivals in Western European countries (see also Section 4, educational programs). STEINBICHLER 85 FRESH FRUIT/VEGETABLES influence, which, of course, can be achieved in the future. Even in: the beginning such an institution should be a part of the discussions. This institution should give guidance to producers and traders on how to achieve the best economic results, in their own favor and in the favor of Romania's agricultural, economy. All this,. of course, has to be seen before the legal framework can be created. 2.06 Also in section five, it is stressed that for the success ofRomania's agricultural strategies and agri-business it is necessary that all the institutions involved and shown above cooperate with each other. This can be done only by bringing people together at one table, creating principle memoranda of understanding and initiating the process of information exchange on a regular basis. Again, this has to be implemented step by step.and all the institutions involved have to be convinced by, for example, international consultants or trainees (first on their own and later on joint sessions) that progress can be reached only by working together. Romania and its agricultural institutions must be made aware of the fact that the country has a potential comparative advantage against its competition in many markets and that an overall concept and policy, once created on a democratic basis,. is better than infighting. Specific Aspects of Horticultural Production and Marketing Policies 2.07 Horticultural production and marketing soon will become more and more important in Romania, because as the overall economical situation of the country improves the demand for fresh nutrition will increase. This of course is a local challenge for the horticultural production and the marketing units. Horticultural products, whether they are processed or distributed in fresh condition, must have priority within the overall agricultural concept and legal framework, because they are highly perishable and of high value. As mentioned in section five, training is the key to success in this respect. Training concepts on all operational levels should aim: * To improve quality in production * To improve quality in marketing. and, presentation * To motivate diversification of production * To improve post-harvest operation, transportation and storage Alongside this local market supply, concepts.have to be elaborated. The aims of these concepts must be: * To make the market entrance for private companies possible on all operational levels * To improve -- through the investment and infrastructure -- the logistical cooling chain from the rural growing areas to the consumption centers * To motivate growers and distributors to supply the local market with top quality * To create a clear marketing channel system ahead of the legal framework 2.08 Especially with respect to the assortment of the present production of horticultural products, diversification is strongly recommended, especially for off-season "high value" vegetable varieties like greenhouse green beans; green, red and yellow peppers; special varieties STEINBICHLER 86 FRESH FRUIT/VEGETABLES of cucumbers; aubergines; melons; chilies; and meat tomatoes. Such diversification programs should be implemented step by step, starting with test productions (e.g., in the greenhouses surrounding Bucharest), and from the beginning the standards for these products must be outlined and controlled. Such a function could be taken over by the research institutes. Of course these activities must be coordinated and doubtlessly the most advanced organization for this is the Research and Development Institute for Turning to Account of Horticultural Products. This institute needs international assistance especially in developing further marketing channels for fruits and vegetables, and specific marketing strategies have to be developed. Other products are fresh cut flowers, ornamentals and processed products. With these high-quality products, research has to be carried out first of all, and then pilot projects have to be identified and realized before operative marketing is done. Export Market Strategies 2.09 Taking the present situation of Romania's horticultural production into consideration there presently is a lack of understanding of the target markets. Whoever is in a position to export aims to export to Western European countries. Doubtlessly Western European countries', and especially EC, standards for fresh fruits and vegetables are horrendously sophisticated and an export concept can fail very quickly. Further, product images, extremely difficult to build, can be destroyed. In general, Eastern European products suffer a bad image (or at least a low-price image). Strategies must be developed against this. The major targets for Romanian export strategies -- whatever the destination -- are the following: * Exporters must be fully aware of import market requirements with respect to packaging, labelling, post-harvest treatment, chemical treatment allowances, palletizing, packaging materials, stuffing of transport means, etc. * The key to success is for exporters, importers and transporters to develop jointly a strategy for a product or for a specific variety at least six months before the actual physical export. These three parties should be very clear on what should be produced, how the transport should be carried out and when the products should be on the market to achieve the highest price. Of course, force majeure always can delay things or even destroy crops, but in the long run this strategy leads to economic success. * Romanian exporters must begin to observe their strategic markets and learn about import regulations, customs, competition and potential partners in these markets. Particularly in the beginning pilot projects should be established. * Existing export markets have to be exploited with new strategies based on a quality philosophy. STEINBICHLER 87 FRESH FRUIT/VEGETABLES 2.10 Different export strategies should be applied to different regions: * Western European Countries: The current strategy to meet Western European quality standards is appropriate and should be continued. However, it has to be clear to producers and traders that to meet these standards and to be fully accepted as a trading partner takes at least three to five years more. * Eastern European Countries: In spite of the economic situations in Ukraine, Russia, Belorussia, Moldavia, etc., these countries represent the market for future over- production in Romania. Contacts should be kept and export strategies for these countries should be developed in detail. * Near East: Countries like Lebanon, Syria, Israel, and Egypt are potential clients for Romania. Trading connections already exist, but the transport system has to be very much improved to reach these markets. The only way to get to these markets is containerization, and, as analyzed above, this presently cannot be done. On the other side, these countries are less restrictive than Western Europe. Of course, they also have their standards and regulations, but have a huge potential and need for fresh products. * Middle East: The Gulf countries, as well as Saudi Arabia have tremendous potential for Romania -- again, as long as the transport problems can be solved. * North African Countries: North African countries themselves have a very highly sophisticated production system and export perishable products, but there is the possibility of shipping "out of season" products to these countries. Again, transport is the key to these opportunities. Improvements of the Transport Infrastructure 2.11 The transport infrastructure has to be improved, especially with respect to river and sea transportation. In this respect, the management and infra-structure of the terminal in Constanta and in the Danube ports of Turnu-Severin, Giurgiu, and Braila require considerable investment. The aim must be to make these ports able to handle, store and maintain reefer containers (20", 40"). This will make it attractive for shipping lines to offer their services to the Near and Middle East as well as on the Danube to Western Europe. 2.12 With privatization, Romanian trucking companies' equipment will be improved. These improvements are necessary to reach destinations like England, Scandinavia or France. The production of trucks, chassis' and even refrigerated machineries in Romania on a license basis or in a joint venture should be considered attractive for investors due to the relatively low labor costs in Romania. 2.13 The rail organization and railroads are very difficult to improve, but this is not the fault of the Romanian railway organization only. It also is a general European problem, and it STEINBICHLER 88 FRESH FRUIT/VEGETABLES Table A: Effect of Temperature on Wound-healing in Potatoes Temperature Days necessary to form in degree Celsius Suberin Periderm 25 1 2 15 2 3 10 3 6 5 5-8 10 2 7-8 not formed Source: Post-harvest Technology of Horticultural Crops, Second Edition, University of California, Division of Agriculture and Natural Resources, Publication 3311 certainly will take many years to get over this inflexibility -- it cannot be expected that quick improvements will be attained. 3. RECOMMENDATIONS ON POST-HARVEST HANDLING Underground Vegetables (Potatoes and Onions) 3.01 Potatoes (tubers) and onions (bulbs) are underground vegetables. The commodities of this grouping have several common characteristics: * They are all storage organs, principally of carbohydrates * They generally have low respiration rates (depending on stage of development) * They are considered relatively nonperishable, especially if the tops are removed * They continue growth after harvest (rooting and sprouting) * They can be stored for relatively long periods 3.02 Indications of maturity vary by commodity. Many of the products may be harvested and marketed at various stages of development, but criteria commonly used to harvest indicate drying of foliage and setting of skin for potatoes, and drying and bending over of tops for onions. 3.03 Both mechanical and manual harvest are used for this group of vegetables. Most potatoes are harvested mechanically and transported in bulk to packinghouses or processing facilities. Onions for fresh markets are undercut mechanically, hand-harvested and trimmed, cured in the STEINBICHLER 89 FRESH FRUIT/VEGETABLES field, and field-packed or transported to packinghouses. Physical damage during the harvesting operations can be extensive and is a major cause of post-harvest losses. 3.04 One of the simplest and most effective ways to reduce water loss and decay during post- harvest storage of tuber and bulb crops is curing after harvest. Curing is the process of wound- healing with the development and suberization of new epidermal tissue called wound periderm. The effect of temperature on wound healing in potatoes is shown in Table A. 3.05 With onions, curing refers to the process of drying the neck tissues and the outer leaves to form dry scales. Some water loss takes place during curing. 3.06 Onions and potatoes are often stored after curing and before preparation for market (cleaning, grading, sizing, and packing). These products are stored from three to ten months in mechanically-refrigerated or -ventilated storages. Preparation for the market is done as follows: Cleaning: Dry brush or wash and partially dry, removing excess moisture Sorting: Eliminate defective products and plant debris Decay control: Post-harvest fungicides are used sometimes, chlorination of wash and flume water provides sanitation Sizing: Size mechanically or by hand Grading: Separate into quality grades Packine: Pack into consumer units (bags, trays) and then pack into shipping containers; or bulk pack into shipping containers (bags, boxes and bins) 3.07 Potatoes and onions destined for storage are cooled during the early phase of the storage period with cool air forced through storage piles or bins. Cooling may be done with cold ambient air or with air cooled by mechanical refrigeration. For storage, onions and potatoes may be sprayed with maleic hydrazide (MH) a few weeks before harvest to inhibit sprouting during storage. Aerosol applications of CIPC (3-chloro-isopropyl-N-phenyl carbamate) often are circulated around stored potatoes to further inhibit sprouting. Some growers occasionally store mature potatoes in the ground several weeks before harvest. Ventilated storage in cellars and warehouses is used for potatoes and onions. More advanced facilities with temperature and relative humidity controls provide forced-air circulation through bulk piles of potatoes or onions, or through and around stacks of bulk bins. Potatoes can be stored up to ten months under proper conditions. Fresh market potatoes should be stored under the following conditions: * 4 to 7 degrees Celsius * 95 to 98% relative humidity * Enough air circulation to prevent oxygen depletion and carbon dioxide accumulation (about .8 cubic feet per minute per 100 pounds of potatoes) * Exclusion of light to avoid degreening STEINBICHLER 90 FRESH FRUIT/VEGETABLES 3.08 Degreening is due to chlorophyll synthesis and is associated with accumulation of a toxic alkaloid, solanine. For processing (e.g., chipping), the proper conditions are: * 8 to 12 degree Celsius * 95-98% relative humidity * Adequate ventilation * Exclusion of light 3.09 This higher temperature storage retards undesirable sweetening of the potatoes and consequent dark color of the processed products. Onions vary in their storage capability. The more pungent types with high soluble solids contents are rarely stored for more than one month. Storage temperature should be either 0-5 degrees Celsius or 28-30 degrees Celsius, as intermediate temperatures favor sprouting. Relative humidity should be maintained between 65 and 70%, and ventilation rate should be from .5 to 1 cubic meter of air per minute for each cubic meter of onions. Avoid light exposure to prevent degreening. Leafy (Lettuce, Cabbage, Green Onions), Stem (Asparagus), and Flower (Cauliflower) Vegetables 3.10 Virtually all leafy vegetables are cut by hand. The determination of horticultural maturity varies with commodity, but, in general, size is the principal criterion. For others, the solidity of the heads determines harvest maturity. Stem vegetables, like asparagus, generally are hand cut when spears are at least 23 cm above the soil surface. All floral vegetables are hand- harvested, but harvest aids (conveyors) are sometimes used. Maturity of floral vegetables is determined by head size and development. 3.11 Field packing is used for all leafy vegetables. The products are selected for maturity and quality, and then cut, trimmed, packed in cartons or crates, transported to cooling facilities, cooled, put into temporary cold storage prior to loading or loaded directly, and transported to market. Field packing generally provides greater marketable yields because of reduced mechanical damage. Wrapped and unwrapped lettuce and cauliflower are mostly field packed. The product is hand selected, cut, trimmed, and then placed on mobile field units where they are wrapped and packed in cartons. It is then palletized and transported to the cooling facilities for cooling and subsequent handling. 3.12 Rough handling in field packing is a major cause of lettuce and cauliflower marketing losses. Keeping commodities clean is a problem in field packing operations, particularly when fields are muddy. 3.13 Delays between harvest and cooling should be avoided, especially during warm weather. Different cooling methods may be applied to the same commodity. The most common methods in commercial use are: STEINBICHLER 91 FRESH FRUIT/VEGETABLES Table B: Controlled Atmosphere Recommendations for Leafy, Stem and Floral Vegetables PRODUCT Temperature in Oxygen level in % Carbon Dioxide degree Celsius level in % Asparagus 2 21 10-14 Broccoli 0 2 5-10 Cabbage 0 2-3 3-6 Cauliflower 0 2-3 3-4 Celery 0 1-4 3-5 Chinese Cabbage Green onion 0 1-2 0-5 Lettuce 0 2-3 0-5 crisp-head leafy 0 1-3 0 Mushrooms 0 1-3 0 Spinach 0 21 10-15 Withloof 0 7-10 5-10 Chicory 0 3-4 4-5 Source: Post-harvest Technology of Horticultural Crops, Second Edition, University of California, Davis, Division of Agriculture and Natural Resources, Publication 3311 * Vacuum cooling for crisp-head lettuce, leaf lettuce, cabbage and cauliflowers * Hydrocooling for leaf lettuce and green onions * Package-icing and liquid-icing for green onions * Room cooling, primarily for cabbage * Forced-air cooling, primarily for cauliflower and to a limited extent for other leafy and stem vegetables In general, these products respond best to a storage temperature of 0 to 1 degrees Celsius. Freezing must be avoided. These products frequently are loaded into refrigerated trailers and containers immediately after cooling. For temporary storage, a temperature of 0 to 2 degrees Celsius and a relative humidity of 90 to 95% are recommended. 3.14 Long-term storage is not recommended, except for cabbage. In storage, air circulation should be minimized to that required for proper temperature control, excess carbon dioxide should be removed, and adequate oxygen levels should be maintained. Exposure to ethylene STEINBICHLER 92 FRESH FRUIT/VEGETABLES should be avoided through -the handling system. Ethylene induces "russet -spotting" disorders in lettuce and decreases the shelf life of all green, leafy vegetables. Exposure to light causes undesirable greening; this can be retarded by maintaining the product at low temperature. 3.15 All the leafy, stem and floral commodities respond favorably to modified and controlled atmosphere. Low oxygen atmospheres (2-3%) contribute to longer shelf lives in all products except asparagus. The recommendations for carbon dioxide modification are more variable (Table B). I I . Fruit Vegetables: Immature Fruit Vegetables (Peas, Beans, Cucumber), Mature Fruit Vegetables (Tomatoes, Melons) 3.16 The harvest index for most immature fruit vegetables is based principally on size and color. Fruits that are too developed are of inferior internal quality and show undesirable color change after harvest. The harvest index for mature fruit vegetables depends on several characteristics, and proper. harvest maturity is the key to adequate shelf life and good quality of the ripened fruit. 3.17 Most fruit vegetables are harvested by hand. Some harvest aids may be used, including pickup machines and conveyors. Mature green tomatoes, for example, usually are harvested into buckets.and emptied into field bins or gondolas. Immature fruit vegetables generally have very tender skins that are easily damaged in harvest and handling. Special care must be taken in all handling operations to prevent product damage and subsequent decay. 3.18 The trend toward field packing of fruit vegetables,is increasing. Grading, sorting, sizing, packing and palletizing are carried out in the field. The products are then transported to central cooling facilities. Mobile packing facilities commonly are towed through the fields for melons and cucumbers. Field-pack operations entail much less -handling of products than packing houses. This reduces product damage and, therefore, increases packout yield of products. In melons, for example, field packing means less rolling, dumping, and dropping and thus helps reduce the "shaker" problem, in which the seed cavity loosens from the pericarp wall. It also reduces scuffing of the net which reduces subsequent water loss. Handling costs also are reduced in field pack operations. 3.19 Loaded field vehicles should be parked in shade to prevent product warming and sunburning. Products may be unloaded by hand, dry-dumped onto sloping, padded ramps or onto moving conveyor belts, or wet-dumped into tanks of moving water to reduce physical injury. Considerable mechanical damage occurs in dry-dumping operations: bruising, scratching, abrading and splitting are common examples. The water temperature in wet-dump tanks for tomatoes should be slightly warmer than the product temperature to prevent uptake of water and decay-causing organisms into the fruits. The dump tank water needs to be chlorinated. Preliminary operations include pre-sizing, sorting or selection, grading, waxing, sizing, packing, and palletizing. Various methods are used for cooling fruit vegetables. The most common methods are forced-air- and hydro-cooling as well as package icing and liquid-icing. STEINBICHLER 93 FRESH FRUIT/VEGETABLES 3.20 For uniform and controlled ripening, ethylene oftenis applied to mature green tomatoes and sometimes to some varieties of melons. Ethylene treatments may be done at the shipping point or the destination, although final fruit quality generally is considered best if the treatment is applied at the shipping point soon after harvest. 3.21 Modified and controlled atmospheres are used increasingly during shipment for these products, as consumers demand sun-ripened fruits. Controlled atmospheres reduce ethylene production and respiration rates, and delay ripening and senescence. Pome Fruits (Apples, Pears) and Stone Fruits (Apricots, Sweet Cherries, Peaches, Plums) 3.22 Apple and pear handling usually are highly mechanized and investments shall be made in cooling and storage facilities, including controlled atmosphere facilities for long-term storage. Because of their capability for long-term storage, these fruits have great potential for export. 3.23 Pome fruits are subject to storage loss from Botrytis and Penicillium rots, which can develop in wounds or at the stem or calyx end. Frequent cleaning and chlorine treatment of water dumps can reduce, but not eliminate, the problem. A number of physiological disorders can cause serious losses, especially after prolonged storage. 3.24 Apples and pears can be damaged by bruising. Roller bruising affects the surface of the fruit, resulting in brown areas or brands where rolling, rubbing, or vibration occurred, and damage usually is not apparent below the surface. Impact bruising affects the flesh, resulting in brown spots under the skin that may not be visible from the surface. The browning results from oxidation of phefiols in the presence of an oxidizing enzyme. 3.25 Maturity changes in pears and apples include surface color, seed color, flesh firmness, soluble solids content, starch content, titratable acid content, respiratory rate, ethylene production, and production of other flavor and odor constituents. Suggested maturity indices have included all of these as well as time (days from full bloom), accumulated heat units, fruit size, and various combinations of these. 3.26 As a general rule, pome fruits respond best to rapid cooling and storage at as low a temperature as is possible without danger of freezing or low-temperature injury. The lowest safe storage temperature is related to the extent of temperature fluctuation in the room and the soluble solids content of the fruit. Freezing injury in pears and apples usually starts in the core area, which has the lowest soluble solid content. Therefore, knowledge of the soluble solids contents of the core tissue is necessary to predict the lowest safe storage temperature. Cooling delays are associated with shortened storage life, flesh softening, increased physiological disorders, and post-harvest diseases. Thus fruit should be cooled as soon as possible after harvest. 3.27 A controlled atmosphere (CA) involves refrigerating an insulated gastight room and controlling the atmosphere within so that it is higher in carbon dioxide and lower in oxygen than normal. Most CA rooms have atmospheric generators that burn the oxygen from the air much STEINBICHLER 94 FRESH FRUIT/VEGETABLES more rapidly than can be done by fruit respiration. Excess carbon dioxide from fruit respiration in the gastight rooms must be scrubbed from the air. Scrubbing of carbon dioxide is done with dry lime, water, caustic soda, activated carbon or molecular sieve chemicals. Apples in CA storage respire, ripen, and soften more slowly and have fewer disorders than those in air storage. Consequently, CA fruits have longer storage life and shelf life after removal from storage than fruit stored in air. In CA rooms for apples, an atmosphere of 1.5-3% oxygen, 1- 8% carbon dioxide, and nitrogen (the remainder) is carefully maintained. Recommendations differ by variety. 3.28 Relative humidity of about 95%, considered ideal for pears and apples, is difficult to maintain using large-surface cooling coils alone. Supplemental humidification, especially with fog spray nozzles, now is widely used. 3.29 Numerous precautions should be taken in operating a CA storage. Foremost, never enter a CA room without an air mask, and always have an outside observer (also equipped with an air mask). A 2-3% oxygen atmosphere is lethal to humans. 3.30 Fruits are hand-picked into bags, gently transferred into field bins, and transported to the packing facility. Apples, which often are stored in field bins to await later packing, may be drenched with a scald inhibitor and fungicide and sometimes treated with calcium chloride for bitter pit control before storage. Pears may be wrap-packed or tight-fill packed. 3.31 Packed containers are segregated by fruit size and stacked onto unitized pallets, which are designed and manufactured to be moved directly to the receiving markets. Final cooling of these pallet loads commonly is done after packing. 3.32 Stone fruits characteristically are soft fleshed and highly perishable, and have a limited market life potential. Post-harvest loss of stone fruits to rotting organisms is considered the greatest deterioration problem. Good orchard control is vital to minimize problems after harvest. It is common to use a post-harvest fungicidal treatment against disorders. Careful handling to minimize fruit injury, sanitation of packing equipment, and rapid, thorough cooling as soon as possible after harvest also are important for effective disease suppression. 3.33 Another major cause of deterioration is a low-temperature or chilling injury problem generically called internal breakdown. Some stone fruits are susceptible to mechanical injuries including impact, compression, and abrasion bruising. Careful handling and packing equipment that minimizes such injuries is important because the injuries result in worse appearance, accelerated physiological activity (thus shorter potential market life), more potential inoculation by fruit decay organisms, and greater water loss. Loss of 4-5% of water can cause visual shriveling in stone fruits. Rapid cooling after harvest followed by storage under constant low temperature and high relative humidity are the main means of limiting water loss. The maturity at which stone fruits are harvested greatly influences their ultimate quality. Harvest maturity controls the fruit's flavor components, physiological deterioration problems, susceptibility to STEINBICHLER 95 FRESH FRUIT/VEGETABLES mechanical injuries, resistance to moisture loss, susceptibility to invasion by rot organisms, and ability to ripen. 3.34 Cooling requirements depend in part upon the scheduling of the packing operation. Fruit can be cooled in field bins using forced-air cooling or hydrocooling. Fruit in packed containers should be cooled to near 0 degrees Celsius. Even fruits that were thoroughly cooled in the bins will warm substantially during packing and should be thoroughly recooled after packing. Stone- fruit storage and transport should be at or below 0 degrees Celsius. Maintaining these low temperatures requires knowledge of the freezing point of the fruit and of the temperature fluctuations in the storage system. Holding stone fruits at these low temperatures minimizes both the losses associated with rotting organisms and the deterioration resulting from internal breakdown. Small Fruits (Table Grapes and Strawberries) 3.35 The table grape, a non-climacteric fruit with a relatively low rate of physiological activity, is subject to serious water loss following harvest, which can result in stem drying and browning, berry shatter, and even wilting and shrivelling of berries. Botrytis rot infection caused by the fungus Botrytis cinerea requires constant attention and treatment during storage and handling. Rough handling and rubbing destroys the bloom, giving the skin a shine rather than the more desirable luster effect. 3.36 Grapes are harvested when mature, based upon the soluble solids content of the cluster. Titratable acidity and sugar-to-acid ratio also are used as maturity indices. The minimum requirements vary by cultivar and growing area. 3.37 Because stems and fruit are susceptible to deterioration from water loss, grapes normally are cooled as soon as possible after harvest. Even a few hours delay at field temperatures can cause severe drying and browning of cluster stems. Grapes do not tolerate the wetting associated with cooling. 3.38 Field packing is the most common system. The fruit is picked and placed into picking lugs. Usually the picker also trims the cluster. The picking lug is then transferred a short distance to the packer, who works at a small portable stand in the avenue between vineyard blocks. With many packing stands around the vineyard, supervision is more difficult than in a packing shed, but easier than for vine packing. 3.39 Shed-packed fruit is harvested by pickers and placed in the field lugs without trimming, then placed in the shade of the vines to await transport to the shed. At the packing shed the field lugs are distributed to packers who select, trim and pack the fruit. After packing and lidding, grapes are palletized, usually on disposable pallets. Often loaded pallets coming from the field pass through a "pallet squeeze," a device that straightens and tightens the stacks of containers. STEINBICHLER 96 FRESH FRUIT/VEGETABLES 3.40 After palletization is complete, the pallets are moved either to a fumigation chamber for immediate SO2 treatment or to a forced-air cooler, where fumigation is done at the end of the day's packing. After cooling is completed, the pallets are moved to a storage room to await transport. Ideally the storage room operates at -1 to 0 degrees Celsius and 90-95% relative humidity, with a moderate air flow. 3.41 The proper use of sulphur dioxide is necessary to control growth and spread of Botrytis rot during storage and distribution. To maintain grape quality and limit losses to Botrytis rot with any of these fumigation procedures, good management and supervision of table grape production and handling are vital. Thorough and rapid cooling should be done as soon as possible after harvest. 3.42 Strawberries are among the most perishable fresh fruits, yet they are marketed in increasing volume on both the European and U.S. markets. Strawberries have very tender skins and are easily injured. They are subject to invasion by fruit-rotting organisms and have one of the highest respiratory activity rates of all fresh fruits. Each of these factors poses a severe loss potential to the fruit. 3.43 The greatest single cause of loss to fresh strawberries is "grey mould" or Botrytis rot, caused by the fungus Botrytis cinerea. This organism can invade the berry blossom and remain latent until ripening commences, or it can enter wounds that occur during harvesting or handling, or mycelium of the fungus growing in the soil may penetrate berries in contact with the soil. Many infections probably have occurred by the time the fruit is picked. Supervision of picking and grading operations to try to avoid all visible lesions in the picked fruit is critical to minimizing post-harvest losses. 3.44 Strawberries are subject to rapid water loss, which can cause the fruit to shrivel and appear old and deteriorated, and cause the fruit calyx to wilt and dry. These symptoms affect the fruit's sales appeal before they affect actual eating quality. Because of their high rate of physiological activity, strawberries quickly pass from ripeness to an overripe or senescent state if held at warm temperatures. Strawberries are subject to serious injury during harvest and post- harvest handling. Studies show that many of the injuries occur in the field during picking and packing, and variation in the magnitude of mechanical injuries caused by human pickers is so great as to mask other causes of deterioration. Vibration (or roller) bruising usually is not considered serious for strawberries. Because of its elasticity, the fruit apparently absorbs much of the motion rather than transmitting it and thus limits its exposure to damage in transport. 3.45 Mostly, strawberries are harvested, graded and packed in the field by the picker, who also is responsible for removing rotted or overripe fruit from the plants. This combined operation precludes rehandig of the fruit at packing facilities and reduces the time delay between harvest and cooling. Major attention must, however, be directed to picker supervision if good quality control is to be achieved. STEINBICHLER 97 FRESH FRUIT/VEGETABLES 3.46 Strawberries usually are at least three-fourths colored when harvested for the fresh market. Riper fruit sometimes can be harvested for nearby markets where handling delays can be avoided. Fruit that becomes too ripe for fresh market handling may be diverted to the freezer. Depending on weather conditions, harvesting may be necessary several times per week for uniform fruit maturity. 3.47 Most strawberries are shipped on unitized pallets. The "one-way disposable" wooden pallets are placed on flatbed trucks in the field and stacked with berry crates immediately after harvest, and they remain intact until final distribution in the market area. The tight stacking required for stability and transport-load density must be compensated for in cooling and handling operations. 3.48 Delays of more than one hour between harvest and cooling can accelerate fruit deterioration. , Growers should schedule frequent deliveries of small or partial loads of fruit to the cooler to minimize delays. 3.49 Rapid cooling and avoidance of fruit wetting, which strawberries do not tolerate, is a must. Most strawberry coolers are capable of seven-eights cooling in 2-3 hours. Rapid cooling slows the rate of fruit deterioration and prepares the berries for immediate shipment. 3.50 In the U.S. and Europe many loads are shipped under modified and controlled atmospheres during transit. One of the systems used is to cover the entire loaded pallet with a plastic bag that is sealed to a plastic pallet cover beneath the berry crates. After sealing, the bag is injected with carbon dioxide to create approximately a 15% carbon dioxide atmosphere. If sealing is done correctly, this atmosphere can be maintained throughout transit, with the carbon dioxide produced by fruit respiration roughly matching carbon dioxide leakage from the bag. Pallet bags are installed after cooling, usually just before loading for transport. Another system more and more used is a controlled atmosphere marine container in which temperature, a gas mixture (carbon dioxide, oxygen and nitrogen) and relative humidity are continuously controlled and adjusted according to the products' requirements. Marine containers also can be used for carbon dioxide shock-treatments to fight fruit diseases. 3.51 Temperature is critical in shipping strawberries and therefore use of refrigerated trucks and containers, both in surface and air transport, is recommended. Studies of air shipment of strawberries indicate that unrefrigerated transit time is considerable. During the time in flight, about one-third of the total transit time, the temperature of the cargo hold is warmed to protect other freight. It is possible, therefore, for losses to be greater in air shipment than in truck or container transport despite the shorter transit time. 3.52 Market handlers of strawberries historically have sustained heavy fruit losses (25% in some cases) because of fruit deterioration. Improvements in post-harvest cooling, combined with better surface transport conditions, have greatly reduced these losses. This has changed the STEINBICHLER 98 FRESH FRUIT/VEGETABLES attitude of many receivers toward strawberry handling and prompted them to seek further improvements.1 4. TRAINING PROGRAMS 4.01 In order to build new marketing channels especially for fresh products, not only for local markets but for exports, a training program is recommended. It would focus on all operational levels and aim: * To motivate growers to produce not only quantity but also quality * To initiate diversification programs in the growing areas * To build understanding of marketing activities and marketing channels * To train all trading levels and to make them aware of Western European and international standards * To enhance cooperation between growers, traders and authorities * To develop (together with local research institutes and universities) long-term training programs in which the combination of practice and theory should optimize harvesting and trading within Romania and internationally 4.02 After having thoroughly studied the structure of the current Romanian agricultural industry, particularly taking into consideration the various policy and strategy development projects as well as investment projects presently being elaborated or already in the process of implementation in Romania, an over-whelming fact stands out. The importance of coupled training programs is still sorely neglected in the overall strategic plan. 4.03 In particular, alongside the implementation of a wholesale market organization in Bucharest (a project financed by the European Bank for Reconstruction and Development, co- financed previously by the Gesellschaft fir technische Zusammenarbeit (GTZ), Germany), there is a specific need for a comprehensive training program linked to this market organization. This applies especially to the area of horticultural products, in view of their high value yet highly perishable nature. Training programs should focus on production, handling, trading and commercialization. Throughout agricultural marketing systems worldwide, coupling technical training programs with production and marketing are keys to success. A comprehensive training program would need to consider: , The detailed information in Section 3 is a summary of Freschconsult's transport, storage and handling experience with the respective product groups. The theoretical background is based on Harald Hansen, Leitfaden fur Lagerung and Transport von Gemilse und eflbaren Friichten, Karlsruhe, 1985; United States Department of Agriculture, The Commercial Storage of Fruits, Vegetables, and Florist and Nursery Stocks, 1986; University of California, Postharvest Technology of Horticultural Crops, Davis, 1992. STEINBICHLER 99 FRESH FRUIT/VEGETABLES * Geographical aspects and general administration * The target groups * The training team * Types of training and topics * Implementation schedule and further development * Possible financial resources Structure Of A Comprehensive Training Program 4.04 The topography of Romania incorporates a range of climatic and environmental zones. This provides the basis for several main horticultural production areas, each with specific strengths and weaknesses. The map of Romania outlined below highlights these main production for fruits and vegetables, including potatoes. 4.05 It is apparent that, due to the topographical separation as mentioned, each zone has its own advantages and disadvantages, strengths and weaknesses, which must be maximized and minimized. What would be entirely appropriate in one zone could be inappropriate in another. Therefore, in order for the country as a whole to realize an optimization of horticultural production, each zone should have its own training program. At the same time, there must be a coordination of effort for maximum efficiency. For the organization of these training programs in each of these zones, local official training partners who can assist with the administration must be identified. Table C shows the names of the regions as well as the respective institutions with whom cooperation is necessary. 4.06 The administration and coordination of this suggested training program should be arranged through the Ministry of Agriculture and through the ECDVPH -- the Research Institute for Development and Marketing of Horticultural Products. This research institute is owned by the Ministry of Agriculture and is responsible for physiological and biological research of fresh products in Romania. They are in contact with all the above mentioned areas and institutes and therefore know the respective people in charge. There also is a direct link and a very close cooperation with the Ministry of Agriculture. However, contact persons and project managers within the Ministry of Agriculture, and above-mentioned institutes, as well as local partners, would need to be identified. Target Groups 4.07 The target groups for training programs can be classified as follows: * Horticultural Producers (namely private and state owned organizations) have to be motivated and trained with respect to the quality of their products. For the export market in particular, but also for the ever-increasing sophisticated domestic market, production for quantity alone does not suffice. Clients purchase with respect to an absolute minimum standard. This standard might be related to the nutritional value of a product, or to an increased shelf-life which has come to be expected, but in many cases the STEINBICHLER `100 FRESH FRUIT/VEGETABLES Table C.: State Authorities in Romania's Horticultural Production Areas Area Local Administration Partner 1. Bucharest Ministry of Agriculture, University of Agriculture: Research and Development Institute for Turning to Account of Horticultural Products 2. Timisoara/Arad Faculty: of Agriculture 3. Craiova Faculty of Agriculture 4. Iasi Faculty of Agriculture 5. Constanta Faculty of Agriculture 6. Brasov Research Institute for Potatoes 7. Suceava Research Station (Department of Research, Institute for Potatoes in Brasov) standard is arbitrary and has been set by tradition. Regardless of the underlying principles, the producer must be made aware of the minimum acceptable conditions to meet the demands of the market. These standards often are alien to growers. They (the producers) must be convinced that these requirements and specifications of an often distant market have direct impact on the tasks of the producers and definitely influence the choice and use of available technology. In addition to proper handling procedures, communication of these market standards through training regarding definition of grades and standards is critical to success. * Traders of Horticultural Products: These organizations are comprised of (but are not limited to) brokers, exporters, importers, terminal markets, supermarket chains, wholesalers (distributors) and retailers. It is essential that each link (member) of the marketing and distribution chain (system) is aware of the optimum handling technology and procedure to ensure the highest product quality. Each must be made aware that all handling steps are cumulative. Each step and action by an individual party contributes to the eventual quality of the product at the consumer level. Optimum handling by all parties involved means optimum quality, which translates into longer shelf-life, more desirable product and premium prices. The training program for this sector must include participation by every facet of the logistical chain, because the whole system is only as good as the weakest single link. Not only should individuals be made aware of the effects of their own actions on ultimate quality, but there should be an understanding of the history of a crop prior to their receiving it, so that handlers might know what to expect in regard to quality changes. STEINBICHLER :101 FRESH FRUT/VEGETABLES * Authorities Dealing with Production and Trade of Horticultural Products: The Ministry of Agriculture, the Ministry of Trade, the territorial chambers of commerce, the local departments and faculties of the Ministry of Agriculture, including research institutes and research centers also form a specific trget group.. The overall aim is to involve political and administrative authorities and to train them in the direction of quality-oriented production, in order to provide a basis of understanding of the relationship between this production and maximum returns on investment, and to provide for a consensus so that policies officially supporting quality and market oriented horticultural production, can be engineered and implemented. This includes liberalized trading practices for local and export markets. This area encompasses items such as implementing cohesive and comprehensive standards and inspection service as well as policies which do not inhibit but assist with the logistical movement of produce in trade lanes. Training Team 4.08 To provide training to the above-mentioned target groups, a mixed team consisting of three Romanian and three international experts should be formed in order to have 1) input regarding local experiences and conditions, coupled with 2) expertise on recognized standards of international marketing/distribution. This in particular would allow comparison of the systems, resulting in a merging of systems customized for specific conditions, in order to optimize Romanian horticultural production and trade. 4.09 The Romanian experts could be acquired within the Ministry of Agriculture as well as in the research institutes all over the country. Positive impacts also can be expected from guest speakers in the seven local areas where these training courses should be held. The team of international experts should be recruited at universities, e.g.., the University of California at Davis, the Bundesforschungsanstalt fOr Ernd.hrung in Karlsruhe, or the Horticultural University in Brussels. Type of Training and Topics 4.10 The training should begin after nomination and selection of the thiee nationals from Romania. - They should receive an intense one week classroom training, followed'by a hands-on tour of examples of marketing systems in Western Europe. The three international consultants should participate during this period, giving exposure to all available information and technology. During this period, the three national team members should participate in the exchange of information, so that a basis of knowledge to fit Romanian conditions can be developed, which then will be spread throughout the country. The national team members will suggest tours of specific areas/examples within Romania, if they deem them necessary to train the international team members. 4.11 Once this six member team develops a common understanding, a touring course should be conducted to cover the initial basic program, travelling to each of the seven zones of STEINBICHLER 102 FRESH FRUIT/VEGETABLES Romania. The basic course should not take longer than two days per target group, which would require the team to stay for one week in each area. The training also should aim to bring the three major target groups together, which can be done by arranging a plenary session/discussion at the end of the training in each area. 4.12 All lectures should be illustrated by slides, overheads, videos, etc., so that the emphasis is on observed practice with real-life examples. In each region, practical methods and recommendations with respect to products grown in each region should be highlighted. Not only does this method of presentation maintain the highest attention and interest of the audience, but appropriate technologies are more clearly demonstrated and outlined to the target groups. The topics could be classified in categories as follows: * How to achieve quality in production under the varying conditions of the growing areas, pre-harvest treatments, determining maturity and the appropriate harvesting point, chemical treatments during the process of growing (depending on the products), planting and sowing technologies, etc. * Quality at harvesting: Harvesting methods as well as use of modem agricultural machinery should be taught. Quality within the post-harvest chain, which course would cover all transport-related problems as well as post-harvest chemical treatments (depending on varieties and products), packaging materials used, and multiple-use packaging chains. * Quality on the market: Within this lecture the international requirements of the import markets, the EC standards, and the standards in alternative markets like the Near and Middle East should be presented. Quality standards should be developed. * Economical problems related to quality: Free market mechanisms should be shown in vivid pictures. On the other side, barriers related to import markets should be shown and possibilities outlined for Romanian growers and traders to overcome them. This should be the basis for strategies on research production and marketing. Implementation Schedule and Further Development 4.13 An implementation schedule for the outlined training programs could look at the following: Step 1: Following the Romanian calendar for growing fruits and vegetables, there are two best months for training courses. May is one, because the growing season has not started yet, and September the other, because the major crops already are harvested. At these times of year growers can be shown in the field the advantages or disadvantages of the methods they presently use. Unfortunately, the winter months cannot be used for training courses due to transportation and field problems. STEINBICHLER 103 FRESH FRUIT/VEGETABLES For the basic program as already outlined, two weeks initial training of the team is needed, followed by three lectures per zone, which add up to approximately two and a half months in total to cover the seven zones identified. The lectures could be divided into two sessions: one in the spring and the other in the fall. Step 2: Having carried out the basic training, we should initiate the quality-oriented production and bring Romania's horticultural production up to international standards. Training should be institutionalized in Romania; the Ministry of Agriculture should organize ongoing training. It will be a major task of the mixed team to identify where more detailed training programs should be set up and which specialization, regional or product-specific, they should have. These long-term training programs have to fulfill the strategy and policy requirements with respect to the newly-built marketing channels in Romania. 4.14 On the Romanian side, the promoters of such training programs will be the Ministry of Agriculture, who already has expressed high interest and who also will provide administrative personnel. On the other side, all the research institutes in Romania will back these training programs. Initial negotiations with the Research and Development Institute for Turning to Account of Horticultural Products about the local logistics have been held. Internationally, the World Bank, the European Bank for Reconstruction and Development and (most probably) Western European governments, through their development aid organizations like GTZ, the UK Know-How Fund or the Austrian Bundeskanzleramt, will be interested in an ongoing development and quality increase in Romania's agriculture. These institutions have to be approached to finance or co-finance this training program, which also can be seen as a pilot project for other Eastern European countries (or even for developing countries). .5. PRIVATIZATION THROUGH THE ESTABLISHMENTOF JOINT VENTURES; IDEAS, AND POLICY RECOMMENDATIONS 5.01 There still is potential for joint ventures in Romania, but, due to bad experiences (especially those of Western European companies during the past three to five years in the former Eastern Bloc), their image presently is quite low. Particularly in the agricultural field (processing plants and coldstores) quite negative examples of joint ventures in Hungary and Poland exist, where the amount of investment, as well as the amount of working capital needed, was totally underestimated. 5.03 If Romania decides to set up joint ventures with Western European or other foreign partners, the following points must be outlined clearly in a legal framework for joint ventures. * To acquire foreign partners, an investment has to be (or be made) attractive for an investor. In most cases, the enterprises are not able to achieve this by themselves, and therefore state and/or regional governments must support their efforts. This can be STEINBICHLER 104 FRESH FRUIT/VEGETABLES achieved through tax reduction, liberalization of exports, imports or other trade restrictions, and liberal rental agreements or subsidies on purchases of machinery, land or buildings (by lowering interest rates or even giving non-repayable subsidies). * Investing in transport and storage facilities helps to get input and output marketing in place. * Show as much political stability and security as possible. Certainly no one can guarantee this, but faith in Romania will increase with a stable or at least a stable-looking political organization. * Local governments could help in the acquisition of educated personnel, increasing the attraction of Romania through the training of potential employees. 5.04 Again, due to bad experiences, most Western European countries insist on making investment decisions completely on their own, without any state interference. Because a lack of knowledge on working capital requirements, investment requirements, loan management and liquidity management led to disasters in the past, the lack of intervention also has to be guaranteed to make an investment attractive. 5.05 Another way into privatization is to bring international management into bigger organizations for a period of three to five years. These long-term experts then should give detailed training to Romanian counterparts, instructing managers on Western European standards and making these companies ready to be taken over by Western companies or even to be privatized within Romania (through labor or management buy-outs). This strategy could lead to success quickly; support programs could be found within governments of Western European countries or worldwide aid organizations. There is no doubt that Romanian agriculture has a position in the future, and, assuming a "relatively stable" political democratic structure, Romania's agro-industry and economy will rise again and proceed successfully into that future. 6. INVESTMENT SUGGESTIONS Training Courses 6.01 In order to improve the quality of production, training courses and long-term training programs on pre- and post-harvest treatment, distribution and transportation, marketing, and packaging are vital. These shall enable all participants in the fresh produce industry to market their products on the domestic and export markets at fair market values. Improvement of Cold Stores 6.02 Existing coldstores must be retrofitted. Temperature and humidity (humidification and dehumidification) is critical for all horticultural products and a vast number of other products benefit greatly from modified and controlled atmosphere. STEINBICHLER. 105 FRESH FRUIT/VEGETABLES Post-harvest Handling and Treatment Lines 6.03 Post-harvest handling and treatment lines shall be implemented in order to treat the produce according to their specific requirements and under consideration of national and international regulations and standards. Packaging material not only has to withstand the post- harvest handling but also transportation and needs to be designed according to the importing markets' requirements (e.g., EC standards). Furthermore it is advisable to use multiple use and multiple purpose material in order to reduce costs and fulfil the new German law (T6pfer-Law). Research Programs and Extension Service 6.04 Know-how transfer shall not only be done on the level of international research centers but research centers shall act as an information source and trouble shooter for all participants involved in the production of perishables. STEINBICHLER 106 FRESH FRUIT/VEGETABLES Appendix A: Research and Development Institute for Turning to Account of Horticultural Products General Information: This research center, which is the most important of its kind in Romania is owned and financed by the state. The individual departments, however, contribute to the budget through their production and services. All companies get information for payment. At present the markets which are mainly focused are Central Europe, the former Soviet Union and the Middle East. The individual departments and their tasks are: Design Department: This department is in charge of developing and cultivating store rooms, coldstores, greenhouses, mushroom-cultivation plants, wineries and processing plants for other departments and various other customers such as private local and foreign companies. Further feasibility studies for investments are made and technical assistance is given. Greenhouse Crops Department: This department, which has a branch office in Ischalniza, is examining various fruits grown in greenhouses (mainly tomatoes and cucumbers). The specifics of the individual fruits are examined and new qualities are cultivated, e.g., four new qualities of tomatoes and three new qualities of cucumbers which are largely resistant against parasites and low temperature and which were approved by the authorized state commission. These tomatoes which are absolutely competitive to the Dutch ones were started being exported in 1986. Further tests are made with pesticides and fertilizers and irrigation and agro-technology in general is examined. Concerning pesticides it has to be mentioned that pesticides are produced under license only and that they cannot compete with foreign products. Vegetable and Fruit Processing Department: This department examines the quality and means of production and concentrates on new cultivation methods, e.g., diabetic products. Further pre-market studies and after-market-studies are carried out. In the canning department, glass as well as metal is used whereas the concentration lies on glass because of cost reasons. Transport Mechanization, Economy and Organization Department: This department examines the transport chain from the producer to the consumer whereas studies and cost-benefit calcuations are done. At present a data-bank with all aspects regarding the mechanization of the individual fruits and vegetables starting from the post-harvest phase up to the consumer is established. The main interest of this department is to found a stock exchange for fruits and vetegables. Post-harvest Department: This department deals with handling, sorting, post-harvest treatment, storing and cold store technology. Their aim is to improve post-harvest quality and to optimize the chain from STEINBICHLER 107 FRESH FRUIT/VEGETABLES harvesting up to the consumer. Further, the establishment of quality standards for packaging, storing and grading is planned and the existing Romanian standards should be adjusted to the international standards. Juice and Cold Drinks Department: This department has generated a great number of fruit and vegetable drinks on a natural production basis at the Institute. STEINBICHLER 108 FRESH FRUIT/VEGETABLES Appendix B: General Austrian Import Regulations for Horticultural Products Department III A 5 Person in charge: Reg.Rat Harzer / 6751 Subject: Explanation of the import regime for fruits and vegetables DECISION to no. 34.085/01-III/A/4/93 The legal basis for imports of fruits and vegetables is the Federal Law about the execution of the merchandise movements with foreign countries (Foreign Trade Law 1984), Official Federal Gazette No. 184/1984, in the presently valid wording as well as a number of ordinances hereto, particularly the ordinance about the authorization of the customs offices to confer export and import licences in a simplified form, Official Federal Gazette No. 630/1987. Based on the licence principles standardized in the Foreign Trade Law, the so-called "Three- phase-system" is applied in the field of fruits and vegetables. The first phase applies for the period in which the corresponding domestic product is not offered on the market due to the lack of production quantities and in which it can be imported without quantity limitation. The second phase expresses the quota-imports during those periods in which the domestic production quantities on the market are not sufficient (mostly at the beginning and at the end of the domestic harvest). The third import phase comprises the period in which the supply by the domestic production is given. During this period no import licences are granted. The periods of the import without quantity limitation laid down by law (Customs Authorization Ordinance according to Official Federal Gazette no. 630/1987) for vegetables and fruits (chapter 7 and 8) are,among others, included in the concise edition of the Austrian working tariff. Vienna, January 21, 1993 Dr. Lejeune Figure 1 Marketing channels fresh fruit & vegetables in Romania 0 't** M gaMNEM Small farms Medium farms Big farms 0 wholesale market Import-Export Internal- Trade Companies marketF (D Retailers External market (exports.and Imports) o 0I ORGANIZATIONAL FRAMEWORK FOR ROMANIAS HORTICULTURAL ADMINISTRATION Figure 2 MINISTERY OF_MINISTERY OF - CHAMBER 4 AGRICULTURE TRD OFCMEE AND FOOD TRD DFCMEE UNIVERSmTES COORDINATING INSTITUTION RESEARCH INSTITUTES PrPmae & St owned producifon assodiations COLDSTORES WHOLESALE WHOLESALERS MARKET Table 1: TOTAL FRUIT PRODUCTION IN ROMANIA DURING 1980 - 1992 (in 1000 tons) YEAR: 1980 1985 1986 1987 1988 1989 1990 1991 1992 TOTAL FRUIT' 1327,8t 1959,5 1943,9 1440,5 507,7 158,2 1454 1156,3 1167 APPLES 391,5 699,1 994,4 594,2 609,4 697,4 683,2 504,5 541,1 PEARS 76,9 119,1 90 94,4 97,1 83,4 73,8 56,9 63,1 PLUMS 578,6 816,5 540,9 540,5 534,2 493,8 449,5 413,3 346,7 SWEET AND SOUR CHERRIES 67,1 88,5 82,6 73,9 79,2 79,9 67,7 60,9 73 APRICOTS 33 42,5 49,1 32,8 35,8 49,7 48 26,4 40,7 PEACHES AND NECTARINES 55,3 62,8 83,9 8 57,5 81 52,9 43,2 37,3 NUTS 34,3 39,2 31 28,4 24,8 24,4 26 17,3 21,8 STRAWBERRIES 31,6 27,2 23,4 21,8 24 29,6 18,2 13,9 12,7 OTHER FRUITS 58,7 63,5 46,8 44,2 41,9 37,7 32,2 17,2 28,7 FRUIT BUSHES 0,8 1,1 1,8 2,3 3,8 3,3 2,5 2,7 1,9 Source: Ministry of Agriculture and Food Table 2: TOTAL VEGETABLE PRODUCTION IN ROMANIA DURING 1980 - 1992 (in 1000 tons) YEAR 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 EGETABLE TALVI ABE ;X7 9,;Wl 9.21~ S _1:034' II.sa 2- 11.*189 .9.216 7.872 12 8.13~S9 402 .3 POTATOES (total) 3.942 4.428 4.769 5.815 5.842 6.631 5.186 4.141 3.620 4.420 3.185 1.828 2.601 Export 0 0 0 6 6 20 12 2 3 0 0 0 0 GREEN PEPPERS Itotall 174 228 256 262 311 317 251 269 294 253 182 162 180 Export 5 5 4 3 3 2 1 0 0 0 0 0 0 TOMATOES (totall 1.198 1.615 1.581 1.486 1.908 1.904 1.347 1.194 1.085 1.011 813 643 783 Export 25 22 18 15 16 12 6 7 5 3 2 0 0 BEANS 53 74 87 82 103 92 121 118 68 39 30 36 35 CUCUMBERS 178 212 213 180 218 182 100 110 213 78 79 78 68 CABBAGE 830 835 1.081 987 1.376 1.130 904 815 911 877 552 616 676 GARLIC (dry) 20 31 29 29 36 38 28 27 33 46 30 32 43 ONIONS 281 240 268 328 365 366 299 305 326 412 225 218 339 PEAS 120 130 185 132 207 178 153 184 329 234 97 54 45 ROOT, CROPS letc.) 216 242 278 257 343 324 267 286 258 252 158 193 214 OTHER VEGETABLES 263 366 468 476 823 807 554 423 575 521 188 182 155 Source: Ministry of Agriculture and Food Table 3: TOTAL PRODUCTION OF CANNED VEGETABLES AND FRUITS DURING 1989 - 1992 (in 1000 tons) YEAR: 1989 1990 1991 1992 Export CANNED VEGETABLES 205,41 122,08 92,63 110,25 0,00 CANNED FRUITS 65,35 48,00 31,91 33,42 0,00 TOMATO PASTE 31,13 27,07 15,87 22,16 0,00 Source: Ministry of Agriculture and Food Table 4: CALENDAR FOR FRUITS GROWN IN ROMANIA (numbers reflect percentage of total production per annum) Month I It 1il IV V VI VII VIII IX X XI XII Weeks of the year 1 -4 5-8 9-13 14-17 18-21 22-26 27-30 31 -34 35-39 40-43 44-47 48-52 TOTAL FRUITS. 0,5 11,4 99 7,8 26,7 26,6 -132 3.9 Peaches 3 30 46 20 1 Plums 1 11 59 25 4 Grapes 1 9 54 31 5 Cherries 7 66 27 Strawberries 3 92 5 Apples 1 1 4 18 42 27 8 Pears 5 21 21 32 18 3 Nuts 9 84 7 1 34 48 17 Apricots 9 84 7 Source: Research and Development Institute for Turning to Account of Horticultural Products, Bucharest Table 5: MAIN HARVESTING PERIODS OF FRUITS DURING THE YEAR Beginning Top End 18 23 - 28 / 37 -41 48 Source: Research and Development Institute for Turning to Account of Horticultural Products Table 6: PERCENTAGE OF FRUITS GROWN IN ROMANIAS MAIN PRODUCTION REGIONS Production Region % p.a. Production Region % p.a. Arges 13% Satu Mare 6% Vilcea 9% Prahova 5% Maramures 8% Vrancea 4% Bistrita 7% Buzau 4% lasi 6% Dirbovita 4% Source: Research and Development Institute for Turning to Account of Horticultural Products Table 7: CALENDAR FOR VEGETABLES GROWN IN ROMANIA (numbers reflect percentage o total production per annum) MONTHS I II Ill IV V VI VII VIII IX X XI XII VEGETABLE CoTe POTATOES early 5 80 15 middle 16 77 7 late 10 54 36 CUCUMBERS greenhouse 1 25 43 28 3 summer 17 66 1:7 late 13 57 30 LETTUCE greenhouse A 1 50 32--- early 45_-- ___ 45. 50 :5. middle : 5 32 36 27 late .10 90 TOMATOES greenhouse ___:20____ 3 :20 43 32 2 plastic protect. -_35 60 6 early 17 54 29 middle 5 65 30 -.30.- late 30 70 ASPARAGUS 5__80_*_5 80 15 CAULIFLOWER plastic protect. 35 65 early __ 35 middle 45 55 late -30 70- Source: Research and Development Institute for Turning to Account of Horticultural Products. Bucharest Table 7: CALENDAR FOR VEGETABLES GROWN IN ROMANIA (numbers reflect percentage of total production per annum) MONTH 1 II Ill IV V VI VII Vill IX X XI XII VEGETABLE CroplType CABBAGE plastic protect. Z7 25 _ early 320 67 1 middle 30 59 11 late 5 4& 47 ONIONS (green) plastic protect. 90 10 - field . 30 35 30-,:- ONIONS (dry) field /chive 5 95 field / seed 10 90 PEAS (greenl . 25 67 8 BEANS early 23 51 26 late -- 38 62 MELONS greenhouse 30 70'm-. plastic protect. 30 00 field -_ _ 48 2 Source: Research and Development Institute for Turning to Account of Horticultural Products, Bucharest Table 8: MAIN HARVESTING PERIODS OF VEGETABLES DURING THE YEAR Number of the week % from total CROP Beginning Top End production very early (greenhouse protected) 3- 12 19- 22 27-29 5 early field (spring) 19 - 22 24 - 28 30 -34 30 middle late field (summer) 27 33 - 36 41 40 late field (fall) 38- 39 41 -44 45 -48 20 late (greenhouse protected) 41 52 5 Table 9: PERCENTAGE OF VEGETABLES GROWN IN ROMANIAS MAIN PRODUCTION REGIONS Production Region % p. a. Production Region % p.a. Production Region % p.a. llfov 11% Arad 7% Buzau 4% Timis 8% Dolj 6% Prahova 4% Teleorman 7% alomita 5% Ot 4% Braila 3% Bihor 3% Constanta 4% Source: Research and Development Institute for Turning to Account of Horticultural Products Table T0: GENERAL OUTLINE OF COMPETITION VARIETIES OF PRODUCTS EXPORT CHANCES TO MAJOR COMPETITIVE COUNTRIES WESTERN EUROPE AUSTRIA EEC VEGETABLES Potatoes low low all EEC countries, Cyprus Cucumbers moderate good Netherlands, Germany, Spain Lettuce moderate moderate Netherlands, Italy Tomatoes moderate moderate Netherlands, Italy, Turkey Asparagus low low France, Spain, Germany Cauliflower vexy low good France, Spain, Germany, Italy, U.K. Cabbage low low Germany, Poland, Netherlands. Scandinavia Onions, dry very low very low all EEC countries Onions, green low low all EEC countries Peas very low moderate France, Hungary, U.K. Beans low good Turkey, Italy, Spain, Egypt, California Melons very low good Spain, Greece, Turkey, Israel FRUITS Peaches low moderate Greece, Spain, Italy Plums moderate low Germany, Yugoslavia, U.K. Grapes moderate moderate Italy, France, Spain Cherries low good France, Italy, Bulgaria, Turkey Strawberries very low moderate Spain, Italy, Poland Apples very low very low France, Germany, overseas production Pears low low Italy, Germany pricots very good moderate Spain, France, Turkey, Italy Index: very low no export chances at aB low slight chances at specific times of the year moderate chances of finding export markets at specific times of the year good good chances to find export markets at specific times of the year very good very good chances to market succesafully the products excellent excellent chances to market successfully the products ROMANIA A STRATEGY FOR THE TRANSITION IN AGRICULTURE WORKING PAPER THE AGRICULTURAL INPUT DISTRIBUTION SYSTEM ALEXANDER GROBMAN JUNE 1993 JOINT ROMANIAN-INTERNATIONAL AGRICULTURAL STRATEGY TEAM THE WORLD BANK, IN COOPERATION WITH EC-PHARE, EBRD, USAID, AND THE FRENCH AND GERMAN GOVERNMENTS 121 ROMANIA AGRICULTURAL INPUT DISTRIBUTION ALEXANDER GROBMAN TABLE OF CONTENTS Page Summary 127 Recommendations 131 1. Introduction and Background 135 2. Technical and Economic Opportunities and Limitations 136 Opportunities for the Use of Farm Inputs 140 Limitations to the Use of Agricultural Inputs 142 3. Inputs: The Technology Supply Function 143 The Fertilizer Technology Supply Function 144 The Technological Seed Supply Function 147 The Technological Pesticide Supply Function 148 The Technological Agricultural Machinery Supply Function 148 The Feed Technology Supply Function 149 4. Input Description 149 Seeds and Plant Propagating Material 149 Fertilizers 153 Pesticides 154 Agricultural Machinery 156 Fuel 159 Irrigation 160 Feed 161 5. Input Distribution Systems 164 Integrators and their Relationship 166 Roles of the Ministry of Agriculture and Food 168 Input Distribution System for Fertilizers 170 Input Distribution System for Seeds 177 Input Distribution System for Pesticides 188 Distribution System for Agricultural Machinery 190 Mechanization Services 192 Input Distribution System for Animal Feed 194 6. The Credit System and Agricultural Input Distribution 195 Recommendations for Dispensing Credit for Input Procurement 198 7. Price Relationships 201 Recommendations 203 8. Privatization of the Input Distribution System 204 The State Ownership Fund 206 Agromecs 208 Semrom S.A. 208 Unisem S.A. 210 R.A. Romcereal 210 Manufacturing Companies 213 Appendices A. Present Limitations to Investment in the Seed Industry 215 LIST OF TABLES 1. Area of Principal Crops in Romania (by 1,000 ha) 219 2. Production of Principal Crops in Romania (by 1,000 tons) 220 3. Consumption of Chemical Fertilizers in Romania 221 4. Production, Consumption, and Export of Fertilizers 222 5. Comparative Use of Fertilizers, Romania and European Countries 223 6. Nitrogen and Phosphorus Fertilization in Maize for Optimum Economic Results 224 7. Phosphorus Fertilizer Supply Compared to Optimum 225 8. Fertilizer Price and Cost Evolution 226 9. Fertilizer Price and Cost Evolution, Complex Fertilizers 227 10. Cost and Price of Superphosphate Fertilizers 228 11. Distribution of Nitrogen Fertilizers by Judet 229 12. Distribution of Phosphate Fertilizers by Judet 230 13. Production Costs and Returns for Wheat per Hectare 231 14. Ratio of Prices of Fertilizer and Grain 232 15. Estimation of Nitrogen Added to Soil as Manure 233 16. Economic Optimal Rate of Nitrogen Application 234 17. Comparative Prices of Fertilizers 235 18. Fertilizer Production, Consumption, and Export 236 19. Economic Optimum Dose of Fertilizers 237 20. Seed Distributed by Semrom 238 21. Seed Demand and Supply by Semrom 239 22. Operational Capacity of Agrosem Plants 240 23. Cost of Production of Hybrid Maize Seed 241 24. Financial Indicators of Semrom 242 25. Price Structure for Cereal and Technical Plant Seeds 243 26. Prices of Vegetable Seeds in Romania 247 27., Wheat and Rye Production, Delivery, and Seed Retention 248 28. Maize Hybrids Produced and Sold by Semrom 249 29. Maize Hybrids Planted in Romania 250 30. Commercial Seed Demand, Supply, and Distribution 251 31. Imports and Exports of Seeds 252 32. Varieties of Soybean Cultivated in Romania 253 33. Unisem Business Figures for 1992 254 34. Fleet of Tractors and Farm Machinery 255 35. Description and Prices of Romanian-made Agricultural Machinery 256 36. Equipment Required to Manage a 1,000 Hectare Irrigated Farm Module 258 37. Projected Demand for Tractors in Romania 259 38. Selected Tariffs Charged by Agromec 260 39. Imported and Formulated Pesticides in Romania 261 40.' Distributors and Prices of Pesticides in Romania 264 41. Reception of Grain by Romcereal -- Quality and Prices 267 42. A Program for Privatization of Romcereal and the Input Distribution System 268 43. Total Fertilizer, Romania -- Production, Consumption, and Export 269 44. Ratio of Grain/Fertilizer Prices in Terms of Nitrogen Nutrient 270 45. Average P205 Use and P205 Soil Status 271 46. Fertilizer Consumption in Romania 272 47. Fertilizer Exports from Romania 273 48. Evolution of Maize Yield 274 49. General Organization of Semrom 275 50. General Organization of Agrosem 276 51. Semrom Seed Production Flow 277 52. Seed Distribution Channels 278 53. Fertilizer Distribution Channels 280 54. Pesticide Distribution Channels 281 55. Romcereal Credit, Input and Grain Flows 282 56. UTB Manufacturing Diagram 283 57. Destination of Wheat and Rye 286 ROMANIA AGRICULTURAL INPUT DISTRIBUTION Alexander Grobman Penta Seeds Group, Lima SUMMARY'. Romania, with more than nine million hectares of mostly fertile, mostly flat, arable land, has favorable ecological conditions relative to those of the majority of other European countries. However, it has limitations in regard to low annual precipitation and distribution, which limits crop yields and the effective use of inputs. These factors also limit the length of growing periods for some species, especially for spring crops such as maize and soybeans, effectively limiting their maximum yield ceilings, and conditioning maximum levels of fertilizer application. Irrigation, benefitting more than three million hectares, removes limits to efficiency in the use of fertilizers and improves dramatically average crop yields in Romania. The land reform process, with its resulting land redistribution and the disappearance of the Agricultural Production Cooperatives (CAPs), resulted in the emergence of more than five million new farmers with average holdings of 2.5 ha. This process has had a major effect on the scale of farm operations and the mix of crops. Land reform also has lowered the total area planted, lowered yields in general, reduced the use of fertilizers and pesticides, increased the use of non-certified seeds (mostly of the autogamous species such as wheat, barley, and oats), and reduced poultry and pig populations in the formerly technologically-advanced production operations of the CAPs (these have been replaced partially by smaller farm operations with production mainly destined to self-consumption). It has resulted additionally in farmers storing, rather than selling, their produce, especially grain, as insurance against inflation, and consequently reduced the volume of farm commodities procured by the state agencies at official prices for feeding the urban population. As a policy response to this scenario, GOR decided to implement a production-oriented set of policies. These hinge strongly on increasing the utilization of farm production inputs by the emergent private farmers and farmer associations. The means to accomplish the chosen objective include: * Subsidization of the prices of fertilizers, seeds, pesticides, farm machinery and agricultural mechanization services, irrigation water, and animal feed. In most cases the levels of the subsidies are exaggerated, as for fertilizers and pesticides, reaching close to 90% of their cost of production. * Funds on the order of 60 billion lei have been appropriated by GOR, from the general budget, for a subsidized credit program directed at private farmers. Credit is allocated for advance to farmers for their purchases of production inputs and agricultural GROBMAN 128 INPUT DISTRIBUTION mechanization services. This type of credit is made available through Banca Agricola to intermediaries called integrators, who dispense it to farmers. It is supplied at a subsidized annual interest rate of 15%. * Primary integrators are state-owned organizations which may dispense the subsidized credit referred to above to farmers in exchange for contracts by means of which the farmers obligate their crops to the integrators, at fixed prices and in such quantities as to repay twice the amount of the credit advanced. In other words, farmers may receive an advance of 50% of the value of their contracts for buying agricultural inputs and mechanization services. Primary integrators are R.A. Romcereal for grain, Semrom S.A. for field crop seeds, Unisem S.A. for vegetable seeds, sugar beet factories, vegetable fiber factories, the tobacco monopoly, the dairy monopoly Romlacta, and malting and beer-making factories. Feed mills recently have been granted integrator status, but they have to work out subsidy issues before being able to operate as integrators. * Secondary integrators supply inputs and services through the linkages with primary integrators. Agromec companies supply mechanization services to farmers, mainly as sub-contractors to Romcereal and to Romcereal's clients. Semrom supplies seeds to Romcereal clients, although Romcereal procures some 30% of the seeds sold by Semrom for direct distribution. Both Agromec and Semrom supply services or seeds to farmers who are clients of Agromec or not, also on their own account. Agromec, further, acts as distributor of fertilizer and fuel to farmers who request it. Some Agromecs also have become dealers for tractor and farm machinery companies. Additionally, some Agromecs farm relatively large tracts of leased land. ! Official prices have been raised on some grain commodities and set closer to border prices than they were. Not all prices were readjusted, leaving some serious price distortions that produced decreases in their respective crop-planted areas. The oilseed crops were affected most. The resulting shortage of protein meals and cakes affects the quality of feed and obliges GOR to spend large sums of scarce hard currency to import protein meals (twenty billion lei worth in 1993). * Animal sanitary services, irrigation water costs, costs of soil amendments for ameliorating acid and saline soils, natural insemination of animals, plant protection, land survey and mapping services, veterinary products, and erosion control are also subsidized agricultural services. * Feed and flour mills buy grain from Romcereal at subsidized prices in order to lower the price of their final products. Imported wheat also is sold at subsidized prices. * Direct food subsidies are applied to bread, sugar, oil, dairy products (milk and butter) and meat. GROBMAN 129 INPUT DISTRIBUTION Economic Considerations on Farm Input Use The subsidized prices of farm production inputs and prices paid for agricultural commodities have benefitted farmers who have had access to inputs. Those who got them in sufficient quantities -- mainly state farms, some associations, operators who have leased large tracts of land, and some individual farmers -- have realized windfall profits. For wheat, with good yields, in reported cases this could mean between 160 and 220% gross profits over cost. In general, however, the effect of the low cost of inputs is lost on most farmers in the case of fertilizers and pesticides. Their supply is at a level much lower than that which would be influenced by prices which enhanced their demand. In the case of both fertilizers and pesticides, insufficient availability of raw materials limits production, as the factories that manufacture the exports require imported gas, phosphate rock,.and potash in the case of the fertilizers, and technical chemical products in the case of pesticides. The general shortage of hard currency and access to it is a handicap. Analysis of crop production costs indicates that mechanization in the case of wheat may account for the largest share of the cost of production, about 55%, followed by 30% for the cost of seed and only 7% for the cost of fertilizer. The extremely low cost of fertilizers and the very high seeding rates used for wheat in Romania may account for these figures. Production costs of inputs in Romania under present conditions are lower than border prices of most seeds, fertilizers (except high formula phosphate-based), pesticides produced locally, tractors and farm machinery, and fuel. No immediate possibilities are seen for the alleviation of shortages of most inputs by way of straight final input importation, except in the case of some seeds such as trefoils, some plaguicides of lower cost, and large quantities of protein meals (mostly soybean meal and fish meal). The importation of raw materials for production of the final farm production inputs in Romania will continue to be the preferred solution in the transitional period. In the transitional period the major factors that will affect the use of inputs will be: * Their availability to farmers, represented by sufficient supply and efficient distribution * An intensive educational and promotional campaign on the technical and economic benefits of the use of technologically-advanced farm inputs * Expansion of credit and access to it, even at closer to real interest rates, which will require accelerating the issuance of land titles and provisional legal validation of present ones * Development of the legal and promotional base for the establishment of an input distribution system in the private sector * Liberalization of all farm commodity prices, allowing them to approach border prices GROBMAN 130 INPUT DISTRIBUTION The Input Distribution System The input distribution system in Romania is similar in its major features to the system that existed before the revolution. State agencies still collect expected demand information and pass it to the factories and supply companies. There still is active participation of the Ministry of Agriculture in fixing maximum prices for inputs and a 10% estimated gross profit allowance to manufacturers. There continues to be an independent, parallel system of distribution for each input which is very inefficient in terms of resource use (and typical of former Eastern European socialist economies). The absence of private sector wholesalers and dealers, with some exceptions, is evident. Without a clear policy and legal promotional base for the function and operation of,a private network of farm input wholesalers and dealers, these critically important components of an efficient input distribution system, will continue to be absent. Their void then will continue to be occupied by state agencies, whose social cost to the economy will be several orders of magnitude higher than the private sector system of operation. The new role of Romcereal is that of a facilitator for the access of private farmers to credit and thus to inputs. It, and other primary integrators, become in effect credit intermediaries and secondary distribution agents. Their positive role as collateralizers of credit during the past emergency period must be recognized. On the other hand, it must be realized that this role is not permanent, and that their stopgap presence delays and actually impedes the development of a permanent input distribution system in the private sector. Total consumption of fertilizers is lower in Romania than other Eastern European countries, and half that of a basket of European countries in terms of total nutrients: 121 kg/ha in 1992-93 against 229 kg/ha. Fertilizers are bought by state farms (or their resulting commercial agricultural companies) in amounts disproportionate to their share of agricultural land, 75% of consumption vs. 20% of land. Because of the scarce supply, buyers must put money up front several months before delivery in order to ensure those deliveries. Factories deliver at their gate; farmers residing nearby get fertilizers directly at the factory. Private farmers located farther away obtain their fertilizers at communal centers, where they must pick them up at the time of arrival (as there are no storage facilities for them), or at state farms, or from Agromec companies (with previous order and advance payment), or from Romcereal or other integrators, or, finally, from a BATMA store (with previous advance order and payment). Semrom supplies in the vicinity of 60-65% of the total seed demand. It produces and distributes (either directly or through Romcereal) some 600,000-700,000 tons of seed annually. About 70% is directly distributed by Semrom from its complexes (Agrosems) located in each judet. State farms and some farmers' associations produce seed under contract for Semrom. Some specialized state farms also sell seed directly to other farmers (and keep some seed for their own use). An increasing number of private farmers save their own seed, primarily for small grain cereal crops. GROBMAN 131 INPUT DISTRIBUTION Pesticides produced by six major factories and several minor producers are distributed primarily by the Inspectorate for Plant Protection of the Ministry of Agriculture and Food (MAF). In every judet there are zonal and communal depots at which pesticides are stored. Class I and II (high toxicity) pesticides are stored in the zonal depots of the Inspectorate; class III and IV (lower toxicity) pesticides are distributed from communal agricultural centers' phytopharmacies. Imported pesticides also were and are distributed by Romcereal. Private importers associated with multinational chemical firms in the field of plaguicides are in the process, since 1993, of organizing their own network of distributors, starting at the regional level. Imported pesticides are more expensive than locally-produced ones, but availability of the latter presently is limited by the scarceness of hard currency available to the factories to import technical products and other raw materials. Tractor and agricultural machinery factories used to sell their products at the factory gate and were geared to serve Agromecs and large CAPs and state farms. With the advent of a large number of new potential clients, the major firms have resorted to the establishment of some Agromec companies, and companies formed by former Agromec employees as full sales and service dealers for equipment and spares. Credit is available to farmers with 40 hectares of land to buy tractors or combines for acting as service suppliers to others with 15 % down payment and up to six years to pay. Some 600 Agromec companies existed at the time of the revolution. A number of them have gone through consolidation in preparation for privatization. Their services to farmers are supplied at rates approved by MAF, which are very low and allow them a 10% gross profit. Agromec rates are lower than those of private operators. Agromecs usually subcontract their services to Romcereal farmer clients, and get their payment from Romcereal. Direct contracts to farmers account for 70% of their revenue. Additional services performed by Agromecs are distribution of fuel, fertilizers (usually linked to their application) some seed, and pesticides. Some Agromecs are now farming large tracts of leased land in order to supplement their income and to utilize their large machines. Feed mills receive subsidies for the grain they procure through Romcereal. These subsidies allow them to provide animal feed to their farmer clients at lower prices than if they purchased grain directly using their integrator status. Concentrated animal feed use has fallen abruptly with the demise of the CAPs and the reduction of the animal feeding activities of their successors. Feed is sold at the feed factory and also at their (few) own stores. No other organized distribution system exists. RECOMMENDATIONS In August/September 1990, GOR announced a broad policy framework of agricultural reforms. The reforms included divestiture and privatization in the agricultural sector of the GROBMAN 132 INPUT DISTRIBUTION majority of state entities, market and foreign trade liberalization, price and credit system liberalization, encouragement of foreign joint ventures, and reform of the land property system. It appears that, two and a half years later, only the latter objective shows clear signs of positive accomplishment. The cost of explicit subsidies to inputs and services to farmers is expected to reach 172.4 billion lei in 1993 -- slightly more than half of the total subsidies of the sector -- and 8% of total planned GOR revenues. With the addition of subsidies to credits used to buy agricultural inputs, the total explicit subsidies targeted for inputs will reach 232.4 billion lei. This figure is equivalent to 10.8% of projected fiscal revenues in 1993. These expenses represent a major portion of the fiscal deficit expected for 1993. Therefore the pressure to reduce subsidies and transfer the agricultural input distribution system to the private sector has made GOR decide to take action. The State Ownership Fund (SOF) was established as a controller of the state's shares in state-owned companies and as an administrator agency for the privatization process. It has as its main objective the selling of state company shares. It admits, however, that this process is handicapped by several factors including: * Legislation incomplete for a market economy * Absence of an operational securities market * The need for amendments to Law 35, the foreign investment law, which now are being considered in Parliament * The need to develop a mutual fund investment system * The lack of a modem accounting law (one is expected to be approved next year) * A modified commercial law, as the present one is not considered suitable for the protection of the interests of small shareholders * Participation of the banking community in financing deferred payments for shares in the privatization process Some of the decisions under consideration at SOF include: * The privatization of Agromec companies; a specific methodology for doing this has been developed at the MAF * In the case of agricultural research, seed activities, and other institutions related to other inputs in the agricultural sector, there is no definition, as the state appears to intend to continue exercising direct control * No decision has been made on how to proceed With Romcereal and with the integrator system in the short term * A law on intellectual property protection is in Parliament The mission recommends, in the case of the Agromecs, the continuation of the privatization process, expected to be fully activated within six months. Some of the Agromecs GROBMANt 133 INPUT DISTRIBUTION may be core companies when in the private domain, to become multi-input dealerships for farm machinery, tractors, fertilizers, seed, plaguicides, veterinary products, and feed. The future of Semrom is confused at this time. Semrom should be partitioned into blocks of components and auctioned in public tenders in order to allow a possible 10-12 companies of medium size and other smaller ones to own their facilities and become true competitors in an open market. Facilities not immediately privatized should be given to firms willing to establish management contracts during the transition as prelude to the privatization of these components. Ultimately, at the end of the transition, no state-owned enterprises or institutions should remain in the seed business. The same recommendations apply to the vegetable seed company Unisem S.A. A new seed law has been presented in Parliament. Appendix A lists some of the major problems that a private sector investor would confront and which need to be addressed by a seed law. The mission submits that the bill now in Parliament, while introducing some important points favoring a private sector presence, is incomplete and insufficient to address the problems of the development of a seed industry in the transition, and that it should be completely modified in its orientation and contents. Romcereal has a special position in the input distribution system of Romania, as well as in the framework of its general agricultural structure and policy. It has, in effect, become the largest state agency and by far the largest user of Banca Agricola credit. It also is the major wholesale channel for the distribution of fertilizers, seeds, and pesticides. It is the major finance of mechanization services. Its effective command of the input distribution system in Romania, as long as continued, will have far-reaching effects in paralyzing any private sector development in its areas of responsibility. It acts as: * Credit intermediary * Supplier of integrator services including facilitation of input acquisition * Grain procurement operator * Organizer of the marketing channel for the officially-priced grain market through presence of a "purchasing power" * Supplier of grain drying and storage facilities for its own grain as well as for other clients * Grain supplier to flour, feed and oil/meal milling processors * Initiator of imports of grain and protein meal * Grain redistributor among judets * Manager of the national grain fund (food security reserve) * Manager of primary grain statistical information Romcereal figures in MAF's strategy primarily as a problem-solver organization. It used to procure grain from the CAPs, and with their demise the decline in procurement of grain by the state had to be reversed. Romcereal was called to take this responsibility and thus became GROBMAN 134 INPUT DISTRIBUTION the central agency of state farm policy. Nevertheless, it must be recognized that its role as a problem solver is transitory. The longer it continues to function in its present multiple role, the longer and harder will be the restructuring of the system and the adoption of permanent solutions. These solutions ought to go through the integral privatization of the production and distribution system for farm inputs. The state shall remain as supplier of some services not easily provided through the private sector, and as a general administrator, promoter, and policy formulator, but the state neither should produce nor distribute inputs. There is no definite policy formulation concerning the future of Romcereal. The mission proposes a period of disengagement from its present functions and transformation for Romcereal, along the following general lines. They involve parallel changes in other policies and their adaptation to the transition, in order to pave the way for the gradual process of change in the functions of Romcereal. These are listed below: * For a period not to exceed the next two years, Romcereal should continue to performing its general services, but not provide new ones. Farmers should be allowed to increase options for direct financing, direct purchase of inputs from distributors, and free market access. * During the transition period, Romcereal should cease to offer interest-free loans to farmers. All farm input distributors should have access to the same credit conditions as Romcereal gets from Banca Agricola. Romcereal should cease operating as a wholesaler or retailer for farm inputs; all the inputs it orders should go to new private wholesalers and dealers. * State-owned factories, in the transition period, should support the evolving private input distribution system by starting to operate with wholesalers, minimizing or curtailing small order sales at factory gates * Romcereal shall, during the transition, in coordination with MAF, Banca Agricola and other banks, develop and legalize a grain warranting system applicable to farmers. It should offer its grain silos and flat grain storage facilities as bonded grain storage services to farmers, farmer associations and companies, grain handling companies, seed companies, grain millers, and banks and other financing agencies. Grain stored at Romcereal shall serve as collateral for warrants issued by banks for 80% of the market value of the grain. Farmers also shall have the option to sell grain at full free market price to Romcereal at harvest time, whether or not they are contractors to Romcereal. At their option they should be able to repurchase the same volume of grain sold, minus shrinkage, from Romcereal at the original market price, up to six months from date of sale with the additional payment of a monthly fee (including interest) for the grain storage services. Grain warrants will be recognized and guaranteed by Banca Agricola and other financial agents as negotiable financial instruments. They may be used as collateral for loans to farmers to start new agricultural campaigns. GROBMAN 135 INPUT DISTRIBUTION * The grain warranting system will be supported by grain spot and grain futures wholesale cash markets, and the early and full liberalization of grain prices * Concomitantly with the former measures, a nationwide grain and other commodity price collection and reporting system should be developed * Romanian grain grading standards should be developed or revised to adjust them to international standards, and especially to U.S. standards, especially if international futures option trading is to take place with Romanian grain * During the transition a privatization program should be developed and announced for transfer by sale of Romcereal facilities to the private sector * In the privatization process, Romcereal may optionally be allowed to retain under its control and ownership up to 15% of its present grain storage facilities. These would be used for food security purposes, and as a reserve to limit potential excessive grain price fluctuations. * With the orderly establishment of the programmatic stages and actions outlined above, and with an emergent private sector/government partnership, the phasing out of Romcereal and the replacement of its functions with new systems of credit, input distribution, and marketing, the farming community not only will be comforted and protected during the transition, but will be able to reap considerable future benefits * The final fate of the state companies dealing with the production of fertilizers, tractor and farm machinery, and plaguicides, which are in the industrial sector, should be their outright privatization. The UTB tractor factory at Brasov is a special case because of its horizontal and vertical integration. This case requires special study, which at present is being provided by a foreign consulting firm. 1. INTRODUCTION AND BACKGROUND 1.01 Romanian agricultural production has declined sharply since the 1989 revolution (Tables 1, 2). This drop in production is a consequence of several factors: * The decollectivization of the farm cooperatives, with the agricultural resources (including six million hectares) divided among small, under-capitalized, and under-managed farm units with an average size of two ha of arable land * The breakdown of the technical support system that had been geared to work on large farm agricultural structures, with no replacement introduced GROBMAN 136 INPUT DISTRIBUTION * The collapse of the production and distribution of fertilizers, tractors, agricultural machinery, seeds, feed, and plaguicides, due to unavailability of hard currency needed for the importation of critical parts, components, and raw materials. Coupled with this problem came the demise of the COMECON market and its planned interchangeability of products in a closed market based on the ruble currency. * The shift of preference of smaller farmers to produce certain agricultural products from others (example: to maize from wheat), creating unpredicted deficits * Continued price distortions in the. farm products market. This situation is a consequence of inflation, price lagging, slow adaptability of the command economy and the large monopolistic regional farm product buyers, poor price information dissemination, and inadequate storage at the farm level. * Limitations on direct credit to small farmers, associated with the farmers' inability to provide solid guarantees, especially land titles. This situation has forced many of them to accept subsidized credit, but also has resulted in the mortgaging of their crops at lower than market prices to large state-farm products procurement monopolies including Romcereal, Nutricom, Semrom, Unicarne, Zaharom, and Romlacta. 1.02 Both the Ministry of Agriculture and the Cabinet have produced documents proposing policies that these respective bodies consider appropriate for Romania in the short/medium time period. In consideration of their respective positions, the recommendations presented here are based on the development of a macroeconomic and sectoral policy. Minimum macroeconomic and sectoral policy options are necessary for our recommendations to restructure the agricultural input supply system successfully. 2. TECHNICAL AND ECONOMIC OPPORTUNITIES AND LIMITATIONS 2.01 Romania possesses soil and climatic factors that both enhance and limit the opportunities for agricultural production. The country is located geographically between 420 30' and 480 North, coinciding approximately with the northern Corn Belt region of the U.S. Relative to Europe, Romania is located in a more southern location than most countries, allowing crops a relatively longer cropping season. 2.02 In terms of rainfall during the critical period of June to September when the temperatures are highest, the lowest precipitations are found in Dobrogea, with increasing rainfall in southern Moldavia and eastern Moltenia, and followed by still higher precipitation in the southern plains of Oltenia and Moltenia. Even higher rainfall is found in northern Moldavia, the Transylvanian plateau and the western plains. Total precipitation, especially its distribution in the critical summer months, may be a limiting factor for crop yields in many years. For example, in the GROBMAN 137 INPUT DISTRIBUTION Fundulea maize area near Bucharest, total precipitation between September 1991 and October 1992 (a drought year) was a meager 380 mm, insufficient for a regular maize crop. 2.03 Insufficient precipitation also may affect the potential for fertilizer use under rain-fed crop growing conditions. In effect, if soil moisture becomes the limiting factor for plant growth, economic optima of fertilizer use are achieved at lower levels of fertilization. Fertilizer use under less than favorable crop prices may become more depressed in the drier-cropping non- irrigated areas of Romania. 2.04 The World Bank advocated the increased use of newer drought-resistant grain crop hybrids in Romania, especially grain sorghum and sunflower, in a previous report (World Bank, Romania Agricultural Sector, Working Papers, February 1991). Experimental results with modem grain sorghum hybrids obtained from the Fundulea Cereal and Technical Crops Research Center for 1992 show plot yields of close to eleven tons/ha in a drought year with a total of 380 mm rainfall, and confirm that sorghum has possibilities for becoming a major grain crop under low rainfall conditions such as. prevail in Romania. 2.05 The precipitation/evapotranspiration balance fluctuates from year to year and differs from one region to another. As an example, data for two locations in the Timis judet show for Gavojdia annual precipitation between 646 and 825 mm per year for a sample of six years, and only three of those years show a positive precipitation minus evapotranspiration balance. For the locality of Berini, the annual precipitation-fall in those same six years was between 552 and 660 mm, with five of those years exhibiting negative precipitation minus evapotranspiration balances. 2.06 These considerations have prompted the Romanians to install irrigation systems for around three million ha of land, with plans to expand the irrigated area to a total of five million ha. Most of the irrigation systems use large pumps with which water is conveyed from rivers, such as the Danube and the Prut, to open canals from which it is. pumped to buried pipes. Sprinkler connections are linked to the buried pipes. The irrigation systems have fallen into disrepair and require a substantial investment in order to restructure some and restore others to operation. Some of them are uneconomical and will have to be remodeled completely. The effect of irrigation on potential crop yields is impressive as compared to rainfall cropping. Table 28 illustrates the range of yields for a series of maize hybrids under irrigation and under non- irrigated cropping; it shows that irrigated maize yields can increase between 25% and 45%. Yet, additional studies are needed to determine to what extent additional investment in irrigation is economically viable. 2.07 Table A indicates the available degree-days (effective daily temperatures over ten degrees centigrade) available for successive croppings starting in June (for example, after wheat harvest). The southern plains of Oltenia and Moltenia, Dobrogea and parts of Southern Moldavia are in Zones I and II. Zone III includes the northern part of the southern plains, southern Moldavia, and the plains of Banat in eastern Romania. Zone IV is the southern piedmont area of the GROBMAN 138 INPUT DISTRIBUTION Carpathian Mountains and a strip in western Transylvania. The low temperature summation zones (V to VIII) are concentrated in the central Transylvania plateau and in northern Moldavia and Bucovina. Table A: Thermal Resource Zoning for Succesive Cropping ZONE Average multiannual value for summation of degree-days from indicated date to the first frost in Autumn (oC) 1/6 10/6 20/6 1/7 10/7 I 1400-1500 1300-1400 1200-1300 1100-1200 1000-1100 II 1300-1400 1200-1300 1100-1200 1000-1100 900-1000 III 1200-1300 1100-1200 1000-1100 900-1000 800-900 IV 1100-1200 1000-1100 900-1000 800-900 700-800 V 1000-1100 900-1000 800-900 700-800 600-700 VI 900-1000 800-900 700-800 600-700 500-600 VII 800-900 700-800 600-700 500-600 400-500 VIII 700-800 600-700 550-650 500-600 400-500 ource: Bilteanu, Gh. et al. FITOTEHNIE. Editora Didactica. Bucharest, 199 1. 2.08 The thermal zoning for maize hybrids used in Romania appears in Tables 28 and 29. Late maize hybrids (FAO Group 500-650) are grown in the southern plains. They require more than 1,400 thermal units. Semi-late hybrids (FAO groups 400-499) are grown mostly in the northern part of Oltenia and Moltenia and parts of southern Moldavia. Medium maturity and early hybrids are found in northern Moldavia and Transylvania. They also are planted in the southern plains in late planting dates. 2.09 The most favorable winter wheat-growing areas are in the southern and western plains, parts of the Transylvania plateau and northern Moldavia, where there is a more favorable precipitation pattern. This coincides also with the barley-growing areas. Zones I and II, the most favorable for barley, are in the south, Moldavia and western Transylvania. 2.10 In Romania, because of lower annual mean temperatures than in the Corn Belt of the U.S., it is required that soybean varieties be earlier than in the U.S. Maturity classes for soybean varieties (Table 32) must thus be modified by one to two classes when importing varieties from the U.S., as they become later in Romania. Therefore, of the ten maturity groups into which soybeans are classified, only varieties belonging to the earlier five or six groups can be grown in Romania. As a result, soybean production is, because of thermic factors, concentrated in the southern part of the country, on more fertile soils and more than half of its GROBMAN 139 INPUT DISTRIBUTION cropped area uses irrigation or freatic resources. Some soybean production also is carried out in the western plains and in southern Moldavia with the use of earlier varieties. 2.11 High-yield, high oil (over 50% oil) hybrids and varieties of sunflower developed in Romania are grown in the country, mostly in non-irrigated areas. Some 85% of the sunflower area is in the judets of Constanta, Teleorman, Dolj, Calarasi, Braila, Ialomita, Olt, Giurgiu, Galati and Tulcea, in the southern part of the country and with an annual mean temperature of 100C. Additional large sunflower areas are in Moldavia and the western plains. Because of the higher oil content and yields of sunflower (both more than doubling those of soybeans) and the good response of sunflower to irrigation, there would be an advantage in expanding the use of sunflower over soybean in the irrigated areas. This approach would be a quick way of reducing protein deficits and expanding oil production. 2.12 Rice is grown in specialized state farms in the Danube basin under irrigation. A narrow territorial band of some twenty kilometers, with saline soils that can be washed with heavy irrigation and additionally favorable temperature conditions, allow the growing of rice. Two additional rice areas are found in the Timis judet and in the Danube Delta region. Specific chemical herbicides are essential for rice production. . There are high water-pumping requirements to maintain both a water layer and water circulation in rice fields and thus reduce salinity in the upper soil layers during the growing season in the southern rice areas. 2.13 Cropped area has fallen some 650,000 ha from 1989 to 1991 (Table 1). There appears to have been a recovery in the last year. The alteration in the areas, production and yields for the different crops has created different-from-normal demands for seeds and other farm inputs. There is a substantially-increased demand for maize seed provoked by the increased number of small farms planting maize, who find it easier to harvest and store maize than small grains. Furthermore, maize is used by them to feed directly their farm animals rather than using feed obtained at higher prices from feed mills. After years of decreasing production of maize, production levels have come back to those at the beginning of the last decade (Table 2). Wheat in the 1991 and 1992 growing periods, which were characterized by drought and diminished areas, gave a lower production, forcing grain imports. Government reaction was to raise prices in order to insure a higher level of procurement. Official prices for wheat now are nearer to border prices. Free market prices for wheat are 14-28% higher than procurement prices paid by Romcereal, thus stimulating the potential added use of fertilizers and herbicides at their present subsidized price levels, but also allowing their use at unsubsidized levels. 2.14 The most apparent changes in areas and production which may affect the higher (+) or lower (-) demand for seed are seen in wheat (-), maize (+), barley (+), oats (+ + +) for use by horses for traction in small land-holdings, grain legumes (---), fiber crops (---), and in soybeans (--)(Tables 1, 2). GROBMAN. 140 INPUT DISTRIBUTION Opportunities for the Use of Farm Inputs 2.15 The decision of the government of Romania (GOR) to subsidize the cost of farm inputs, in order to reduce the cost of food to urban consumers, is less costly than subsidization of the cost of the means of production or the subsidization of the price of food. GOR is committed to using both means, at a high cost to the national budget. By also managing the supply of farm inputs through state channels and linking them to the supply of credit through Romcereal and other state procurement firms, the-state has been relatively successful in holding down prices of grain in a deficit situation. Even so, state grain procurement prices paid by Romcereal were left to lag far behind inflation, and GOR was forced to lift procurement prices closer to border prices for wheat and maize. . If grain market prices were stabilized at near border prices, it would not be necessary to maintain the input subsidies at their present costly, high level, and they could be phased out gradually. 2.16 Romania has a large fertilizer production industry with excess capacity -- ten plants with a total of 4.1 million tons of nutrients. The production of nitrogen (N) fertilizers is obtained in Romania at a cost lower than that of imported fertilizers. Even importing gas from Russia, final, unsubsidized nitrogen fertilizer can be produced at a price advantage in Romania. The situation with phosphate and potash fertilizers is different. Raw materials need to be imported. The final price of phosphate fertilizers in Romania is somewhat higher than the price of imported phosphate fertilizers. Nonetheless, even at these lower prices, fertilizer consumption in Romania is lower than in Western Europe (Table 5). The rather normal levels of 1989 nitrogen and total nutrient fertilizer consumption were half those of Czechoslovakia, Hungary, and France, and lower than any other country in the area. Romania was the sixth largest fertilizer exporter in the world. These relative figures are. indicative of a higher potential market for fertilizers in Romania, expanded by a factor of two. 2.17 The agricultural machinery industry of Romania is based on a small number of large manufacturing plants. They are capable of supplying the tractor and agricultural machinery needs of Romania at lower prices, even unsubsidized, than imported tractors and machinery prices (Tables 35, 36). Several of these plants also have produced machinery for export. Limiting factors for their market expansion in Romania are the new market structure, the capacity of many new small farmers to pay, credit availability, and the hard currency needed to buy foreign components such as special steels and natural rubber-based and specialized components. In the period 1985-87 the average annual number of tractors in Romania was around 184,000; in the period 1990-92 it fell to an annual average of around 130,000. This is equivalent to a 30% drop in the number of available tractors. The self-propelled combines for harvesting small grains numbered 52,300, as an annual average, for the period 1985-87; their number fell to an annual average of 34,700 for the period 1990-92, a 34% drop. The self- propelled combines for harvesting corn in the period 1985-87 had an annual average number of 14,300; in 1991 their number had dropped to 3,117. Evidently, there is a great potential market and potential for increase of sales in these and other items of farm machinery which have been decommissioned in recent years through obsolescence and have not been replaced. There are GROBMAN 141 INPUT DISTRIBUTION still many more that ought to be decommissioned and are maintained in operation, at high costs of operation, because of purchasing constraints. 2.18 The pesticide industry of Romania supplies, at low prices, some generic pesticides whose patents have expired but still are useful in agriculture. Advanced chemical research conducted elsewhere to develop new pesticides is too expensive and sophisticated and has not been emulated in Romania. Therefore, newer chemical pesticides and some generic ones that require complex production requirements either are licensed to Romanian pesticide manufacturers or their active chemicals are imported for local formulation. Additionally, pesticides are imported for direct distribution in Romania. There is a need to open up still more the market for the importation of pesticides and to eliminate unnecessary restrictions to importation. The deficit of herbicides is a serious limiting factor to the production of small grain crops. 2.19 The Romanian pesticide manufacturing industry has, on the other hand, made considerable progress in synthesizing artificial pheromones and made them available for the control of a number of insects, particularly those affecting the production of orchard crops. There is real leadership for Romania in this field. 2.20 Seed availability in Romania, quantity-wise, generally has not been limiting. Pasture seed -- of trefoils in particular -- is in limited supply and has to be imported (Table 31). Farmers in Romania benefit from a large number of crop varieties that have been -developed through public agricultural research in the country and which exhibit relatively high genetic yield potential. There are, nevertheless, indications for some crops that, should 'the Romanian research system include more foreign varieties and hybrids for testing, and the seed laws and organizations implementing them become more flexible, there likely would be an increase in the yield ceilings of varieties and hybrids that farmers could use. The participation of foreign joint ventures and privatized seed business is one of the areas in which Romania could draw more benefits from foreign participation. Seeds represent to farmers a relatively low cost of investment, repaid in excess by potential yield increases. Crop varieties and hybrids are nongeneric, are evolving constantly, and have many points of origin, contrary, to a certain extent, to the case for agricultural machinery and fertilizers. 2.21 Fuel and lubricants have not limited farm production and transportation in Romania, as the country has its own oil resources. Some seasonal shortages have been reported during autumn for diesel fuel oil (called "motorina". in Romania) for crop-drying use. 2.22 Animal feed products in Romania are. not in sufficient supply, and their quality is low. Concentrated animal feed generally is lower in protein coitent than in Western Europe or the Americas. This brings about lower-than-acceptable conversion ratios for animals. The price lag in oil grains (especially soybeans and sunflower) as compared to cereal grains undoubtedly has been a disincentive for their production in sufficient quantities and may explain the substantial drop in production experienced in the last years. This drop in oilseed production was 60% for soybeans and 24% for sunflower between 1980 and 1991 (Table 2). Because of the GROBMAN 142 INPUT DISTRIBUTION curtailment of poultry and pig production with the demise of the CAP system, a greatly decreased number of animals has meant a lower demand for concentrate feed. Expanding concentrate feed production will require a recovery of animal production and the maintenance of urban consumption levels, something which is not likely to happen in the short term. On the other hand, private farmers are maintaining farm animals for self-consumption, so they may retain larger volumes of grain on the farm, mix grain and other ingredients and prepare their own feed formulas, usually poor in protein and general quality. This practice should be discouraged, but the quality of concentrates should be increased and they should be accessible in price to farmers. Limitations to the Use of Agricultural Inputs 2.23 The physical supply of inputs is limiting in the cases of pesticides, fertilizers, and certain types of seeds. The supply of agricultural machinery has been adjusted to the present lower market potential by the factories through lower production levels. 2.24 There has been a decided general decline in the use of all kinds of inputs in absolute and per hectare terms since the revolution. This basically is a result of the disappearance of the CAPS and the associated tremendous increase in land-holdings. The influx of unskilled farm operators, undercapitalized, noncreditworthy, and further, bent in many cases on simple self- support production objectives, has contributed markedly to the reduction in use of farm inputs and, therefore, in yields. 2.25 GOR is aware of the negative effects of the delay in issuing final titles to land ownership on credit availability to the new farmers. Passing of a complementary law to allow the provisional titles to land use (adeverinte) to become effective as documents for credit support and for leases should not be delayed any further. Permanent titles based on final cadastres should be issued as soon as possible. This entails expediency and quickness in designing and implementing the formulation of a new rural cadastre. 2.26 Excessive red tape limits the flexibility of import operations. The importation of pesticides in Romania is one such case. Many of the problems stem from bureaucratic resistance to the loss of power and privileges and from the custody and apportioning of scarce currency. A license for the importation of pesticides exhibited no fewer than seventeen signatures, including several ministry directors and even ministers. There should be concessional availability of a supervised supply of hard currency for the purpose of importing pesticides and other farm inputs. 2.27 The distribution system for inputs in Romania is dominated by the state through various channels. Should the state find it necessary to maintain subsidies of inputs to farmers for some time, it may do so by allocating money to make up the differences between costs and prices in the input marketing system. GROBMAN 143 INPUT DISTRIBUTION 2.28 GOR proposes to pursue a policy of maintaining both public and private enterprises in the field of farm input supply. This is a mistake. There is no good experience available anywhere of a successful coexistence of both systems. Wherever both existed, there have been delays for the private system in becoming established and sufficiently healthy financially to survive. The establishment of ground rules and incentives that open the market to competition is the best assurance of satisfaction to both the businesses and to end-users. 2.29 The "integrators," companies such as Semrom, Agromec, and the regie autonome Romcereal, are de facto administrators of the distribution of inputs on a grand scale in Romania. Their monopolistic or cartel presence in Romania inhibits and will continue to inhibit the appearance and establishment of a private, efficient, farm input production and distribution system. GOR is conscious of this fact and should be encouraged to subdivide and privatize, or disengage these firms from their present functions at the earliest possible time. 3. INPUTS: THE TECHNOLOGY SUPPLY FUNCTION 3.01 The use of agricultural production inputs is conditioned by the technological capabilities that the inputs have for enhancing crop and animal production at various levels of use and by their costs relative to prices paid for farm commodities. Viewed in a three-dimensional system, the last two variables, costs and prices, can be quantified and related easily in economic terms. The technological potential of a given input is measurable in terms of its yield-enhancing capacity, but is itself subjected to interaction with other physical or environmental factors and their effects in limiting the expression of the input's potential. While it can be argued that for the sake of simplicity a two-factor cost/price analysis is sufficient, production economics theory has advanced to the point that there is wide agreement on the need for a combined analysis including the technology function. 3.02 Simple crop models are being developed in Romania. They are a beginning and they should be tested against more sophisticated crop models such as DSSAT. The incorporation of DSSAT as a sophisticated model of wide application to wheat, barley, maize, sorghum, rice, and other crops should be of primary interest and importance in Romania. Its application in research and economic planning in the general field of agriculture would contribute to a better understanding of the effect of the factors of production and their technology levels given Romanian environmental variables (e.g., soil, climate, pests, diseases, pollution effects). Farm models can be developed further on the basis of crop models, with added information on erosion models (especially in the montane areas of Romania). 3.03 The use of the PAM (Policy Analysis Matrix) system for the analysis of agricultural policy related to issues such as input subsidies, costs, and efficiency of resource use should be introduced in Romania. When linked with DSSAT as a supplier of information into PAM, decisions regarding policy course optimization, and solution of conflicts between public and GROBMAN 144 INPUT DISTRIBUTION private interests, could be achieved more easily. Social profitability as compared to economic profitability could be evaluated under different policy assumptions; for example, the establishment of food security reserves as practiced now in Romania could be evaluated in terms of social costs, and alternatives could be examined, such as price bonuses required for a certain level of ,supply, rather than subsidies on credit and input costs. Costs of inputs, subsidies on inputs and credits, subsidies on food, and fixation of commodity prices, when analyzed jointly with PAM could provide quantitative insights for analyzing alternative policy decisions. The Fertilizer Technological Supply Function. 3.04 Fertilizer use in Romania has researched been widely and deeply. Optimum fertilizer application rates for different soils and crops have been studied combining field experiments with laboratory soil fertility data into mathematical equations. Research on mode of application of fertilizers related to nutrient absorption, using isotopes as tracers for independent nutrients, was started in the 1960s and has continued to this time at the Fundulea Cereal and Technical Crop Research Institute. Detailed recommendations were extracted from analysis of the results of research and developed for the farm level as well as for the policy-makers to use. Priorities at the policy level were proposed and enunciated on the basis of these models, although it is improbable that they ever were implemented. 3.05 It can be easily seen that the continuation of fertilizer subsidization has no technical support. Response data to various fertilizer nutrient levels and cost/benefit analysis has been used to define broad recommendations for fertilizer use. Generalizations from many such experiments in specific types of soils, linked to characterization of the fertility status and yield potential of each soil type, were initial broad landmarks. Landmark fertilizer recommendations based on soil types and irrigated vs. non-irrigated maize crops can be seen in Table 6. These are very general recommendations and give approximate physical yield increases. More detailed analyses involve economic functions. Equations proposing solutions for economic optima in nutrient application, have been developed. Economic optima for nitrogen fertilizer application assuming two alternative yield levels for wheat (4,000 and 6,000 kg/ha) and two for maize (5,000 and 7,000 kg/ha), under various price of grain to cost of nutrient ratios are shown in Table 16 Present ratios of 1.54 for wheat and 1.32 for maize (for nitrogen in ammonium nitrate, as a major source for nitrogen in Romania) are very favorable to farmers, as compared to a case in which present border prices for fertilizers were used and which would give ratios of .34 for wheat and .29 for maize (Table 19), exactly identical to the ratios of the early 1980s (specifically of 1982). 3.06 At present subsidized prices, farmers would have a strong tendency to use more fertilizers if they could get them and pay for them. They still would have an incentive to use high fertilizer levels at border prices similar to 1982 unsubsidized prices (Table 19). In order to correct for availability factors and polluting effects of excess nitrogen in the freatic water levels, a correction is introduced and recommended as seen in Table 16. . This correction assumes greater significance with higher price/cost ratios such as those that prevail today. From GROBMAN 145 INPUT DISTRIBUTION Table 16 for corrected yields, rates of 114 to 120 kg of N/ha would be recommended for wheat for expected yields above 4,000 kg/ha and 122 to 163 kg N/ha for maize for expected yields of 5,000 kg/ha and 7,000 kg/ha respectively. Ratios of fertilizer prices to grain prices for 1986 and the last three years appear in Table 14. With use of Table 19 it can be seen for maize that to raise yields one ton/ha at a soil nitrogen index of 1.5%, 22 kg of N/ha are recommended; the physical response is 45 kg maize/kg nitrogen, which multiplied by a maize/nitrogen price ratio of 3.00 (Table 14) gives a net benefit to cost ratio for each kilogram of nitrogen applied in this example of 135 lei. This is equivalent to an incredible net profit of 1,230% on the nitrogen unit cost. At an unsubsidized ratio of .27, the net profit per kg of nitrogen used would be 11 lei. This is equivalent to about 100% profit on the nitrogen unit cost. 3.07 While no precise data are available for national average rates of nitrogen used in wheat and maize, we could use the national average for all crops, considering that cereals make two- thirds of the arable land, and that wheat, rye, and maize represent 52% of the area and receive preferential credit from Romcereal, and find the following comparisons: 3.08 The added nitrogen supply required under these modest recommendations would be on the order of 160,000 tons per year compared to the 1990 rate of nitrogen application, for just these two crops. It would represent an addition of 20% over the nitrogen fertilizer distributed in 1990 (Table 10). As compared to the low level of 1992 nitrogen fertilizer distribution, some additional 320,000 tons of nitrogen would be needed, just for these two crops. 3.09 If we assumed a scenario in which present maize and wheat prices (close to border prices), and real N and P205 border prices were to be used (Table 16), corresponding to price/cost ratios which for wheat were similar to those of the early 1980s and identical to the 1982 ratio (Table 16) and very similar for maize, we could develop a table with recommendations of rates of fertilizer application as seen in Table 16. This table includes fertilizer rates being recommended on the basis of expected yields and soil nutrient analysis. Even at these ratios, higher fertilizer levels than those used today under subsidization would be at their economic optimum under most expected yield levels. Therefore, the argument for subsidization of fertilizer prices would not hold, given that credit could be made available for farmers to purchase fertilizers at real prices. 3.10 Should higher yields be aimed at, under a context of variable limiting environmental factors such as prevail in Romania, an economic risk correction coefficient could be introduced based on the probability of obtaining a certain level of yield based on a set of climatic factors (especially precipitation) and soil data for each judet for the last 50 years. An even better method would be the use of prediction tables (such as actuarial tables) to assess risk and recovery of investment (and loans), not over one crop period, but over five-year average periods. These predictions could be enhanced with modern modeling tools such as DSSAT coupled with GIS (Geographical Information Systems) both for computerized backward analysis and forward crop predictions. GROBMAN 146 INPUT DISTRIBUTION Year Average Rate of Nitrogen Used for all Arable Land 1990 81 kg/ha 1991 16 kg/ha 1992 38 kg/ha Recommended Nitrogen Application Rates Wheat 114-120 kg/ha Maize 122-163 kg/ha 3.11 Ratios of N and P205 fertilizer nutrient costs to farmers to grain prices evolving from a base in 1986 to more recent ratios under price decrees 1355/1991 and 464/1991 (which still apply), are seen in Table 14 and graphically illustrated in Table 44 for nitrogen alone. The evolution of these ratios is shown to have increased more than in other markets. Ratios are fifteen times more favorable to farmers in 1993 than they were in 1986. This has been one of the main factors increasing the income of new farmers. This windfall profit basically is siphoned out from the general budget at the expense of the whole economy. The application of prices programmed with decree 494/1991 which was held back, leaving the current early prices of decree 1355/1991 in its place, condition the high ratios of grain/fertilizer prices of 1993. In the indicated Table 44 the symmetric right side of the curve (the decrease side point shown in the X axis point 4/1993b) would be a result of the application of decree 464/1991. It would initiate a trend which we propose to draw symmetrically on the right side of the curve over a period of two to three years. That trend would be effective in reducing the grain/fertilizer price ratio to levels lower than 1 and eventually reaching .34-.35 for wheat. 3.12 Phosphate fertilizer use lags behind nitrogen use. There does not seem to be a correlation of soil P deficiency and relative use of P205 fertilizers. We have graphed average availability of P205 in the soil in PAL units, and average P205 fertilizer rate for all judets of Romania (Table 45). Lower soil P205. in the X axis should correspond to higher P205 use in the judet and vice versa. That this is not so in general, except for a few cases, can be easily seen. Therefore one may conclude that there either is a deficiency of use, diffusion of information or application of recommendations of the soil-testing laboratories, or that procurement of fertilizers has nothing to do in Romania with relative needs, having other sets of factors to account for the discrepancy. GROBMAN 147 INPUT DISTRIBUTION The Technological Seed Supply Function 3.13 At present, with a few exceptions, varieties and hybrids of crops planted in Romania originated in research stations of the state system. The more prominent exceptions are some old wheat varieties from Russia, potatoes imported years ago from the Netherlands and Britain, soybeans from the U.S., Pioneer maize hybrids, presently licensed to Semrom, and some other maize hybrid imports from the Republic of Moldova and Russia. 3.14 The Romanian Agricultural Research System was well organized and adequately financed in the past. It has well-trained plant breeders who have done a good job of obtaining varieties and hybrids of field crops, vegetables, and orchard crops. At the present time, the system is plagued with budgetary problems, obsolete equipment, lack of spares, and some desertion from the research area to production fields, where salaries are higher (even within the research system itself). Some of the research stations are becoming more geared to production in order to maintain salaries and personnel, and are not committing their best human resources to research, which is their primary mandate. The end result is a less than satisfactory turnover of new varieties, and a longer life span for older varieties. 3.15 Private plant-breeding work in Romania is almost non-existent. A proposed new seed law recognizes the registration and protection of varieties but fails to establish incentives for research in plant breeding by the private sector. The testing of new varieties is conducted by a State Committee for Variety Testing and Registration. It uses very formal procedures, based on the state becoming a screen for new varieties, before they have an opportunity of being tested in the market. The sheer formality of the system, purporting to protect the farmer, carries with it a serious delay before a variety of hybrids from reach the Romanian farmer, where the actual performance test should be conducted. In the benefit of competition and greater variety turnover it would be quite appropriate to reduce screening tests to one normal year for eliminating only substandard varieties, and letting the market discriminate among as many good varieties from different companies as possible. This is a procedure used in the Americas. It appears, however, that the Romanian technical and bureaucratic establishment still has a strong tendency to assert control. 3.16 A liberal law allowing for investment incentives from the private sector in plant-breeding research in Romania, also simplifying the introduction of top foreign varieties and hybrids, and providing full intellectual protection of the variety obtentions and plant introductions, would go a long way toward establishing a sound base for a vigorous seed industry. A further policy necessity would be the elimination of state seed enterprises, which will use every possible advantage and trick in the book, emanating from their state-preferred status to compete with private companies. This means that both Semrom and Unisem should be privatized and broken down into a number of smaller competing companies. In the seed business, products offered for sale by different companies must be sufficiently different and identifiable for the companies to be able to actively seek preferences and produce a market response. Sales of the same public GROBMAN 148 INPUT DISTRIBUTION varieties by all companies would bring about only price wars, decapitalization and eventual failure. 3.17 There is a penchant in Romania for trying to establish a good base for seed exports. Potential importers.are keen, not only on biological and physical quality, but on varieties that suit: their .markets. Great strides in plant breeding will have to be made in Romania to supply those markets effectively. Another important consideration is the requirement to liberalize imports of basic seed for production of seed varieties in demand by foreign clients. At present there are barriers against the importation of seeds for this purpose. Changes in these limitations would facilitate taking advantage of seed export business opportunities should they arise. The Technological Pesticide Supply Function 3.18 Pesticides are supplied to farmers in Romania from factories that produce and formulate non-proprietary chemicals, developed in foreign countries. Some basic products, especially in the area of cupric and sulphur-based. fungicides, are of Romanian development. So are the pheromones synthesized in Romania; Atrapon, Atrafun, Atrared, Atrambic, Atragan, Atramal, Atraex, Atragam, Atrablanc, etc., and Capcane (pheromone traps) at the Institutul Chimie, Cluj- Napoca. Active materials and finished products also are imported from overseas manufacturers in Europe, the U.S., South Africa, Israel, and Japan. There is a presence of registered products in Romania from all the major world companies in the chemical pesticide field. There are in excess of 600 products registered, with all the major chemical plaguicide formulas. It does not appear that technology is limiting in this area. 3.19 Some 40,000 tons of pesticides per year normally are used in Romanian agriculture. This is a level -that compares, in kg/ha, favorably with Western Europe (4.1 kg/ha of active ingredients vs. 6.6 kg/ha in the EC countries). About one-half of the pesticides used are fungicides, with the balance about equally distributed between herbicides and insecticides. 3.20 The extension and direct supply activities of the Inspectorate for Plant Protection of the Ministry of Agriculture in each judet have diffused knowledge among farmers of pesticides. The Inspectorate recommends, at this time, the lower-cost ones, produced in Romania and supplied at subsidized prices. The recent overture of a number of private companies to direct distribution in the market will restrict the numbers of actual plaguicides effectively used by farmers. There were some twenty products stocked at the Inspectorate of Plant Protection in Alba lulia. The Technological Agricultural Machinery Supply Function , 3.21 Tractors are supplied by few companies in Romania. Universal Tractors, Brasov, has offerings in the following categories: hp 27 34 45 53 55 64 65 70 75 85 102 150 180 Wheel x x x x x x x x x x x Crawler - I K - x[ x xj x - - I x x GROBMAN 149 INPUT DISTRIBUTION The larger are industrial tractors. An offering of articulated 195 hp tractors comes from MAT S.A., Craiova. Smaller motocultor-type tractors are supplied by MAT S.A., and Semanatoarea S.A., Bucharest, has designs of 23 hp tractors being prepared for production line. Small Chinese tractors have been imported and were seen in Transylvania. No other tractors appear in the Romanian market because of price differentials. UTB indicates that a number of their tractors are produced under a license from Fiat. Technical improvements have been made by Romanian engineers. 3.22 Several factories supply other agricultural machinery and equipment. Suma S.A., Bailesti, supplies disk harrows; MAT S.A. is an important supplier of plows, disk harrows, and fertilizer and manure spreaders; Mecanica Ceahlau, Pietra Neamt, is a supplier of disk harrows, cultivators and precision planters; IMA S.A, Timisoara, supplies cereal transport trucks and chick transports; Multim, Timisoara produces milking machines and general equipment for livestock activities. Semanatoarea S.A., in Bucharest is the major manufacturer of combines and precision planters as well as other equipment in the country. The combines were developed with a Laverda (Italy) license and Fortschrit (German Democratic Republic) technology. 3.23 An Agricultural Machinery Design Institute operates near Otopeni Airport in Bucharest. It is charged with the responsibility of generating mechanical designs- for agricultural equipment. It appears that their interaction with the agricultural machinery manufacturers is positive, but the larger companies such as UTB and Semanatoarea rely on their own design and manufacturing staffs. The Feed Technology Supply Function 3.24 Feed in Romania is of low quality. This is to a great extent due to the shortfall in the supply of protein from local sources. Local fish meal production has dropped considerably because of the high cost of energy, and oilseed crop production has fallen considerably. Some 70% of the soybean meal used in feeds is imported. The economic situation of many of the clients of the feed mills determines that, since they are in arrears in payments, there is an acceptance of sub-optimal quality feed mixes. Importation of new early Canadian soybean varieties should be a possible solution to the low yields obtained with soybeans in Romania. Expansion of sunflower production also should help to decrease the excessive use of wheat and barley in feed mixes. Supply of concentrates, vitamins, antibiotics and minerals comes from a factory in Craiova. Superconcentrates can be manufactured under special order. 4. INPUT DESCRIPTION Seeds and Plant Propagating Material 4.01 A large number of varieties and hybrids of field, vegetable, industrial, forage, and orchard crops are available to Romanian farmers. They originated from the efforts of a number GROBMAN 150 INPUT DISTRIBUTION of Agricultural Research Stations, and in some cases from imports. Commercial seeds of these varieties and hybrids, after being tested and duly registered by the creator institutions, are produced and offered to the market by Semrom for the field and technical crops (oilseeds, cotton, forage crops) and by Unisem for vegetables and potato seed. For specialized industrial crops (sugar beets, fiber crops, and tobacco) the seed is produced and distributed under the control of their respective industrial firms. Plant propagating materials for vineyards and orchards have been created by a number of specialized Wine and Vineyard Research and Production Stations and Orchard Research and Production Stations. 4.02 Maize is the most important crop in area and production in Romania with between one- third and one-fourth of all arable land. Maize yields have evolved from an annual national average of about one ton/ha in the 1934-38 period to more than four tons/ha in the 1981-85 period, which was reached again in 1991 (Table 48). The number of hybrids being offered in the market by the one single company in Romania, Semrom is very large, and perhaps not justifiable for maintenance by a single company. The cost of maintenance of too many hybrids and their eventual seed carryovers for Semrom is likely to be excessive. This is aggravated by the additional Pioneer hybrid seed offerings, added to their own, that Semrom produces under license and carries in stock. In a truly commercial setting, and in a geographical market as limited as Romania, the number of maize hybrids offered by any one company would be much lower, due mainly to business considerations. Only with a number of companies competing among themselves would the offerings probably reach the present number of maize hybrids offered by Semrom. To illustrate this point, a list of maize hybrids presently commercialized by Seirom in Romania is presented in Table 28. It exhibits 27 locally-developed hybrids and eleven Pioneer Hi-Bred hybrids produced by Semrom under license and marketed in Romania, as well as produced under contract for Pioneer Hi-Bred's Austrian operation. These are the only foreign hybrids produced by Semrom. Some offerings have been made in the past of maize hybrids from the Republic of Moldova and from Yugoslavia, with smaller seed volumes. 4.03 The Pioneer hybrids have demonstrated good field standability as compared to the Romanian hybrids and are preferred by many farmers. Some characteristics of Romanian and Pioneer hybrids regarding yield potential and adaptation are shown in Table 28 as well as in Table 29. It can be seen that medium/late hybrids under irrigation and well-managed in the southern plains of Romania potentially are capable of reaching yields as high as fifteen tons/ha, similar to averages in good areas of the Corn Belt of the U.S. 4.04 Soybean varieties, along with their respective origins and characteristics, are shown in Table 32. It can be seen that only early varieties, incapable of high yields, are grown in Romania. All the soybean varieties tend to become later in Romania than their maturity class designation would indicate. Thus a late variety introduction from the U.S. would not perform well in Romania, as the number of degree-days needed to achieve physiological maturity would not be reached before first frost date (because of the relatively low daily temperatures prevailing in Romania). For example, for the Lovrin Agricultural Experiment Station located in the Western Plains Region, the average annual temperature computed over 25 years was 10.80C, GROBMAN 151 INPUT DISTRIBUTION and the mean biological effective sum of degree-days over 100C was 1,540 degrees for the period April-October (1,563 degrees for January-December, again averaged over 25 years). This would be equivalent to the sum of degree days for the south Canada plains area. 4.05 Major wheat varieties cultivated in Romania are winter wheat types, although some spring wheat is also planted. Wheat varieties have been developed primarily at the Fundulea and Lovrin Research Stations. Crosses originating in Bezostaya Russian wheat (high yield of grain and straw, high grain quality) with Italian, Argentinean and Romanian varieties have produced as offspring the present wheat varieties. Fundulea 4 is a preferred variety, as are Lovrin 32, Lovrin 34 and Flamura 80. Long straw is still preferred by Romanian farmers for bedding, and this may be a factor inhibiting higher fertilizer response with lower harvest index (ratio of grain yield to total yield of grain plus straw) varieties. Still, a genetic progress of 72 kg/ha/year for wheat yields, representing 1.4%/year, has been achieved at the Lovrin Research Station, mainly by breeding for higher harvest index and reducing height of the varieties. 4.06 Rye varieties Gloria Ergo and Orizont, created at the Suceava Station in Bucovina, Aurie de Dankow, and Epos and lanos from Germany are the best known ones. 4.07 Barley varieties form two groups, the 6-row (of kernels in the spike) types, used mainly for fodder, and the 2-row barleys used for malting. The 6-row (orz group) winter barleys are Miraj, Precoce, Productiv, Ciclon and Friberga, while the best known winter 2-row barley (orzoica) varieties are Victoria and Grivitza. Spring barleys are all 2-row ones. Their representative varieties are Grit, Bonus, Dvoran, Cristal, Fatran, Dera, Rapid, Rubin, Trumpa and Salome. These varieties have their origins either in Czechoslovakia or Germany. 4.08 Romania has had a prominent place in the development of varieties and hybrids of sunflower for oil. Their hybrids are reputed to be among the best in the world. Their yield ceiling under irrigated conditions is reported at up to 4,500 kg/ha with oil contents of over 50%. While there is a good number of excellent hybrids and open-pollinated varieties of sunflower available to farmers in Romania, the low prices paid to farmers for sunflower grain have held back their interest in planting this crop and has thus resulted in a reduction of its area. Seed of hybrids has been in short supply. The shortfall of hybrid seed is made up with seed of open- pollinated varieties, especially the variety Record. Sunflower hybrids planted in Romania are divided into two groups: in the early group we find Fundulea 90, and Festiv; in the semi-late group we find hybrids Super, Fundulea 53, Fundulea 59, Fundulea 206, Fundulea 305, Florom 328, Florom 401, Felix and Select. The normal yield range of the latter group falls between 3,000 and 4,000 kg/ha with an oil content between 50% and 56%. This yield level is twice the yield level and three times the oil content of soybeans. Expansion of the sunflower, a crop well adapted to the dry summer conditions found in Romania, should go a long way towards meeting the country's protein deficit, by using sunflower seed meal and cake and exporting excess oil to buy additional protein from foreign sources. GROBMAN 152 INPUT DISTRIBUTION 4.09 Potato varieties in Romania trace their origins either to the Netherlands or Britain. They were imported mostly during the 1970s and early 1980s and have multiplied in Romania ever since. Common varieties in Romania are Ostara and Carpatin in the early group; Adretta, Semenic and Sucevita in the semi-early group; Super, Muresan, Desiree, Corona and Cati in the semi-late group (105-120 days), and Eba Manuela and Procura in the late group (more than 120 days). Major basic seed stocks at present are of varieties Sante and Cardinal at the Brasov Agricultural Research Station. With about 335,000 ha planted to potatoes in Romania in 1988, this is not a garden but a field crop. Area went down to 234,000 ha in 1991. Average yields were 10.8 tons/ha in 1988; they fell to 8.0 tons/ha in 1991. The major problem with potato seed multiplication in Romania is the maintenance of virus-free basic seed. Major potato-seed producing judets are Suceava, Harghi, Covasna and Brasov, because of their lower average temperatures and the possibility to maintain a lower level of virus infestation. Some potato seed has been imported from Yugoslavia, Poland, and Turkey. 4.10 Unisem, the vegetable seed monopoly, supplies both seed of vegetable varieties of Romanian origin and some seed of imported varieties and hybrids obtained as representatives of the firm Royal Sluiz of the Netherlands and from some other companies. There are some Bulgarian and Turkish seed merchants that offer small quantities of their vegetable varieties in the local market. 4.11 Propagating material of virus-free apples, sour cherries, sweet cherries, pears, prunes, and quince is obtainable at the Bistrita Research and Production Station and the Voynest Fruit Research and Production Station located near Bucharest. There are, for example, 79 clones representing different apple varieties at the Bistrita Station. Some of the better known foreign apple varieties are Golden Delicious, lonathan Sugar Crab, Goldspur, Starkcrimson, Granny Smith, Red Delicious, Cox Orange, Elstar, Boskoop, lonal Gold and Gloster. These are exported, especially to Germany. Cherry varieties include Early, Red and Black of Bistrita, Jubileu 30, Rubin, Junskaia, Ullster, Stella and Stella Compact, Ny 7690, Ny 1495, Ny 1699, Rainier, Hedelfinger, and Boambe de Cotnari, all for table; Yellow Drogana for stewed fruit, and Pink of Marculesti, renowned for sweetness. Among sour cherry varieties the better known ones are Nana, Black Morella, Ilva, Oblacinska, Mocanesti BN, Meteor, early English, and Dropia. Among plum tree varieties important ones are De Bistrita 9/5, Sylvia, Centenar, and Valor for productivity and fruit quality; BN 5/125 for fresh and dry fruit, and BN 6/260 and BN 13/22 for resistance to plum pox. 4.12 Seed prices charged by Semrom and Unisem appear in Tables 25 and 26 for various types of seeds and levels of multiplication, that is, basic seed (elite seed-E), -first and second multiplication seed (11 and 12), and hybrid seed (H). Seed prices are lower than their equivalents in Western countries by a large factor. While a maize single cross-hybrid in Romania is sold at a maximum of 533 lei/kg, equivalent in March 1993 to US$0.87, it would be sold in the U.S. for between 3.80 and 4.50/kg and in Spain at 4.20/kg (all in US$ equivalents). Double cross hybrid seed in Romania is at US$0.50/kg. In Spain a similar hybrid could be fetched for US$1.60/kg and in Peru for US$1.80-2.00/kg. Seed prices for hybrid GROBMAN 153 INPUT DISTRIBUTION maize thus are at a ratio of 5:1 to the price of maize grain. For wheat seed the ratio is 2:1 to the price of wheat grain. These ratios, while low, are found in many countries with less than developed commercial seed enterprises. Maximum seed prices are fixed by the Ministry of Agriculture; they can be negotiated downwards but not upwards. Fertilizers 4.13 Romanian farmers, because of a mixed agriculture/livestock type of exploitation, add significant amounts of manure to their soils. Applications could vary between 10 and 30 tons/ha on a yearly, biannual, or triennial basis. The contribution to increments of nitrogen in the soil from the farm manure source are shown in Table 15. It could average 20 to 30 kg N/ha at the usual contents of nitrogen in farm manure in Romania, provided it is well-stored and -handled. This would represent a significant contribution to the fertility levels of soils in Romania. In order to define better the importance of the farm manure contribution to fertility, some balance sheets should be carried out on this important input. 4.14 Research has demonstrated the potential of inoculating legume seeds with strains of various Rhizobium species (nitrogen-fixing bacteria). The use of inoculants is especially attractive on soybeans, where the response found is greatest among grain legume species. The use of an inoculant of a strain of Bradirhizobium japonicum on soybeans at planting time, and in succeeding crops (with soil inoculum persistence), showed that on a semi-salty soil with irrigation in Braila, an unfertilized but inoculated crop, soybean yields exceeded fertilized-only, fertilized and inoculated, and non-fertilized non-inoculated yields by 217%, 53%, and 233%, respectively. The Fundulea Research Station near Bucharest produces inoculants, mainly for soybeans, but their use has not been diffused in the country to the extent it should be. Contacts of Romanian researchers should be established with the international NifTAL project located at the University of Hawaii for importation of newer, possibly more effective strains of Rhizobium and for inoculant-producing techniques. The potential for savings in nitrogen fertilizers and extended use of N2-fixing bacterial inoculants in Romania deserves more practical attention. 4.15 Chemical fertilizers in Romania are manufactured on the basis of a limited number of formulations. The nitrogen fertilizers include ammonium nitrate, urea, nitrocal, and ammonium sulphate, all in solid form. The phosphate-based fertilizers include simple and triple superphosphate and dicalcium phosphate. Complex, multiple-element fertilizers include diammonium phosphate and mixed formulas such as 15-15-15, 27-13.5-0, and 22-22-0. 4.16 The consumption of chemical fertilizers in terms of basic nutrients has been on the order of 555,000 tons of total NPK nutrients in 1992, of which 363,000 tons are N, 164,000 tons are P205, and 26,000 tons K20. The drop in these levels of consumption as compared to the mean of 1980-90 is of 40% for total fertilizer consumption, with a 48% decrease for N, a 42% drop for P205 and an 11% reduction for K20. This level of farm utilization of fertilizers is only one-fourth of the calculated optimum (Table 3). While consumption in kg/ha for nitrogen in the judets varied from averages as low as 35 to 128 in 1990, it had gone down to only a range of GROBMAN 154 INPUT DISTRIBUTION 4 to 35 in 1991, with a recovery of the range to 14 to 88 kg/ha in 1992 (Table 11). A similar case is found in P205 (Table 12) with present rates of P205 use varying from 3 to 36 kg/ha, while in 1990 the range was between 13 and 55 kg/ha per judet; furthermore, in 1990, most of the judets had utilization levels ranging from 30 to 35 kg/ha. For increased crop production, fertilizer use levels with the present fertilizer formulas should go up and return to pre-revolution levels in a first stage of recovery, and then move up to higher levels in a new commodity to fertilizer price/cost policy context. 4.17 Costs of production, prices of fertilizers to the public, and levels of subsidization for each factory are shown in Tables 8 and 9 for each kind of fertilizer and each factory. Levels of subsidization shown on the basis of the last price decree vary around 80% in the selling price to the farmers for nitrogen. These levels go to about 84% for the complex fertilizers and the phosphate-based fertilizers (relatively higher priced). This subsidy went as high as 90% for nitrogen fertilizers, as the new price-setting decree was held back in its application for political reasons. In retrospect, this was unnecessary because it transferred (to farmers who used fertilizers) profits in excess of what would be normal, although it did help increase significantly the level of fertilizer consumption in 1992 over 1991. 4.18 Acid and alkaline soils prevail over large tracts of land in Romania. Proper utilization of fertilizers cannot be achieved unless there is a correction of pH by proper soil amendments with correcting materials. Romanian arable land is 20% strongly acid soil (pH 5.6-6.2), 20% slightly acid soil (pH 6.2-6.6), 3% alkaline soils (pH 7.2-8.0), while the remainder (57%) are normal soils. Calcium carbonate, a residual material from the manufacture of complex fertilizers by attacking phosphate rocks with nitric acid, is used widely to raise pH and correct acid soils. It is sold in bulk at an approximate cost of 600 lei/ton. Transport is subsidized by the state up to the last railroad station, from where farmers haul it to their farms at their own cost. Application rates of calcium carbonate are 4-5 tons/ha depending on soil acidity, once every 4-5 years. In the case of alkaline soils, phospho-gypsum (calcium sulphate) is used as a correcting amendment. It is produced by attacking rock phosphate with sulfuric acid. It is applied to the soil at a rate of 6-8 ton/ha every 6-8 years. Its average cost in bulk is around 300 lei/ton. Pesticides 4.19 Plaguicides or pesticides for agriculture fall basically into the three most important categories: herbicides, insecticides, and fungicides. Additionally, less-important groups of acaricides, nematicides, and rodenticides are included in this general category. Plaguicides both are imported and manufactured locally. The local manufacture with local raw materials covers a limited number of older plaguicides such as the 2,4-D herbicide. Modern plaguicides are formulated in Romania on the basis of imported active ingredients. Pesticides also are imported by some 12-15 local Romanian trading companies which serve as importing agents for branches of multinational companies not allowed to import directly, such as CIBA GEIGY, Schering, Monsanto, etc. The most important companies operating in this field in Romania are SIBCO GROBMAN 155 INPUT DISTRIBUTION (representing Hoechst and Roussel UCLAF), BRIMEX (representing Elanco, Dow, and Monsanto), AGROFARM (representing CIBA GEIGY) with the largest market share, MERCOM (representing ICI) and recently PROPLANT (a new company through which the state participates as a commercial enterprise substituting for the old Inspectorate distribution system). The importation of pesticides requires availability of foreign hard currency and/or active credit lines. Both are sorely lacking, the latter due to arrears in payment to some foreign chemical firms who gave direct credit to their local offices in Romania and who have been unable to get foreign currency to pay their debts. For example, CIBA GEIGY has been able to collect only SF2.5 million of its debt in Romania; still outstanding is SF6.5 million from a shipment of pesticides with a MAF guarantee. Furthermore, delays in obtaining hard currency play havoc with crop production, such as occurred with the wheat crop in 1990, when no herbicides were available and thousands of hectares went unharvested due to extreme weed infestation. 4.20 A large number of pesticides has been registered in Romania. A partial list of most of the important registered pesticides is shown in.Table 39. This table exhibits product name, active ingredient, manufacturer or formulator company, crops on which used, and controls which the product produces, such as types of weeds, insects or diseases. In Table 40 is given a list of the products more likely to be found in the market under conditions prevailing in spring 1993; prices to end-users are listed in lei together with their US$ equivalents. Prices for CIBA GEIGY and Sibco Agrovet for imported pesticides are given per kilo; prices for Romanian pesticide manufacturers are given ex-plant in lei per ton and their US$ equivalent. 4.21 The large number of registered pesticides may be misleading. A much smaller number of products is actually found in the market at the present time. Some twenty products take the lion's share of sales. While the Inspectorate for Plant Protection appears with the largest distribution network and played the most prominent part in the distribution efforts of recent years, their poor financial/budgetary position precludes them from continuing as important contributors in the pesticide supply chain. The Inspectorate and its zonal and communal distribution depots were responsible for distributing the major share of lower cost plaguicides, mainly those manufactured in Romania, and therefore, were the largest suppliers to the small farms. Whether this situation will continue unchanged is doubtful. It is more likely to change as the Romanian manufacturers drop their market position due to lack of financing, and as imported, more expensive plaguicides take up a larger share of the market through direct distribution, even though the total market contracts in terms of volume of plaguicides sold. 4.22 The state interests probably have realized what is in store, and two potentially modifying actions have taken place. The first one was the announcement made on television by Romcereal that it had obtained a US$6 million line of credit to be used to import pesticides. The second one was the organization of Proplant as a state owned company -- basically a new facade for the old Inspectorate of Plant Protection activities. Obviously, these actions are intended to maintain the flow of low-cost, subsidized pesticides. GROBMAN 156 INPUT DISTRIBUTION 4.23 A cursory examination and comparison of the prices of imported and locally manufactured/formulated plaguicides (Table 40) shows the wide divergence in prices that exists due to the subsidization of locally manufactured/formulated plaguicides. For example, Lasso, a Monsanto-imported herbicide with 480 gr/lt of Alachlor active ingredient, sells in the Romanian retail market at US$4/it and in larger quantities at US$3.85/it. The same formulation, with the same imported active ingredient and concentration, is produced by the Romanian chemical firm Oltchim Rimnicul Vilcea under the trade name Mecloran 48 and sold at a price of US$0.298/lt. Wheat and other cereals are treated for pre-emergence weed control with Icedin Forte 33 or Icedin Super CS herbicides. These are mixtures of 2,4-D at 280 gr/lt a.i. acid in the form of DMA salt, manufactured locally by Chimcomplex S.A. at their Burzesti plant, to which is added 50 gr/lt Dicamba a.i. (imported from Sandoz), and the same but with 10% Dicamba. Icedin Forte 33 is sold at US$0.22/lt. The cost of application per ha at this subsidized price is about 200 lei. The real cost would be somewhat less than US$10/ha. Recently a more potent version, Icedin Super 39 Extra, has been added, which is sold at about US$0.48/it, still well below actual cost. The local branches of multinational firms do recognize that under,present conditions of restricted credit, expensive pesticide formulations, such as US$8 per kilo herbicide, will be hard to sell, so they concentrate on importing the lower-cost products. Agricultural Machinery 4.24 Tractors available to agriculture in Romania fall into the following categories: large, 100 or more hp; medium, 50-80 hp; and -small, fewer than 50 hp. Large, articulated-body tractors in the 100+ hp range are built at a factory in Craiova. Most of the other tractors are built at the UTB factory in Brasov. A few smaller tractors (around 25 hp) are built elsewhere. Very small tractors (13 hp) currently are being imported from China. Brasov tractors have been shown to have an average useful life of 12-13 years. In addition to use in Romania, they are exported to many Middle Eastern countries, including Israel, and to South and Central America, the United States, and Canada. The Long tractor factory of Tarboro, North Carolina, U.S., markets what is essentially a modified UTB tractor in the United States. List prices for tractors in Romania, as compared to foreign tractors are shown in Table B. 4.25 Prices are subsidized by roughly 100%. UTB lists export prices for unsubsidized 65 hp tractors at approximately US$8,000 per unit. It is unlikely that Romanian farmers could afford tractors at unsubsidized prices. However, farmers have been seen lined up in Bistrita to apply for new tractors -- at unsubsidized prices -- eager to buy if long-term, subsidized credit is available. 4.26 Land consolidation needs to proceed further before higher-priced machinery and tractors can penetrate the Romanian market. At present, it is unlikely that higher-quality foreign tractors and machinery could compete with run-down but operational Romanian farm machinery because of price considerations. GROBMAN 157 INPUT DISTRIBUTION Table B: Tractor Prices in Romania Tractor Type Price in. lei Price Equivalent in US$ Romanian Tractor Wheel 26-32 hp 1,300,000 2,166 4x4 Wheel 45 hp 1,800,000 3,000 Wheel 45 hp 1,600,000 2,666 Wheel 65 hp 2,600,000 4,333 (with cab) 2,800,000 4,666 4x4Wheel 65 hp 3,000,000 5,000 Wheel 100 hp 5,000,000 8,333 Foreign Tractor Wheel 45 hp 18,000-20,000 Wheel 60 hp, John Deere 5300 22,000 (landed Romania) Wheel 70 hp, John Deere 5400 L 24,000 (landed Romania) 4.27 A similar situation applies to harvesting machinery. Self-propelled combines are manufactured in Romania by Semanatoarea S.A. Their combines are produced with an initial Laverda (Italy) license and some Fortschrit (German Democratic Republic combine-maker) know-how, with further local development. Some of their motor models (truck motors) could stand improvement, as could their cutting bars, hydraulic systems, and length and area of the straw walkers (and their capacity coordination to the threshing cylinder capacity and speed). Nevertheless, these combines have been performing reasonably well. They come in several models and sizes, including a slope-adjusting model. The combine models include: * Self-propelled combine, 64 hp 105 hp (Autocamion motor); cutting width 2.1-2.6 meters; entrance system 700-900 mm * Self-propelled combine medium size; cutting width 3.6-4.2 meters; normal model is C- 12; model CP-12 allows the cutting platform, conveying system, and reel to work on a 300 slope GROBMAN 158 INPUT DISTRIBUTION * Large scale self-propelled combines, Model C-14M with 4.2-4.5 meters cutting width, 120 hp motor; Model C-140 with 4.2-4.6 meters cutting width and 150 hp motor. Optional equipment is available for collecting cereals other than small grain, sorghum, rice (including balloon tires and half-track propelling systems), sunflower, and maize- harvesting heads. * Specialized combine Model C-6P for harvesting maize ears; 105 hp motor, equipped for six rows, used to harvest maize for seed * harvesting machines for harvesting and windrowing hay and forages, under license from Fortschrit, Former German Democratic Republic * Small self-propelled combine for maize harvest only in smaller fields, Model CP-4, with a 105 hp motor * A stationary pull-type combine is manufactured for areas where self-propelled combines have difficulty operating, such as sloppy areas. Semanatoarea estimates that 3,500 new combines are needed immediately to avoid harvest losses in grain crops. At present, the combine fleet is 33,000, of which 9-10% need to be replaced, having lived their useful lives. Some 15-20% of production is reserved for export to- China, Venezuela, Argentina, Morocco, Syria, and Turkey. 4.28 Semanatoarea manufactured planting machines before they became involved with combines. At present, planter production is expanding, while combine production has been reduced. Vacuum precision planters for row crops are in the forefront of production, complementing the standard small-grain planters for 21-29 rows. A small motocultor with a 12 hp diesel engine is also being produced. This factory's line is complemented by trailers for fertilizer hauling, cutting bars for forages, rototillers, and portable irrigation systems using polyamide hoses and long-range water guns with the Model IATF-300 turbine. They also manufacture small hammer mills and special equipment for pomiculture and horticulture plant protection. 4.29 Semanatoarea has plans to produce small tractors, in the range of 23-26 hp. In this, they have a different view than that taken by UTB, which insists on maintaining production of larger tractors, with 45 hp a bare minimum. Semanatoarea estimates a need for 140,000 new tractors, many of them in the small capacity demanded by new smaller farms. 4.30 Prices for equipment produced by Semanatoarea are much lower than corresponding prices of imported equipment. The price differentials are quite substantial. As an illustration price ranges for their machinery lines follow. 4.31 For export, a large combine of Semanatoarea may be priced at anywhere between US$26,000 and $30,000, which would reflect an unsubsidized cost and profit. A similar GROBMAN 159 INPUT DISTRIBUTION Table C: Farm Equipment Prices in Romania (Semanatoarea S.A.) Equipment Type Price in lei Equivalent Price US$ Combines 5.1-10 million 8,500-16,666 Precision Planters .8-1.2 million 1,333-2,000 Motocultor Tractor 1.5-1.7 million 2,500-2,833 Mills .15-.6 million 250-1,000 Irrigation Systems 1.2-1.8 million 2,000-3,000 imported combine -- Massey Ferguson -- would start at US$120,000. A John Deere combine, quoted with other equipment to the Monsanto branch in Bucharest was US$140,000 landed in Romania (Table 36 for imported farm equipment costs needed for the management of a 1,000 ha farm). 4.32 In Table 35 there is a list of prices of agricultural machinery produced in Romania. These prices are lower by an order of magnitude of at least one-third or one-fourth to equivalent prices of foreign made equipment. Industrial labor in Romania at factories such as Semanatoarea is paid at a rate of US$0.15-0.30/hour as compared to US$12-15/hour in Western countries. It is ominous that the Association of Agricultural Machinery Manufacturers of the U.S. recently has indicated that 116 of its 135 founding members no longer are in business. It appears quite unlikely that imported machinery, even if local subsidies to farm machinery were to disappear, could find a ready market in Romania in the short/medium term because of their higher prices. Still, room should be made for gradual downward adjustment of the high subsidization rates in order to allow local manufacturers to operate efficiently in a subsidy-free environment. Fuel 4.33 Farmers get their fuel either directly at PECO (National Petroleum Distribution Company) or their fuel allocation from PECO through their local Agromec. There is a charge for transportation and commission charged by Agromec. Beneficiaries from fuel allocation by Agromec tend to be farmers' associations. In either case, fuel -- that is, motorina -- has not been a limiting factor. It may be, though, the single most expensive component of farm production costs. Romcereal includes fuel costs in its loans to farmers, with quantities allocated through Agromec to individual farmers according to Agromec utilization parameters. State farms get their allocation directly from the local PECO distribution point. 4.34 Motorina prices have gone higher in relative terms than the price of grain. Present (1993) cost to farmers of diesel fuel is 110 lei per kilo (somewhat less than one liter). This GROBMAN 160 INPUT DISTRIBUTION price, compared to the, price of wheat (70 lei per kilo) means. that one kilo of wheat buys less than two-thirds of a kilo of motorina, while in 1985 one kilo of wheat bought two kilos of motorina. However, in absolute terms the price of diesel fuel oil in Romania is very low by international standards, a mere US$0.18 per kilo. In spite of the fact that diesel fuel oil is available to farmers without apparent limitations, some Semrom branches indicated seasonal deficiencies in distribution, precisely when demand increases in the autumn for drying the maize seed harvest. Irrigation 4.35 Irrigated areas in Romania have been developed mainly in the south, in the Danube river basin, and in land bathed by its major effluents, especially the Prut and the Siret in Moldavia, and the Ialomita, Buzau, Arges, Olt, and Jiu rivers in Oltenia and Moltenia. Some minor irrigated areas in the west are controlled by water of the Mures river. Irrigation water is a key input, as it allows other inputs, such as seed and fertilizers, to express themselves fully in the attainment of high yields. A doubling of yields is possible, on the average, on irrigated land as compared to rain-fed farmland. Most of Romania experiences light rainfall, and poor distribution at the time of highest evapotranspiration demand. With an average annual precipitation of 517.6 mm registered in the western plains' Lovrin Agricultural Research Station over a 37-year period (annual minimum 293.4 mm; maximum 652.7 mm), it is easy to perceive that water may be, in many years, a limiting factor to agricultural production. In the Transylvanian Plateau precipitations regularly are higher, but in the Southern Plains they are lower. Near Bucharest, at the Fundulea Agricultural Experiment Station, in the center of the corn belt, the total annual rainfall registered in the period October 1991 to September 1992 was 387.8 mm., insufficient to sustain a normal crop of maize. 4.36 The irrigated area in Romania expanded to a total of 3,066,600 ha of agricultural land in 1989, of which 2,907,900 were arable. Of the arable land, 748,600 ha were in state farms (25.7%), with the rest of the irrigated land in agricultural cooperatives. As the cooperatives have been broken down, land parcels have been assigned in many cases with boundaries and orientations that obstruct the use of the irrigation facilities. Additionally, the irrigation system has fallen in general into a state of disrepair. Big thermal motors need to be replaced with electric motors. Pumps, canal linings, and tubing in the Danube, the Prut and the Siret need repair or replacement. The underground piping still is in place, but the overhead connectors and portable aluminum tubing and sprinklers which were the property of the cooperatives need to be assigned to a new modality of communal use. 4.37 What is more important to the irrigation-water supply problem is that the previous organization of water management no longer applies and no solution is in sight. Badly needed is a water rights law which signifies that surface and underground water is a national resource, that it has to be paid for, that certain rights can be attached to certain land boundaries with provisos, that the management of these resources could be entrusted to local committees of users under the overall supervision of the state, and that legal disputes over water rights and uses GROBMAN 161 INPUT DISTRIBUTION should be taken to. specialized agricultural jurisdiction courts in which justice could be dispensed expediently and quickly. In the transition there appears to be a need to establish order in the distribution and use of assets needed for irrigation work. There also is a necessity to define, with new -studies, the feasibility of investment in major irrigation and drainage project rehabilitation, under a new situation of cropping in a competitive and free market environment. New irrigation projects should wait until the efficiency of use of the present system is improved and new legislation is in place. 4.38 Small farm units prevailing in Romania tend to be conservative and to produce crops which require the least amount of mechanization, which lend themselves to use on the farm to gain value-added in livestock products for rural consumption, and which do not require irrigation. Larger units, such as those consolidated in associations or leased in aggregates will be more likely to benefit farm irrigation facilities, where available. The larger units also should consider, especially in the lower rainfall areas, switching to more drought-resistant crops, especially sorghum and sunflower. Sorghum, as has been demonstrated in Romania, can achieve yields per hectare similar to those of maize (with half the soil water consumption). A similar situation exists with sunflower vis a vis soybeans. 4.39 A serious and intensive promotional campaign should be developed to enhance the use of these drought-resistant crops by feed mills, with a pricing mechanism that would follow the relative prices of sorghum to maize grain and sunflower to soybeans that exist in world trade. For example, prices of US No. 2 maize and US No. 2 sorghum between September 1992 and February 1993, in US Gulf ports, varied between US$93 and US$96 per ton for both grains. Differences were between 0% and 5% in price, mostly in favor of maize, but on some dates sorghum had a higher price. In Romania these prices have been similar also, so the problem seems to be more the establishment of a differential that would stimulate sorghum purchases by feed mills, such as propelled seven million ha of sorghum annually into Latin American agriculture. 4.40 In regard to the establishment of a large area of sunflower, it appears that the main problem might lie with the excessively low pricing levels that are applied by Romcereal to purchases of sunflower and soybean grain. In September 1992, sunflower and soybean grain were paid, around harvest time, at the equivalent of US$125/ton and US$143/ton, respectively. The respective border prices were US$256/ton and US$264/ton, respectively. The local prices were 48.8% and 54.2% of border prices for sunflower and soybeans. At the same time relative prices for wheat and maize were 71.4% and 99% of border prices. Hence, one of the main problems leading to the unavailability of protein sources in Romania can be explained by price distortions in a regulated market for the oilseeds. Feed 4.41 The animal feed industry is highly concentrated in large feed mills -- some 67 of them, to be found in every judet and located near the Romcereal grain storage facilities and other GROBMAN 162 INPUT DISTRIBUTION Table D: Prices of Grain and Subsidies to Feed Mills by Romcereal (March 1993) Product Feed Mill Cost Romcereal Subsidy (lei) Procurement Cost (lei) (lei) Wheat 40/kilo 70/kilo 30/kilo Maize 40/kilo 60/kilo 20/kilo Barley 20/kilo 50/kilo 30/kilo processors. They are linked in a National Association of Feed Mills, established since the 1989 revolution. The largest one has an installed capacity of 220,000 tons/year and is located near lasi. Most range in capacity between 40,000 to 140,000 tons/year. It is estimated that total installed capacity in Romania for animal feed production is 6,400,000 tons. The stated demand for feed before the revolution was around 10 million tons/year. The real demand was estimated by the 1990 World Bank Agricultural Mission at 11.4 million tons/year, distributed as follows: pork, 5,054,000 tons; poultry, 3,304,000 tons; cattle, 2,654,000 tons; sheep, 360,000 tons. The present actual demand is difficult to assess, but from sampling data it may have fallen to one- third of the demand stated above. As an example, the manager of a feed mill interviewed in the city of Cluj-Napoca in Transylvania indicated that his production was 170,000 ton of feed in 1990 but had fallen to 70,000 tons in 1992, and that he expected his production to decrease to 60,000 tons in 1993. The reason stated is that, with the demise of the CAPs, most of the large pork and poultry operations they used to supply have disappeared, and demand has not entirely been made up by the new independent farmers and farm associations. One feed mill estimated a 30-40% decrease in animals (poultry and pigs) in its market area. 4.42 The raw materials, basically cereals, are obtained by the feed mills from Romcereal (70% of their supplies) and from other sources. Most of the soybean meal is imported; some one million tons per year are needed. A plant in Craiova, and another in Balotesti, supply, from local production, vitamins, mineral micronutrients, coccidiostats, and anti-oxidants, which the millers consider of good quality. Fish meal supplies from Romania's own fish catch have dwindled, and the industry has to rely on imports for almost all of its needed 40,000 tons. Sunflower cake, rape seed cake, meat meal and fats, and dried yeasts (from breweries) are all locally-supplied raw materials. 4.43 The cost of cereals to the feed mills obtained from Romcereal is lower than the price paid by Romcereal to farmers. The various prices and subsidies for the main cereals (March 1993) are shown below. 4.44 The actual prices paid by the feed mills are Romcereal procurement prices, with the subsidies being reimbursed at later dates by the Ministry of Finance. However, there are delays GROBMAN 163 INPUT DISTRIBUTION in the payment of the subsidies, which force the millers to borrow money from BA, thus incurring financial costs as well. One mill manager, when interviewed, complained that the payment of government subsidies to his mill were six months in arrears. 4.45 Feed formulas are available for different types of farm animals, ages and types of operations. One mill in Cluj had the following formulas: broiler chicken, three recipes (formulas); layer chicken, five recipes; pigs, six recipes; dairy and beef cattle, six recipes; rabbits, two recipes; silver fox, two recipes; fish, no recipes, but plans to develop some for the 8,000-10,000 ha of fish farms in the area. Average prices paid for these feed formulas are 80 lei/kg for poultry; 73 lei/kg for pigs; and 67 lei/kg for cattle. 4.46 Animal feed formulas are of admittedly low quality in Romania. They are basically low in protein and use an excess of grain to compensate for calories. Romania does not produce sufficient protein-based raw materials, and the importation of soybeans, soybean meal and some fish meal for up to 70% of their protein needs has become a necessity. The ratio of cereals to total components in the formulas has been 80% on the average. It went down to 77% in 1990 with a large importation of soybeans. The ratio of cereals to soybean meal has varied from as high as 47 times in 1989 to as low as seven times in 1990, with an average of about sixteen times. The supply of sunflower cake has been held almost constant varying between 200,000 to 260,000 tons per year. This points to a serious shortage of protein in the feed formulas, accounting for the low conversion ratios obtained in Romanian feeding operations and a wastage of grain. A basic reason for this situation may be found in the very low prices paid for sunflower and soybeans (50% of border prices, September 1992), which bear no relation to the much higher relative prices paid for cereals. A further complication is that many clients of the feed mills are in arrears in their payments. These clients accept deliveries of even lower-protein feed formulas than the standard ones, in a mutual arrangement between the farm associations and the mills, as a way to obtain a gradual repayment of debt. 4.47 Local private mills exist in the countryside. They may be part of the older CAP-owned mills used to feed their own livestock operations, or may have arisen independently. Receiving no subsidies and having to procure their grain from private wholesale grain markets, at higher prices, their competitive position is likely to be weak. The state-owned mills, on the other hand, are gearing themselves to bypass Romcereal and act in the capacity of integrators by contracting directly with private farms and associations, offering them the incentives of no-interest-rate credit, as is being offered presently by Romcereal, but with higher grain contract prices. Whether these aspirations can be put into practice, and these mills are allowed to receive subsidized credit directly from Banca Agricola at 15% interest for its reallocation to farmers, is yet to be seen. GROBMAN .164 INPUT DISTRIBUTION 5. INPUT DISTRIBUTION SYSTEMS 5.01 Farm production inputs were distributed in Romania, up until the time of the 1989 revolution, by way of a series of parallel systems, each geared to one type of input and one generic source of production. This was a general model adopted in the socialist economies of Eastern European countries and adapted to a command economy with a relatively low number of farm units. , Many of its features still exist through monopolies, and the additional entanglement of superdistributors under the guise of integrator organizations, that both distribute inputs and contract the purchase of the production. 5.02 In the past, seeds were distributed by Agrosem, a branch of the Directorate of Supply of the Ministry of Agriculture (MAF) and Unisem. At present, Semrom, dressed as a seed company with local Agrosem branches operating seed production and sales complexes at plants in each judet, is very little changed from what it was prior to 1989. 5.03 The Directorate of Supply of the MAF was in charge of procurement of fertilizers from the factories and their distribution to the farmers. Its job was eased by the fact that the number of clients was limited and their demand preplanned months ahead of time of delivery (state farms and CAPs were the direct clients; private farmers obtained their supplies through their nearest state farm or CAP). Now the Directorate of Supply of the MAF has lost its role and the integrators have substituted for the Directorate. 5.04 Fertilizer needs are predicted by collecting information and aggregating it at the judet level from communes and state farms. Stocks of fertilizers are not distributed, however, all the way down to the commune level. They remain consolidated at the judet level because of the acute shortage of fertilizers. They,must be obtained at the factory gate by state farms, private farmers and associations, Romcereal, Semrom or,even Agromecs. The integrators distribute the fertilizers on fixed dates, on the spot, from truck platform to farmer's trailer. Communal centers participate also in the same form of distribution. Fertilizer production is based on operational capacity of the plants, and hard currency available for the importation of gas. As production plans are firmed, part of the production is apportioned to export to obtain hard currency. In the past, up to 60% of the production went to export. The rest was allocated to the internal demand, with priority to state farms, which get 75% of the production. 5.05 Pesticides continue to be distributed by a state organization independent of the other input distribution channels. The basic channel is the Inspectorate for Plant Protection and its branches in every judet. They stock pesticides of high relative toxicity in zonal depots, under the control of their respective "Centru de Protectie Plantelor," from which they are distributed to users under the control of the Inspectorate's technical personnel. Low-toxicity pesticides are stocked both in the former zonal depots as well as in the "Centru Agricol" communal depots, from which they are dispensed to farmers. Joining this system, some large private pesticide companies have started in 1993 the establishment of regional distribution branches, which they GROBMAN 165 INPUT DISTRIBUTION plan to develop into a full private network of dealerships for pesticide sales and service. Romcereal can also obtain low-toxicity pesticides by buying directly from importers and making products available to farmers. Romcereal plans to import pesticides directly in 1993. Agrosem branches of Semrom also. buy pesticides directly. A new state-owned company, Proplant, apparently a new company formed from the Plant Protection Inspectorate distribution system, also has appeared. 5.06 Fuel is distributed by the PECO and by the Agromec companies in each judet. Agromec also provides transportation service for fuel from the PECO distribution center to the farm. Prediction of needs is aggregated at the consumer level --' state farms and private farmers and associations -- and consolidated judet-wide all the way up to Bucharest. Fuel is allocated at the commune level and to state farms. Agromec is, as stated before, a major distributor to private farmers. 5.07 The former Agricultural Machinery Stations (SMAs) are now mixed-capital -Agromec companies in all judets, with the state holding absolute majority ownership. Agromec companies provide mechanization services, and as subcontractors to Romcereal also provide some other production inputs to private farmers. However, they are coming into a new role as distributors of tractors and agricultural machinery. UTB and Semanatoarea at least have designated a number of Agromecs as their dealers for tractors and farm machinery in the localities they serve. 5.08 Animal feed products are distributed from the processing plants (and a few stores owned by 72 large feed mills) directly to users. Smaller feed mills (3/4 ton per hour capacity, numbering over 100) operate as adjuncts to poultry farms and hog-fattening units, and cater mostly to their own needs. 5.09 An exception to the parallel distribution systems is the operation of the "Basa de Aprovizionare Tecnica e Material Agricola" (BATMA) centers in major towns in every judet. These centers are successors to the former Agrocapa, which in turn succeeded the Directorate of Supply. BATMAs presently handle materials used on farms, spare parts, and also some farm inputs. The latter are the least important part of their business. For example, BATMAs handle around 5% of the total volume of fertilizers distributed.' Since they do not have access to the 15% interest credit for advance of inputs available to integrators, they are in a poor position to compete in input distribution. They usually require advance payment for orders, including transportation charges. 5.10 The traditional parallel system of input distribution continues in effect up to this day in Romania. It has undergone some changes in format but not in substance. It lacks the element of a private sector with a profit motivation. All the actors at present (with a few exceptions) are state-owned enterprises or enterprises in which the state owns a majority share. Even the so- called mixed enterprises, in which 30% of the shares have been transferred to workers, are still - - in effect -- functionally state dependencies. These enterprises are limited to a maximum 10% profit, which then is taxed at 45%, and of the remainder the state is entitled to a 70% share of GROBMAN 166 INPUT DISTRIBUTION dividends. Not much incentive is left to the private component of the ownership. The parallel input distribution system, while built on efficiency of planning premises, although it had inherent inefficiencies of design and operations, did, at least, perform the function of distribution of each type of input through its channels. It disregarded the potential savings in costs that might have accrued from "confluential" systems, in which several types of inputs coming from the various input producers would flow through joint wholesaler and retailer channels, thus avoiding the present multiplication that exists in the distribution channels. 5.11 Since the 1989 reforms in land tenure and the appearance of several million new farm- holdings, the present, almost unaltered, input distribution system has become grossly inadequate for serving the new private farmers by itself. Rather than overhauling the input distribution system and privatizing it, the solution of the state has been the patching of the system with intermediaries -- the integrators. These are providers of one more step of intermediation, but in reality are acting basically as suppliers and guarantors of the collateral needed by the new private farmers for credit in order to acquire inputs, in exchange for contracts to sell their crops. In this sense, the "patching" element of the integrators has played a useful role. This is, nevertheless, a transient role and does not represent a change in the basic input delivery system. Only when private wholesalers and dealers appear and offer a full assortment of inputs to farmers on a competitive basis will there be, in reality, a new input distribution system. Integrators and their Relationship 5.12 The decision to allow the breakdown of the CAPs and their fragmentation into smaller land-holdings created an estimated 6.2 million new landowners/land claimants, many of them ill-equipped to farm their new land. With 2.5 ha (average) landholding, and less than 2.0 ha arable land average granted, most claims had to be downsized. With only provisional land titles and less than 3% of definitive titles awarded at this time, a major drop in productivity ensued, which the MAF tried to avert and reverse. New farmers -- mainly subsistence farmers -- retained milking cows and minor farm animals for security purposes and self-consumption. This resulted in use of more than one million excess tons of cereals in feeding farm animals directly, reducing the stream of cereal grains to milling processors and ultimately to the cities. This situation, plus environmental limitations, and the drop in productivity, brought about cereal deficits and the need to import more than one million tons of cereal grains in 1990-91. As a consequence, a new scheme was devised to reverse the production downtrend, taking into consideration existing circumstances, institutions, and the feasibility of quick state actions. The major decision was to establish a new role for the procurement institutions that existed at the time, formatting them with new functions, and reshaping them into the so called "integrators." The integrators were allowed to operate with the following resources and assignments: * Banca Agricola was required to advance to integrators a sum between 60 and 65 billion lei annually (1992/93 agricultural season) for the express purpose of using it as an "advance loan for the purchase of production inputs." These funds are available to GROBMAN 167 INPUT DISTRIBUTION integrators at a 15% rate of interest to onlend to private farmers and farm associations for a period of time of one crop season. * Integrators lend funds received from Banca Agricola to private farmers and associations, up to 50% of their estimated production costs. The rate of interest varies; Romcereal does not charge interest and assumes this loss, which it regains in the prices paid to farmers at time of procurement and in the prices at which it sells grain to feed, flour and oil millers, and from other business activities such as storage services; other integrators charge interest. * In order to assure integrators of recuperation of the loans, they carry their own loan administration, and contract with farmers the purchase of their crop at pre-established prices. The volume of crop contracted is fixed, and more than enough to pay for the loan. Farmers are free to sell excess crop elsewhere, but must not default on the minimum fixed in order to retain creditworthiness. Prices at harvest could be adjusted only if the MAF officially indexes or adjusts all prices, but not if the market fluctuates because of inflation or other pressures. 5.13 There are several firms and institutions that have been given the status of integrators. The largest one is Romcereal, which absorbs some 60% of the Banca Agricola production credit. It is accompanied by Semrom, which deals with cereal, oil and technical seeds; Unisem, which deals with vegetable seeds; the Agromecs, which provide mechanization services and which operate also as distributors of inputs. Specialized integrators are the sugar beet factories, dairy complexes, the tobacco monopoly, the fiber-processing companies, and to a limited extent beer- and malt-producing companies. The latter, and some other processors such as fruit and vegetable processors and the feed and flour millers, are desirous of acquiring the status of integrators, in order to lower the cost of raw materials and improve their cashflow, eliminating the delays in return of subsidies from the Ministry of Finance. Feed mills as of 1993 may start buying grain as integrators. However, the subsidies paid to them by Romcereal, on the grain the mills buy from Romcereal, would also have to be assigned to them, but this time directly, something which has not been organized. 5.14 While each integrator is likely to operate independently fulfilling its own objectives in its area of influence, there are overlaps which have led to specific arrangements among the major integrators. Romcereal buys seed from Semrom to resell to farmers. It also acquires fertilizers and pesticides to resell direct. The sales really are credit in kind in which some, but minor, profit accrues to Romcereal. The advantage to the farmer of going through Romcereal is the incentive of paying no interest on the credit, which other suppliers charge at the rate of 15% allowed to integrators. The Agromecs contract with Romcereal for the delivery of mechanization services, which include plowing and land preparation, seeding and fertilizing, spraying for weed and insect and disease control, and mechanical harvesting. Romcereal pays the Agromec companies for their mechanization services to the farmers. Agromecs also operate as suppliers of fertilizers and fuel to private farmers, who may decide to include delivery and GROBMAN 168 INPUT DISTRIBUTION application services jointly with fertilizers. Only. in a less common manner may seeds be delivered by Agromec to private farmers. These additional services may be directly offered by Agromec, or in agreement as a further intermediary, -with Romcereal. State farms and state commercial societies usually stay out of the above system, although they may be entitled to avail themselves of it. Table 55 indicates graphically the various relationships of the integrators and the proportions of the market which they capture. 5.15 Other integrators, such as tobacco, sugar beet and fiber (flax, hemp) processors, supply seed out of their own or contract production, and also supply fertilizers and some pesticides to the farmers with whom they contract production. The mechanization services, as in the cases of Romcereal and Semrom, are contracted with Agromec, and paid by the integrator to the respective Agromec company, as part of the credit allocated to each farmer. 5.16 The relative credit allocations worked out between Romcereal and Banca Agricola condition an advance of 50% of the estimated costs of production. This 50% breaks down as follows: agricultural mechanization, 40%; seeds, 20%; fertilizers, 20%; pesticides, 15%; other services,, 5%. These allocation percentages are inadequate for seeds and fertilizers. Therefore, they lead to the use of cheaper, advanced-generation, uncertified wheat seed, which should not necessarily decrease wheat or barley yield significantly but would do so with hybrid seed, and to low levels of fertilizer applications or none, which do indeed lower yields. With fertilizer supplies around 28% of potential demand, supply rather than credit may at this time be the chief bottleneck to higher fertilizer applications per hectare. Roles of the Ministry of Agriculture and Food 5.17 After having transferred the responsibility of handling the physical delivery of inputs to other organizations, MAF still holds on to a major part of the pesticide distribution through its Inspectorate for Plant Protection. Other than this remnant of its once preponderant role in supply distribution, MAF still acts in the collection of information at the commune level and its consolidation, at the judet and national levels, on demand and supply of inputs. It compels a 20-25% over-production of seeds in order to establish a strategic reserve, causing an increase in the cost of carryovers at Semrom, which is financed out of Semrom's own resources. It also forces the accumulation of a strategic grain reserve for food security, which in recent years has been lower than the target aimed at. MAF additionally estimates advances and deficits in the agricultural plans, and presents its requirements to the Cabinet and to the Ministry of Finance for allocation of resources. 5.18 For the first three months of 1993, for example, the state and MAF examined the situation of power resources, and were informed that 15,800,000 tons of conventional fuel had been used in that time period; 63.5% from domestic production and 23.5% from imports made over that time period. In the same period plowing had proceeded for spring plantings on an area of 4.3 million ha, while another 1.4 million hectares had to be completed by the end of April. Fuel supply from imports was high (in the consideration of the state) as the level of local GROBMAN 169 INPUT DISTRIBUTION production was steady -but insufficient for demand. Seed supply for spring planting was considered adequate, and the pesticide supply situation was on its way to being solved. Fertilizer supply was grossly inadequate at the 28% level of demand for fertilization of new spring plantings and fertilization of winter crops in the spring. Detailed analysis and forecasts are made of NPK fertilizer needs, pesticides by each specific product, and seeds of each crop, and consolidated at the Ministry of Agriculture in Bucharest. This information is passed on to pesticide plants, pesticide importers, fertilizer plants, Semrom, and Unisem, in order that they may adjust their production plans. The forecasts have been accurate to a relatively high degree. However, they did not forecast the increase of corn plantings, and the decrease of wheat, barley, and oilseed areas. With possibilities for the private sector to react much more quickly to market prices and opportunities, it will be less difficult for both farmers and suppliers to adjust reciprocally in the future. The short term, during the transition, however, will be unsteady on account of potential disruptions of the supply/demand forecasts and the need to accommodate production and distribution to them. 5.19 The MAF is confronted with a technological gap that has suddenly arisen with the demise of a large number of CAPs. State-owned agricultural companies and private associations with legal status that have replaced the CAPs, and some family associations with their own paid technical advisors, may be at the same or higher technological level as they enjoyed before. However, a very large number of hectares -- in fact the majority of the arable land of the country in the domain of private farmers -- are being worked with lower technology, and in some cases without the use of advanced production inputs. Innovation in creating both a subsidized extension force and incentives for the formation of private extension and general service enterprises are needed urgently. The present agronomic engineers at the commune level are engaged in rural development, extension, supply distribution, statistical data collection, and several other services. The time they can allocate to extension and their preparation for realistic extension work are limited. There are opportunities and great demands for MAF to revise its agricultural extension organization, orientation, and resources, and exert a great effort in support of private farmers and associations. As much incentive as possible in the form of credits, training, and other resources should be made available to private extension services. 5.20 Another area in which the MAF should exercise leadership is in the organization of free wholesale markets for grain and other produce. These markets should be supported by a system allowing collection of the supply of grain at harvest time with storage facility allocations and a warranting/credit system. An active grain (and other commodity) price information system, reaching all farmers in Romania with the latest information on prices paid in the wholesale cash markets, is an absolute necessity. It might even be possible to develop (in addition to cash markets, as an intermediary step to merchant firm cash spot and firm future transactions) a real futures market for grain and other commodities in Romania. Training in all areas of rural market development necessarily will be of first priority. GROBMAN 170 INPUT DISTRIBUTION Input Distribution System for Fertilizers 5.21 The fertilizer input distribution system is described graphically in Table 53. Fertilizer plants sell direct to state farms, to farmers who are in their vicinity (10-12% of these), to farmers' associations (10-20% of the total volume of this group), to BATMA (5-10%), to Communal Agricultural Centers (7%), and to Romcereal, Semrom/Agrosems, Agromecs, and other integrators (70%). Fertilizer orders placed with the plants are prorated as supplies are much shorter than demand. Payment for fertilizers must be made in advance, including transportation to the intermediary. Fertilizer payments reflect prices which are about 10-20% of the cost to the plant, depending on whether one uses subsidized prices based on Decree HG 1355/1991 or HG 464/1991, the latter being closer to actual prices found at factory gate by the mission (Tables 8, 9, 10, 17). The subsidy for fertilizers included in the Ministry of Industry Budget for 1991, 1992, and estimated for 1993, were, respectively 4,933 million, 46,678 million, and 25,035 million lei. The 1992 subsidy was planned originally at a level of 6,881 million. Its growth to 46,678 million probably is because the decree ordering fertilizer price increases was not applied for the current season. The 80% planned subsidy became, then, a more than 90% price subsidy. Specific percentage subsidies for each product and each plant, calculated on the basis of decrees HG 464/1991 for prices to consumers at factory gate, and HG 412/1992 for costs, are calculated as percentages of the difference between price and cost over cost (Tables 8-10). 5.22 Total fertilizer consumption in Romania in the pre-revolution years was more than 1,300,000 tons of total nutrients (Table 43) and in 1981 and 1986 it reached its peak at 1,600,000 tons (Table 3). Production was near or over 3,000,000 tons annually; exports were slightly below local consumption (Tables 43, 46). Production fell after the revolution and reached bottom in 1991 to slightly more than 1,000,000 tons. Local consumption in 1991 also was at its minimum with 282,100 tons of total nutrients, 17.6% of the level reached in 1986. A tendency to increase production and supply was discerned in 1992 and is expected to continue through 1993. Yet supplies estimated in early 1993 were at a low estimate of 28% of demand. The annual optimum estimate for domestic consumption is 2,230,000 tons of total nutrients. The average for 1980-90 was 1,375,000 tons (62%) and in 1992 was 555,000 tons (25%). In terms of nutrients, the average annual consumption of nitrogen of 1980-90 was 746,000 tons against an optimum estimate for 1993 of 1,130,000 tons. For P205 the corresponding figures are 401,300 tons against and an optimum for 1993 of 800,000 tons; for K20 the 1980-90 annual consumption was 227,700 tons against an optimum of 300,000 ton. The 1992 consumption figures per nutrient have dropped, however, to less than half the 1980-90 averages. 5.23 By European standards, Romania has been and continues to be a low-fertilizer-utilization country. With a total average use between 126.7 kg/ha in 1986 and 121 kg/ha estimated for 1992-93, it is at about half of the use of a basket of countries (Table 5) which have an average of 229.3 kg/ha in terms of total nutrients. It is well behind other former COMECON countries (Czechoslovakia, Hungary and Poland) in per-hectare fertilizer use. GROBMAN 171 INPUT DISTRIBUTION 5.24 Fertilizer distribution figures for quantities of nitrogen fertilizers and phosphate fertilizers by judet are shown in Table 12 for years 1990, 1991, and 1992. The significant drop in fertilizer consumption and distribution of the year 1991 reaches every judet and is manifested in the exceptionally low levels of use of N and P205 per hectare. In 1992 there was a recovery of use of fertilizers, which fell quite short of the utilization levels of 1990, which still were low as compared to a top year, as in 1986. If we compare the figures of use per ha shown in Table 12 with the economic optima calculated for maize and wheat in Table 16, considering that these two crops to make more than half of the total planted area, it plainly is clear that Romanian farmers are using fertilization levels adjusted for low yield expectations. This assertion, furthermore, is expanded further with an additional economic analysis (Table 16) which indicates that, with the exceptionally favorable local price/cost ratio of wheat and maize to nitrogen (5.74 and 4.92, respectively), much higher levels of fertilization than those used even before the revolution would be justified at this time. Even at border prices for fertilizers (US$135 ton/urea), much higher levels of fertilization would appear to be justified economically (Tables 14, 16, 19). In other terms, there does not appear to be any technical or economic justification for the exceptionally high levels of fertilizer subsidization in Romania. 5.25 With fertilizer supply being much shorter than demand, there is further justification for an upward adjustment in prices of fertilizers. To add to these arguments, it can be seen from a cost and profit analysis of a case of wheat production model contract by Romcereal in Vaslui (Table 13) that fertilizer costs amount to about 7% of total costs, a very low figure when compared to other countries. Total costs with subsidized inputs theoretically would allow a wheat farmer in Vaslui (Moldavia), to obtain an average expected net profit of 132,000 lei on an investment of 78,000 lei, a return on investment of 169%. This situation is confirmed by a similar analysis of another wheat cost/benefit case, this time with data from Alba lulia in Transylvania. Total cost of production was 84,000 lei/ha, with a yield of 4,000 kg/ha. This cost includes mechanization expenses at 53,000-55,000 lei/ha (equivalent to 1,000-1,200 kg/ha of wheat grain), 4,700 lei/ha for fertilizer, including transport, and 23,000-30,000 lei/ha for wheat seed. Icedin herbicide (2,4-D + Dicamba) also was considered. Income came to 280,000 lei/ha at current wheat price, giving a profit of 196,000 lei/ha. This is a gross profit over cost of 233 %. The profit figures in the two wheat cases are of the same general order and are abnormally high and much in excess of what wheat farmers obtain in other countries. The increase in income of private farms due to subsidization policies is such that former CAP members make a higher income on their individual farms today than they did as CAP members. Even in the drought year of 1992 they had higher incomes. The frequency of droughts in Romania, and the relatively low precipitation that many of the areas of the country receive, would appear to justify relatively low use levels of fertilizers on the basis of the low precipitation years. However, on average of several years, higher fertilizer application doses would lift average production. Irrigated areas, of course, should be able to benefit from the highest fertilizer application doses. 5.26 Romania has a network of soil test laboratories installed in most judets, with a sophisticated soil test-fertilization recommendation system. This system, from a cursory GROBMAN 172 INPUT DISTRIBUTION examination of our data, would not appear to work at the extension level, as judet use averages do not correlate with soil status analysis. We have graphed, in Table 45, P205 soil phosphorus expressed in PAL units, asjudet averages with average consumption of P205 per judet for 1990, when consumption of P205 had not yet dropped. It would be expected that recommendations would be directed so that low P205 judets in average PAL units, would tend to use higher applications of P205 fertilizer. That this is not the case can be seen in Table 45, in which there are many cases of the reverse being true. Table 7 singles out the high P205 users, Braila; Constanta, Prahova, Teleorman, Mures, Arges and lasi, and the low-level users, Hunedoara, Gorj, and Maramures. It appears from this list that the evidence points not to technical situations, but to distribution, credit and other non-technical factors accounting for these differences. 5.27 Until 1990 fertilizer distribution was made at the government level, and all of it through Agrocapa. State farms had priority in fertilizer distribution. From 1991 on, the percentage of fertilizers distributed through Agrocapa and its successor, BATMA, declined considerably, to the extent that today it represents only about 5%. Present estimates of fertilizer distribution are 30-35% for direct supply, and 65-70% for indirect supply to farmers through integrators. For the state sector, 95% of fertilizer is acquired directly from factories; for the private sector some 70% of fertilizers are acquired through integrators, 5% through Agrocapa/Batma, and 25-30% obtained directly from factories. Of the portion of the distribution handled by integrators, 10% is handled by Agromec, 90% by Romcereal. The difference in farmer payments to integrators is that Romcereal receives payment in grain, while Agromec accepts payment in lei; the latter charges, to the cost of the fertilizer, transportation costs, application charges, and commission, and 15% annual interest if payment is at harvest. Romcereal absorbs the cost of the 15% interest rate on the credit it receives from Banca Agricola. Fertilizer prices are subsidized equally by the state to all distributors. 5.28 Formulations in which fertilizers are sold are simple (single nutrient) and complex (multi- nutrient). Their relative proportions in the distribution stream are: Nitrogen Simple fertilizers 60% Complex fertilizers 40% Phosphorus Simple fertilizers 50% Complex fertilizers 50% In the simple nitrogen fertilizer group, most of the fertilizer used is in the form of ammonium nitrate (33 % N) with nitrocal -- calcium ammonium nitrate (28% N) -- is in one group, with about 50% of the market, and urea (46%), accounts for the other 50% of consumption. Nitrocal and a small production of ammonium,sulphate exhibit minor consumption. Urea is preferred because of its higher concentration of nitrogen, ease of handling, and relatively lower nutrient GROBMAN 173 INPUT DISTRIBUTION cost, and also can be mixed with pesticides and sprayed on some crops for additional leaf assimilation of nitrogen. The problem for farmers is that urea is not always available, as most of the production is singled out for export. In the complex fertilizer group, the following formulas are found in the market: Nitric-based attack of phosphate rock: * 15-15-15 * 27-13.5-0 * 22-22-0 Sulfuric-based attack of phosphate rock: * 16-48-0 (diammonium phosphate) Phosphate fertilizers are presented in the following forms: * Simple superphosphate (18% P205) in powder and granulated forms * Triple superphosphate (46% P205) in powder and granulated forms * Calcium phosphate One factory. in Craiova, Dolochim S.A., produces foliar fertilizers, which are applied with spraying equipment, especially to fruit trees, grapes, potatoes and vegetables. These products are called Folifag F-011, F141, F-231, and F-411. Another product which includes macro- and micro-elements produced in Romania is Polimet. - For potatoes, six It/ha of Folifag are recommended as additional foliar fertilization, supplementing 500 kg of complex fertilizer and twenty tons/ha of manure. Folifag (Polimet) plus wettable sulphur is recommended in foliar applications in orchards. Folifag, in concentrations of .6%, and Polimet, in concentrations of .3%, applied in mixtures with pesticides, are recommended for foliar applications in apple orchards. 5.29 Real fertilizer prices are higher for most farmers than fertilizer plant gate prices. The BATMA distribution costs for Sibiu branch are illustrative. BATMA substitutes for the briefly- operating SCAPAs (Societa Comerciala de Aprovisionare a Productorilor Agricoli), which in turn took over from Agrocapa S.A., a direct-distribution branch of MAF, after the revolution of 1989. BATMA operates as an autonomous entity of MAF. It supplies fertilizers, pesticides, agricultural machinery, spare parts, and construction materials (cement, construction steel, limestone, plastic materials for construction, lumber). They handle some 14,000 items in their inventory, which does not include seeds. BATMAs in each judet procure their materials from local factories in Romania; they do not have import licenses. Imported materials (3% of their inventory) are procured from local importing firms. BATMAs operate out of retail sales outlets. They had two in Sibiu, and a labor force of 85. Their total sales amounted to 1.7 billion lei GROBMAN 174 INPUT DISTRIBUTION in 1992. BATMAs use their own capital, and Banca Agricola credit at a 55% rate of annual interest, to stock themselves. Their price mark-up policy is as follows: * For their wholesale level, for cheaper products, an across the board 30% mark-up is levied on the procurement prices. For more expensive items, the mark-up is progressively lower, reaching as low as 4%; the average mark-up is 11.6% * For the retail level, when merchandise moves from general storage and is sold at retail outlets in Sibiu and Seliste, they add another 20% for average-cost products, to account for wages, transportation, and other costs. For pesticides their total mark-up is 15%. Their fertilizer supply is obtained from the Turgu-Mares plant. Cost and sale price structure are given below: Ammonium Nitrate: Bulk a) Ex-Plant (Turgu-Mures) price 6.80 lei/kg b) Transport in 25 or 50 ton capacity rail wagons in bulk. Cost to Sibiu Railroad Station 38,000 lei per 25 ton wagon 1.52 lei/kg c) From Railroad Station to BATMA warehouse 14 km, 14,000 per 25 tons .56 lei/kg Total cost ex-warehouse 8.88 lei/kg d) General expenses, sales costs and profit .92 lei/kg e) Selling price bagged in 50 kg sacs 9.80 lei/kg Other fertilizers sold are Urea, Nitrocal, and complex formulas (20-25-10, 38-38-0, 15-15-15). Total gross profit on fertilizer sales in 1992 for the Sibiu BATMA was 1.1 million lei. However, there was a net loss, since the mark-up was not enough to cover expenses. For most farmers it could be calculated that, on an average 200 km distance hauling by railroad car, the cost would be raised 2.40 lei/kg to the railroad station. To this another 5.80 lei/kg as an average should be added for transport from railroad station to users' place, and for manipulation and mechanical application to the field. Average cost of railroad transport in April 1992 for a 50-ton bulk rail car were in lei/ton: 1,510/100 km; 2,400/200 km; 3,200/300 km; 4,100/ 400 km; 4,800/500 km. 5.30 Production costs of nitrogen fertilizers in Romania appear to be lower by a substantial margin, even without subsidization, than imported fertilizers (Table 17). For example, Romanian urea costs are the equivalent of US$89/ton bagged, as compared to a C&F reference price of no less than US$120/ton in bulk and US$135/ton bagged. Ammonium nitrate produced in Romania has a cost of US$66/ton, as compared to US$185/ton for imported bagged product. This situation is reversed in the case of phosphate fertilizers. Romania is dependent on the importation of rock phosphate from Morocco, Israel, the U.S., Algeria, Tunisia and Syria at a GROBMAN 175 INPUT DISTRIBUTION Table E: Domestic and Imported Cost Components When Sold Through a Private Market Channel; Resulting Ratios of Nitrogen/Wheat Grain Prices Under Alternative Assumptions Cost Item Local Urea Imported Urea Factory gate unsubsidized price bagged, US$89.00 average/ton Imported, landed, bagged price at port US$149.00 Transportation to storage 3.50 6.00 Losses (1/2%) 0.46 0.77 Storage cost ($0.25/ton/month) 0.75 0.75 Handling ($1.80/ton) 1.80 1.80 Interest of 15%/year (3 months) 4.77 7.87 TOTAL COST 100.28 166.19 Wholesale/retail margins (15%) 15.04 24.92 TOTAL PRICE TO FARMER Product ton basis 115.32 191.11 Nutrient ton basis 250.70 415.56 Wheat price Present, US$/ton 117.65 Border price, US$/ton 185.00 nitrogen/Wheat price* ratio: Case 1 2.13 3.53 Case 2 1.35 2.25 * Nutrient ton basis price of US$35-45/ton. Apatite is imported from Russia at US$50/ton. Calcinated phosphates are imported from Morocco, the U.S., Algeria and Israel at US$49-52/ton. All prices are C&F Constanta. Potash in the form of potassium chloride is imported from Russia and Germany at US$75/ton. Final product prices for triple superphosphate, and diammonium phosphate (both sulfuric acid attack on rock) are higher than the equivalent imported products. For other GROBMAN 176 INPUT DISTRIBUTION complex fertilizers (nitric attack) such as .15-15-15, local production prices are more favorable than imports (Table 17). This may explain why Romania has taken advantage of its large production capacity and competitive advantage in the export market for some fertilizer products. It fails, to explain, on the other hand, the rationale for the extreme differences between local fertilizer prices and border prices of imported fertilizers (example: . ammonium nitrate at US$11/ton, subsidized price, vs. US$185/ton, C&F price) as can be seen in Table 17. This is accentuated even further by the high grain price to fertilizer-cost ratio which is totally the reverse from Western countries. 5.31 Fertilizer stocking does not exist in Romania at present. Conditions do not favor it. With high inflation rates, high costs of storage and handling, high interest rates for independent state and private marketers (55 %) as compared to the 15% annual rate for integrators, and the particular case that Romcereal even subsidizes this credit to farmers (to 0%, recoverable in other forms at harvest), plus the fact that fertilizers are in short supply, and new farmers in most cases would not be subjects of credit to them, it is understandable that no organized distribution system in the private sector has sprung up in Romania. 5.32 Fertilizer exports in the years preceding 1989 ranged between 1.6 and 1.8 million tons per year, at a stable 57% of production (Tables 4, 43). In 1990 exports took a plunge to 30% of total production as production itself fell that year to almost half of the 1986 level because of limited gas supplies diverted from the factories to the cities. The 1991 sharp increase of exports to 72% of production compensated for the low export figure of the preceding year. Between 1992 and projected 1993, exports relative to production are returning to former levels. Nitrogen fertilizers represent 78-79% of all exports, the difference made up by P205 and K20 fertilizers. These exports are made at competitive world prices. With these exports the factories earn the necessary hard currency revenue to be able to effect repairs and buy parts and raw materials from foreign sources. It is doubtful that in the near future this scheme of things will change unless the government decides to transfer from other sources the hard currency funds required by the plants, and/or allows a substantial increase of fertilizer revenues and freeing of other hard currency for their needs. 5.33 The following calculation illustrates the case of pricing of urea to the farmer by a private distributor, at his place of business, for local and imported fertilizer. Local fertilizer sold at factory cost without subsidy would cost the farmer approximately the equivalent of US$115/ton (68 lei/kg) if it were to be sold through a private distribution system, according to the model. Imported fertilizer would have to be sold at $191/ton. This is consistent with cost structures at present in other fertilizer importing countries. The equivalent cost in lei for imported urea to the farmer would be 113 lei/kg (at 595 lei/US$, April 1, 1993). 5.34 Nitrogen/wheat price ratios are determined in Table 16 under the assumption of equivalent US$ purchase price from farmers at present Romcereal official buying price (70 lei/kg) for wheat, and an alternative landed border price for Romcereal of 110 lei/kg, or US$185/ton. GROBMAN 177 INPUT DISTRIBUTION 5.35 The 2.13 ratio which would result from using the present price of wheat and the more favorable 1.35 ratio for a new price- of wheat at the border (Romcereal depot), still would be favorable to farmers. Compared to the 2.94 ratio that existed in 1982, these ratios are more advantageous to farmers, even at the unsubsidized, commercial price. The case of imported fertilizer also would be favorable if the higher cost.of imported fertilizer was balanced with a higher price for wheat in the local market, with the ratio almost equal (2.25) to that of the local fertilizer cost with unchanged wheat price (2.13). These constitute strong arguments for ultimate privatization and elimination of subsidization of fertilizers. Input Distribution System for Seeds 5.36 Seeds .are produced, processed, stored, and distributed by two monopolies. Semrom deals with cereal, oilseed, other industrial crop, and forage seeds. Unisem is in charge of vegetable seeds and part of the potato seed supply. Small-grain seed produced from Elite seed and also in advanced generations of multiplication by some state farms, which bypass Semrom, is sold directly to other farmers. State farms have the status of integrators, may draw credit from Banca Agricola at 15% rate of interest, and can use it in selling seed, which would be mostly small-grain seed. Potato seed is produced and sold to other farmers by state farms, farmers' associations, and growers' associations united in new companies, such as Solanum S.A., based in Brasov, and Fruleg in Bistrita. 5.37 Societata Comerciala Semrom S.A. was registered in the Commercial Registry in 1991 (J/40/895/1991). It is categorized as a society totally integrated with state capital, with its own juridical status. The objectives of Semrom as stated in its statutes are "to buy, condition, transport, add value to, and commercialize seeds of cereals, technical and forage plants, constitute seed reserve funds, supply technical assistance to seed growers, effect import-export operations, as well as any other activities that directly or indirectly may have linkages to its objectives." It is subordinate to the Ministry of Agriculture and organized as follows: Ministry of Agriculture and Food Department for the Regies Autonomes and Societies with State Capital Societata Comerciala Semrom S.A. 41 Agrosem complexes in judets GROBMAN 178 INPUT DISTRIBUTION 5.38 The administration of Semrom at the national level starts with an Administrative Council, (Table 49) under which is an Executive Committee and a Director General. Two Deputy Directors, one for general activities and one for administration, support the General Director. Among the three of them, responsibilities are divided for management of the various sections, which follow: * Service for Reserve Seed Fund, Seed Production, Commercialization and Conditioning Technology * Section for Programming, Marketing, Information Statistics on Operations, Internal and External Relations * Laboratory of Technical Quality Control * Service for Exploitation, Development, Technical Modernization and New Procurement * Bureau for Organization and Norms, Programming Labor Force, Professional Improvement, and Secretariat * Juridic and Legislative Section * Financial Service, Pricing, Economic Analysis, Titles of Property, Internal Financial Control * Administration Section 5.39 At the judet level, the 41 Agrosem complexes of Semrom operate with sufficient jurisdictional authority. Table 50 shows the organizational chart of a typical Agrosem (in this case the one at Alba lulia). A Directing Council and Complex Director are in charge. Departments are organized according to the following lines of responsibility: * Contracting, Seed Gathering and Pre-processing * Commercial * Technical Quality Control * Exploitation, Development, Procurement, Personnel Protection * Financing, Accounting, Pricing, Titles of Property * Organization, Salaries, Norm Development, Professional Improvement, Personnel Records * Secretariat and Administration * Seed Conditioning Station, Alba lulia * Maize Drying and Seed Calibration Station, Alba lulia * Dodder Cleaning Station for Trifoliate Crops, Sintimbru * Sales Store 5.40 Social capital of Semrom was 17,602,792,000 lei on December 31, 1992. Details of financial indicators for Semrom are given in Table 24. Profit in 1992 was 2% on sales. For the business year ending in June 1993, projected profits are a mere .7%. 5.41 The seed production flow (Table 51) starts with breeder's seed, first seed of a new variety obtained by breeders and multiplied by them at an Agricultural Research Station. This GROBMAN 179 INPUT DISTRIBUTION seed category is called Super Elite seed in Romania. From this seed, basic seed called Elite seed in Romania is produced by Production Departments of Agricultural Research Stations. In the case of hybrids, Elite seed corresponds to seed of parental inbred lines and their single cross- seed when the latter also are used as parental seed in hybrids. First multiplication seed (11 seed in Romania) and second multiplication seed (12 in Romania) are sequential generational derivatives of Elite seed. All the above categories, including F1 commercial hybrid seed production, are subject to seed certification procedures to assure genetic identity in each and all of the above indicated generations. Succeeding generations of seed multiplication beyond 12 are not certified. The advanced-generation seed (beyond 12) neither is produced by or for Semrom nor commercialized by Semrom, but is multiplied primarily by state farms and also by other farmers and traded among farmers without state intervention (Table 51). For wheat and rye the advanced-generation, farmer-kept or -traded, uncertified seed may represent two-thirds of all the seed used for planting these crops (Table 27 as evidenced for Brasov). State farms have built a profitable business on selling advanced-generation seed and some 11 and 12 seed retained by them and not marketed through Semrom. 5.42 Super Elite and Elite are higher-quality seed categories which require that higher standards be maintained and are, thus, priced higher than commercial seed (Table 25). A collection of standards -- "Standard de Stat" (STAS) are published for each crop and seed category. Research Stations have developed Production Departments, which engage in large- scale production of these seeds. The Central Cereal and Technical Plant Research Institute at Fundulea, near Bucharest, has in total 6,500 ha, of which 1,200 are dedicated to research and 5,300 in four farms are dedicated to Super Elite, Elite, and inbred line and single cross-seed production. This seed is sold primarily to Semrom, but recently it has also directly reached state farms specializing in seed production. Fundulea had 500 million lei profit from its seed operations in 1992. Differences in prices for wheat Elite seed as compared to 11 seed are 25%, while maize inbred lines run about 60% higher than Fl hybrid seed (Table 25). At this time, it may be possible to increase Elite seed under supervision not only at state farms, but also at selected farmers' associations. 5.43 Semrom, through its Agrosem complexes, contracts commercial seed production with seed growers who have had a long and stable record of operations with the firm. As an integrator, Semrom may advance to their contract seed growers up to 50% of the value of their input needs with no interest on this credit. The value of these advances is one billion lei at this time. Seed growers usually are state farms (they produce 76% of Semrom's seed) that have better-than-standard facilities, especially irrigation, and in some cases drying and processing facilities, although most of the seed is dried and processed at Semrom's own plants. There is a mark-up levied by Semrom on the basic seed that it furnishes its growers; for example, Research Stations charge 490 lei/kg for seed of inbred lines; Semrom charges the contract grower 550 lei/kg for the same seed. A formal contract is established between Semrom and the grower which stipulates the obligations of the parties, the quality standards (official STAS standards) that are applicable, price and its eventual variation, packing form, moisture and drying losses, obligation of producer to transport the seed to the plant, provisions for ownership GROBMAN 180 INPUT DISTRIBUTION of sub-products derived from processing the seed, provision that seed producers have priority on seeds they have produced, and "force majeure" stipulations. Payment to grower is based on the current official grain price for the crop grown, to which a standard bonus is added. In 1992, for example, maize seed was paid to the grower at the rate of 165 leilkg, which is 2.75 times the going price of grain, and 50% of the price of the lowest commercial hybrid seed price. For maize, payments to growers vary according to hybrid maturity and expected yield level. 5.44 In the case of wheat, when Romcereal was paying 25 lei/kg for wheat grain, Semrom, under integration contracts, paid slightly better, 28 lei/kg for 11 seed in Bistrita. The prediction for the 1993 crop of spring wheat seed at harvest for II at Bistrita is 86 lei/kg (present wheat grain official price is 70 lei/kg). In terms of final selling price, payments to growers are high for maize seed as compared to standards in Western countries, which reflects both a high price paid to growers and a low selling price, and which results in lower profit levels to the seed firm (Semrom). Contract pricing levels, it must be said, are established by MAF, within its general pricing and profit level policies. 5.45 Because farmers are advanced inputs at fixed costs and low interest, they do not benefit from inflation in the pricing of the final seed product they grow for Semrom. It is only when there is a general official indexation of prices by MAF that contract prices are adjusted at harvest time by the same index. Growers' seed lots are subject to discounts for moisture, foreign matter, weeds and other crop seed, within limits of the STAS standards. Moisture standards are stringent because of the high cost of drying: 16% for wheat, 30-35% for maize, and 11-12% for sunflower, maximum, depending on varieties. Purity is 85% minimum on wheat and barley seed. Seed lots below acceptable standards are rejected. Checks for seed crop quality are made at the Agrosem plant laboratory (tetrazolium tests) prior to acceptance and during delivery of the crop, together with moisture and physical tests on each seed lot delivered. Payment is authorized automatically for seed delivered, minus discounts for quality, by means of vouchers payable at ' the administrative office of Agrosem within a short time period. Agrosem may agree to provide transportation on incoming seed lots deducting its cost; if farmers wish to have the processing byproducts returned to them they may collect and transport them at their own expense. Detasseling costs are paid by the farmer. Field and seed inspection costs are paid by Semrom. Further, it must be mentioned that Semrom draws additional credit from Banca Agricola to procure its seed crop at harvest time. This credit is paid at a 55% annual rate of interest. 5.46 The grower has his fields inspected by the State Seed Inspection Service at various times during the course of the growing season to check for compliance with minimum field-to-field isolation standards, detasseling, and roguing. Inspection is continued during seed conditioning. Seed samples of each lot (approximately twenty tons per lot) are drawn prior to, during, and after seed processing by the Inspection Service to check for foreign seeds and insect- or fungus- damaged seed. The Inspection Service Laboratory issues a quality analysis bulletin to the Agrosem complex for each seed lot and seed certification category. This bulletin backstops the Agrosem complex and allows it to release the seed to the market. A label, carrying other GROBMAN 181 INPUT DISTRIBUTION analysis performed by Agrosem's own laboratory on seed quality, is attached to each bag. This represents the equivalent of a double-tag system: one for certification and one for quality control, which is the most advanced and technically-sound system of seed quality guarantee, not well grasped by many national seed systems. Reanalysis is required for the 20-25% seeds theoretically kept in the strategic seed reserve fund (carryover) or for otherwise unsold carryover seed, if it is to be used in the next growing season. 5.47 Cost of processing hybrid maize seed is estimated for a 1993 spring planting case (at current prices and costs) by Semrom as exhibited in Table 23. Processing costs come to a total of 165,000 lei/ton, in which a 10% profit of 15,000 lei/ton is pre-charged. This sum, added to payment of 165,000 lei/ton of seed made to the grower, brings the total to 330,000 lei/ton, which is the price charged for the lower-priced hybrid maize (late hybrids with high seed yield). Thus, actual gross profit may be reduced to only 5% in this case.' This scenario necessarily envisions an increase of prices paid to farm seed growers (probably double) and prices to the farmer adjusted for inflation. Hybrid maize seed prices paid to growers, for example, were 165 lei/kg in 1991 and went up to 400 lei/kg in 1992, while consumers were charged for Spring 1993, for hybrid maize seed, 600 lei/kg. As can be seen from Table 23, due to inflation, 1993 estimated costs already are 3.4 times 1992 costs in lei terms. In their accounting procedures, plant processing costs are divided by stages: drying, sorting and selecting; calibration; and treatment. At each processing stage, costs and a 10% profit figure are charged (the latter also as cost) to the specific stage and further consolidated. In a large maize seed processing plant (Alexandria), the highest components of the costs for 1992 per ton of maize seed processed were in lei/ton: general expenses, 17,125; diesel fuel oil, 12,476; and seed treatment, 9,000. In this case, total cost of seed processing was 49,000 lei/ton, a figure that matches that given for 1992 by Semrom. Cost equivalent at the official rate of exchange for seed processing in 1993 would be US$275/ton, still a low figure by Western standards. 5.48 Semrom has 128 stations for seed conditioning. One or more of them can be located in a single plant or within close distance of a plant, forming an operational Agrosem complex. Semrom works on 48 different plant species. The operational capacity of Semrom is exhibited in Table 22 for its 41 Agrosem complexes in terms of processing, drying, and storage. Total processing and storage capacity is more than 634,000 tons, although with provisional storage it can go up to 850,000 tons. Drying capacity, at only 2,930 tons, is the most serious bottleneck in the system, especially for maize which is harvested in the autumn, when relative humidity goes up in Romania, contrary to what happens in the Corn Belt in the U.S. It has been observed commonly in Romania that contracted maize seed received on the'cob has to be open storage in cribs. Natural, slow drying, because of high relative humidity, exposes seed to insects, rain, and fungus diseases. It is expected that great losses will occur. We have not been able to discern the extent of these losses in the seed business, but for grain they may range as high as 15%. While open drying on cribs saves on high fuel costs, it does not help in protecting seed. quality, germination, and vigor, especially for hybrids that need to germinate in low temperatures in early spring in order to complete their vegetative period in time. Improvement in maize reception and drying facilities in Romanian seed plants is an urgent necessity. Seed GROBMAN 182 INPUT DISTRIBUTION quantities actually processed for each species and in each complex are shown also in Table 22. More than half of the total processing capacity, 396,000 tons, was used for wheat seed, followed by barley with more than 138,000 tons, and maize with almost 61,000 tons. Some 2,500 employees in the organization are reinforced by 1,700 short-term workers during the production and processing season. Seed-processing machinery at Semrom's plants is locally-designed and made. Much of the equipment shows signs of aging, and could stand improvement, either overhaul or replacement. Old dryers of Canadian origin have been installed at some plants. 5.49 Semrom receives information from its Agrosems and from the MAF agronomists located in the communal centers, through data consolidation at judets and national levels, on the estimated demand from clients (state farms and private farmers and associations) for seeds of different crops and varieties for the coming planting seasons, both autumn and spring, that they intend to buy from Semrom either directly or through other integrators. These demand estimates and seed supplies of Agrosems are shown in Table 21 for 1990, 1991, and 1992. It should be underscored that the supply figure includes a factor of 20-25% of over-production which is demanded by the state from Semrom and which goes into a strategic reserve or seed fund. The cost of storing this unused reserve and carrying it over to the next year is borne by Semrom and charged to its costs, as it is not subsidized in any way by the state. The estimated collected demand, as described above, is different from the potential seed demand which is based on the total seed needed by the country. This potential demand can be estimated each year from the area planted times the average seed rate used per hectare. Calculated potential seed demand for 1990, for example, before the large decreases in seed consumption, and seed supplied by Semrom for major seed groups is presented in Tables 21 and 30. For cereal and oil seeds (Table 28) seed supplied in 1992 (produced and stocked by Semrom) was 838,778 tons, 78% of the estimated demand for that year. Actual seed distributed and sold by Agrosems was 710,605 tons in 1992, which represents 15% of the seed supplied (produced) and 66% of the estimated demand. These figures point to a carryover (reserve fund of seed, demanded by the state) of 15 %. They also indicate that the processing capacity of the seed plant complexes of the Agrosems (634,648 tons) was exceeded by the seed production of 1990 and 1992; therefore seed processed at seed plants of the state farms had to be included in the inventory, or else the nominal seed capacity was exceeded in the actual campaigns of processing of seed. It is also interesting to point out that for an indicator year such as 1990, and for the same cereal and oil crops, the calculated potential seed demand (seed actually needed for the area planted) was not reached by Semrom's own seed sales or even its own seed production, including reserves (Table 30). For wheat and rye it appears that Semrom produced some 70% of the potential seed demand. This analysis underscores the difficulties of market prediction that have taxed the system since the advent of some six million new farm holdings after the revolution. 5.50 Of the wheat seed sold by Semrom, some 85% is II (first multiplication) and 15% is 12 category. Very occasionally 13 seed, which is certifiable, has been produced. Elite wheat seed produced in 1992 and sold to Semrom by the Fundulea Research Station, to be further processed by Semrom, was charged at wheat grain price plus a bonus of 70%. For example, if wheat grain was at 51 lei/kg, Fundulea charged 86.70 lei/kg. The same bonus applied for 11 seed. GROBMAN 183 INPUT DISTRIBUTION Semrom has to pay a special 2% tax, as other agro-industrial companies do, that is applied to an agricultural research fund. Semrom would be interested in doing its own research using this fund that goes now to the state. 5.51 Seed production contracts are made with growers, which supply to Semrom roughly the following seed volumes: state farms (now mixed capital companies), 50%; private agricultural companies, 35%; private farmers, 15%. Seed distribution channels for cereal and technical crops, are presented graphically in Table 52, for the national, judet, and local levels. Agrosem complexes sell seed directly to state and private farmers at their plants and at a few outlets of their own. The major part of their sales, some 70%, is made by the Agrosems directly to farmers by the respective branch at each judet. Romcereal sells, in some branches, higher percentages than those indicated above to private farmers and associations, included in its credit package. State farms are very minor and occasional users of the Romcereal seed sales channel for small-grain seed, as they tend to save their own seed or trade among themselves, but they do buy hybrid maize and sunflower seed from Agrosems. Agromec does carry minor seed not in stock but as a supplier of inputs to some private farmers, linked to the services they contract, which include mechanical planting. 5.52 Of the almost 60,000 tons of hybrid maize seed presently sold by Semrom in Romania, some 10,000 tons are of Pioneer brand hybrids produced by Semrom under license from Pioneer Hi-Bred Company (Austrian branch). This company contracts also for export seed production of maize hybrid seed with Semrom, which is done at specialized state farms, and is supervised by Pioneer personnel. License fees are paid this way by Semrom. In 1990, 1991, and 1992, maize seed exports were 4,533 tons, 2,788 tons, and 4,994 tons, respectively. Additionally, Pioneer has made a loan and provided technical assistance to build a modern seed-processing plant in Constanta with processing equipment imported from Austria. This loan is being repaid with seed exports to Pioneer. Romcereal, on the other hand, has imported some 7,000 tons of hybrid maize seed from Russia on barter deals and 3,000 additional tons of hybrid maize seed from Porumbe (Republic of Moldova). Romcereal procured only 5,000 tons of hybrid maize seed from Semrom's total sale of 60,000 tons in 1992 for direct supply to farmers. Romcereal also procured (from Semrom) 60,000-70,000 tons of wheat seed in 1992 for its direct distribution channel to farmers, but helped Semrom dispose of 373,000 tons of wheat seed by financing farmers' purchases of seed from Semrom. 5.53 Romania has fourteen specialized maize-seed processing plants capable of processing 5,000 ton/year of seed each, and two plants with 2,500 tons/year capacity each, giving an aggregate capacity of 75,000 tons/year. This capacity is sufficient, at this time, to process maize seed for internal demand, although many of the plants need upgrading and renewal of old and inefficient equipment, especially in the areas of cleaning, drying, and calibration of seeds. For the estimated 110,000 tons of maize seed, which Semrom considers the future internal plus export market, a deficit of 35,000 tons of processing capacity is identified and needs to be financed and built. GROBMAN 184 INPUT DISTRIBUTION 5.54 All seed exported is subjected to seed inspection and certification by the state Seed Inspection Service of MAF. Two seed laboratories, one in Bucharest and one in Constanta, have ISTA (International Seed Testing Association) certification, which allow their analysis to be recognized internationally. At least one more ISTA-certified laboratory (in Arad) would be needed at this time for export of seed. Seed exported to Western and Central Europe is tagged with OECD orange tags, which indicate seed has passed OECD standards. The Seed Inspection Service has offices and laboratories in each judet (Inspectoratul Judetean pentru Calitatea Semintelor si Materialului Saditor) and charges Semrom for its services per hectare inspected. The fees are 800-1,000 lei/ha for maize and 150 lei/ha for wheat. The Analysis Bulletins it issues have a validity of six months before reanalysis is needed. 5.55 Romania has a potential for seed exports, but, because of the depressed situation of its agriculture, and the concentration of seed production and marketing of cereal, technical and forage plants in one single company (which is hard pressed to meet internal demand), it has not exploited the export market in a proper form. Semrom has exported maize hybrid seed. In addition, Romanian firms also have exported regular volumes of soybean, sunflower and sorghum seed (in 1990, 3,500 tons, 2,877 tons and 200 tons, respectively), and, in the past, trefoil seeds (alfalfa and clovers, mainly from Transylvania) found their way into exports. Trefoil seed is now scarce and needs to be imported. In the past, seed of fodder beets has been a major import item. Spring wheat, spring barley and rice seed had the largest volumes in 1990. In 1991 and 1992 the seed import-export activity of Semrom declined considerably. In addition to the figures indicated in the table, some 40-50 tons/year of Lolium multiflorum (ryegrass) seed are exported. It also is reported that 700 tons of grass seed and 1,000 tons of alfalfa and clover seed were imported from Italy. Chickpeas were exported to Libya and Israel. Soybean and barley seed were exported to Russia. 5.56 Unisem produces and markets vegetable and potato seed. It also went into foreign trade in 1990. Unisem has 37 judet branches and 64 shops,. of which four are in Bucharest. From 2,000 workers in 1990, it has reduced personnel to 1,200, of which 26 are in the main office in Bucharest. Financial figures are shown in Table 27. Unisem had a projected social capital, by the end of fiscal 1993 (June 1993), of 3.8 billion lei. On a total income of 11.1 billion lei it expects a 1.48% net profit. It is a fully state-owned company. Its prices are fixed by a committee under MAF and Ministry of Finance supervision, based on proposals presented by Unisem and its cost figures. On this basis maximum prices are allowed to reflect 8-10% profit. Because of seed imports from Germany, Holland, and the U.K. in recent years, especially of 25,000 tons of potato seed, profits were lowered to a 2% level. 5.57 As is the case with all seeds in Romania, vegetable seeds that are allowed into the market must be included in an official list (Lista oficiale a soiurilor (hibrizilor) de plante de culture din Romanie). To be included in this list, varieties must undergo tests for three years under the supervision of a state commission charged with testing and homologating varieties (Comision de Stat pentru Incercarea si omologarea sourilor). Most varieties of vegetables used in Romania originate from the state research stations. Imported varieties necessarily come from a limited GROBMAN. 185 INPUT DISTRIBUTION number of sources, as the system of the official list precludes free importation and wide competition. Especially for vegetable varieties, which can be transferred easily among locations and which have extremely large numbers of variety offerings from many firms, the- list requirement is an obstacle to technology transfer. Unisem authorities agree with this viewpoint. 5.58 Unisem produces seed on its own land (two farms with 1,000 and 965 ha, respectively) and also contracts with seed growers. Prices with growers are negotiated one week before harvest. They usually allow a 30-40% profit on costs to the grower. 5.59 Unisem indicates that it covers 15-20% of the potential vegetable seed and 1 % of the potato seed demand through its production and marketing. The difference in supply, in the case of vegetable seed, comes mostly from seed saved by farmers and traded among themselves. There are also other seed importers. The private sector has made considerable advances in potato seed production. Unisem has, for 1993, a 70,000-ton potato seed production plan, (through its storage capacity does not exceed 30,000 tons). Of this volume, 17,000 tons will be produced by state farms and 53,000 tons by the private sector. Potato seed prices are, for I1 seeds, 25-30% higher than consumption potato market prices. Elite potato seed prices from the Brasov Potato Research Station are 80% higher than consumption potatoes. 5.60 Unisem has been exporting seed of field peas and navy beans to France, the U.K., and Germany. It could develop further exports of seeds, but the requirement of the official list for varieties to be produced in Romania has been a limiting factor, as varieties demanded by the market change frequently in Western Europe. Before one can be registered in Romania, another may be in demand. The new seed law should relax these listing requirements. For seed imports, Unisem has relied mostly on Royal Sluiz, a Dutch seed firm it represents in Romania, although it also has imported from other sources. Major problems with seed imports are the limited availability of hard currency, for which Unisem, being a state company selling a strategic input, does not. enjoy any preference. Unisem has been able to effect barter trade importing garlic seed sets, alfalfa, and clover seed and exporting vegetable seed, with the Republic of Moldova. 5.61 Vegetable seed distribution channels are shown in Table 52 for Unisem S.A. In addition to the trade channels shown in that figure, informal trade channels and self-use of seed by farmers figure prominently for vegetable seed. Total seed volume traded by Unisem in 1992 was 900 tons of small vegetable seed, 14,000-15,000 tons of large seed (peas and beans) and 30,000 tons of potato seed. Seeds sold to clients in their own shops (68 of them) account for 10-15% of Unisem's sales volume, and these cater mostly to small order clients. Large order clients tend to buy direct from their 37 plants, where prices are lower, as the shops charge sales commission. The value of the seed inventory is six billion lei, and their credit needs for inventory-building are 6.7 billion lei per year at this time. 5.62 Potato seed production is carried in the Super Elite and Elite categories, by state seed farms contracted as growers and by the Brasov Potato Research Center. At a typical state farm GROBMAN 186 INPUT DISTRIBUTION in Brasov, some 420 ha were dedicated to this seed crop at Super Elite and Elite levels of the Desiree, Cardinal, and Sante varieties. Yields were around twenty tons/ha, and potato seed production is considered one of the farm's most profitable activities. The zone is good for seed potato production because it is a rather high plateau, 800-900 meters above sea level, surrounded by mountains, with low incidence of virus diseases. The Potato Research Center has 118 growers contracted for Elite seed production. Price paid for this category of potato seed is 140- 150 lei/kg. For 11 potato seed the price varies from 110-150 lei/kg depending on seed grades. Commercial grade potatoes for consumption are priced at 60-70 lei/kg. 5.63 Potato seed is sold in 20-kg crates in autumn. Crates are returnable. Planting rates in Romania are 2,500-4,500 kg/ha, with the higher weights more common because of the use of whole seed and large tubers for planting. No cuttings of tubers are used. The planting density varies between 45,000-75,000 tubers/ha with densities as high as 80,000 tubers/ha, used in the better soils. Seed may represent the major investment in this crop. At 75,000 tubers/ha it may cost 675,000 lei/ha (US$1,250/ha). Use of smaller-seed tubers, mini-tubers, or cuttings should be encouraged in order to reduce costs. 5.64 The Romanian Federation of Potato Growers, a country-wide organization, founded a seed company called Solanum S.A. with 28 members on December 5, 1992. It has the support of the Brasov Research Center. It has branches in all judets that have more than 5,000 ha of potato seed production. Entrance fee is 400 lei per association and 200 lei per individual grower. To support itself, the companylassociation charges its members 2,000 lei/ha of seed production, equivalent to 30 kg of potatoes. The Federation also is providing it with support in the form of inputs at cost, using the 15% interest credit from Banca Agricola. Solanum plans to establish 100 field demonstrations in 1993. Since its foundation, 150 new members have come into its membership from several potato producing judets -- Suceava, Brasov, Cluj, Gorj, and Salaj. 5.65 The potato-seed production system is based on clonal system multiplication through successive clonal stages: A, B, C, D, and E. Rapid-multiplication (vegetative tuberless) propagation is carried on to the B and C levels. Virus-freedom is controlled at all stages. Following the last clonal stage, Super Elite seed is obtained, costing 450 lei/kg. Elite seed and Il, and 12 categories of seed follow from tuber. 12 category is used in smaller percentages and costs less; 80-160 lei/kg. Seed production costs are estimated at 40-60 lei/kg. Prices in the Romanian market for potatoes for consumption relative to commercial potato seed, have a ratio of 1:1.2-3.0 (the latter of higher grades). The equivalent ratio in international markets is 1:3.5. 5.66 Potato seed is stored in cold storage deposits with total capacity of 100,000 tons. This capacity is insufficient for the country's potato seed storage needs. At the Brasov Research Center farm, a modest 5,600 ton facility for Super Elite seed storage exists. 5.67 Potato seed is distributed by the Brasov Station, by the growers of Solanum and another company in Transylvania, and by state seed farms and a few associations and private growers, GROBMAN 187 INPUT DISTRIBUTION to other planters. Farmers saving their own seed leads to low production levels, prevalent in Romania, because of the impossibility of guaranteeing non-transmittal of virus from one generation to the next via the tuber seed. This may be one of the major problems in increasing potato productivity in Romania. Increase in capacity of production and distribution of private sector companies and seedsmen under proper technical supervision and seed certification could go a long way in helping Romanian potato farmers. 5.68 Industrial crop seed, such as sugar beets, tobacco, and fiber crops (hemp, flax, and some cotton) are produced by the respective industrial companies that procure the crops as integrators. They also supply the seed to the contract farm producers as part of a credit package with a 15% annual interest rate credit, and payment in kind at harvest, according to contract stipulations (Table 52). 5.69 Grafted and non-grafted orchard tree- and vineyard-propagating material is produced and sold to farmers out of orchard and vineyard research and production stations. The distribution system for these materials is presented in Table 52. At the Research and Production Station for Pomiculture in Bistrita, and the Voynest Station near Bucharest, there are Production Sections in addition to the Research Sections. A novel approach was devised at Bistrita after former owners regained property of the land on which the Station had developed orchards. The growers became partners of the Station in seven farms with 1,037 ha in fruit production, sales of propagating material and derived products (cider, wine, tzuica, etc.). They also lease new land. There are eight technical people in research, fifteen in production, and two in extension at the Bistrita Station. Some 80% of the land is planted in apples, pears, plums, cherries and sour cherries. In 1992, some 300,000 grafted, mostly 2-year-old trees, were sold as propagating material. This is not an impressive volume of sales. They are thoroughly tested and certified to be virus-free. The tests, including ELISA tests and serological tests, are conducted at the National Institute for Virus Research in Vitesti. Average selling price is 120 lei/tree; for three- year grafted trees the price goes up to 150 lei/tree. As total sales are consolidated, including sales of fruit, wines, tzuica, and cider at two shops in addition to the station, it is difficult to find figures for profitability of the tree-propagation operation. It appears too small to be economically viable on its own. The Station calculates as a whole that for each 1,000 lei in sales, its expenses are, including taxes, 975 lei. Their sales volume was 430 million lei in 1992, with 20 million lei profit. 5.70 A new Seed Law proposal has been presented to Parliament. The project was found to have a number of new elements favoring the establishment of a private seed distribution system with authorization from the MAF. GROBMAN 188 INPUT DISTRIBUTION Input Distribution System for Pesticides 5.71 The input distribution system for pesticides is explained graphically in Table 54. The following are pesticide factories in Romania: Ampelum S.A., Zlatna. Nitramonia S.A., Fagaras U.C.T.S.A., Turda Bicapa S.A. Tirnaveni Sinteza S.A.,.Oradea . Chimcomplex S.A., Borzesti Oltchim S.A., Rm. Vilcea Aprechin S.A., Pitesti Vitronet S.A., Victoria ICP Romania CCPP Romania L.A.M.N. Romania Chimopar S.A., Bucharest C. Fibre Artificiale, Braila SC Glob-R-Enchim SRL Institut Chimie, Cluj-Napoca 5.72 These companies purchase either inorganic or organic chemicals from foreign firms or produce their own ,locally. Some formulate foreign-firm original products in various presentations. Institut Chimie, Cluj-Napoca, a synthesizer-developer of complex chemical molecules, used as pheromone attractants for some insect species. The first four companies specialize in a few inorganic, chemical-based fungicides. Four major local companies manufacture and formulate a wide array of plaguicides (herbicides, insecticides/acaricides/nematicides, and fungicides): Chimcomplex, Chimopar, Oltchim, and Sinteza. Pesticide factories sell, at the factory gate, directly to: * State farms and Mixed Commercial Agricultural companies in which certified entomologists can supervise the use and application of toxic pesticides * The Inspectorate for Plant Protection of MAF branches in each judet; the Inspectorate keeps zonal depots at Centers for Plant Protection, where the more toxic pesticides are stored, and they also, store the less toxic pesticides at the phytopharmacies of the communal centers * To the BATMAS * To Romcereal and other integrators These, in turn, sell pesticides to the farmers. The integrators allow farmers credit at 15% interest, with the exception of Romcereal, credit from which is interest-free. Beneficiaries, as GROBMAN 189 INPUT DISTRIBUTION in the case of other inputs, of the integrators' credit facilities usually are private farmers and farmers' associations, who pay their credit in kind at harvest time with part of their crop. 5.73 Pesticides are imported by state importing companies who act on behalf of agents of multinational companies (Ciba Geigy, Monsanto, Schering, Hoechst, etc.) or local pesticide distribution companies charging a 2% commission for their import service. Companies importing and selling pesticides number 12-15. The pesticide distribution companies in turn have started developing their own network of local distributors. They began placing full-page newspaper adds in March 1993 in preparation for the spring planting period. Proplant, a state company representing Inspectorate interests, has requested authorization to compete with private plaguicide companies in distribution. Romcereal broadcast on national television and other media that it expects to obtain US$9 million from the national budget in 1993 for direct importation of plaguicides for sales on its own account (though this had not been confirmed at the time of this report). All pesticide formulations need to be registered at the "Comisia Interministeriali pentru Avizarea Pesticidelor si a Altor Produse de Uz Fitosanitar in Romania." The pesticides allowed to be commercialized appear on an approved list. A partial list of the most important pesticides on the list appear in Table 39. Romcereal was a buyer of imported pesticides from the agent companies of multinational corporations in 1992. At least two of the four major pesticide distributing companies, Ciba Geigy Romania, through Agrofarm, and Brimex, are advancing the formation of networks of distributors in major market locations. One of the companies has defined five regional distribution centers (Vrancea, Mures, Dolj, Timis, and Bucharest) and plans to identify and support some twenty local wholesale distributing companies. Initially these companies, some with their own shops, will be paid commission on sales, but later they will have to pay for stocks of pesticides. In the private sector distribution system, prices of imported pesticides are not regulated by the state, and are much higher than the prices of subsidized pesticides sold by the local pesticide plants. The private sector bases its competition option on the fact that the state will not have enough hard currency apportioned to import raw materials, and project that only 10% of national plaguicide needs may be supported from the state budget. State farms, having privileged access to credit, have been able to buy pesticides direct from importing/distributing companies, forming a solid 70% of the sales of the latter. Agrosem complexes in each judet procure part of their pesticide requirements from importing/distributing companies. 5.74 Importing/distributing companies have the following approximate share of types of plaguicides in their stocks: herbicides, 30%; fungicides, 30%; insecticides, 40%. In order of importance as clients, one of the private pesticide-marketing companies cites the following institutions or groups, in order of importance from top to bottom: * State farms * Large farmers' associations * Romcereal and Agrosems * Agromec * Inspectorate of Plant Protection, MAF * Small farmers' associations GROBMAN 190 INPUT DISTRIBUTION Pesticide prices are negotiated by the pesticide plants with the commission charged through price regulation by the MAF. Prices are subsidized at the plant gate (as compared to the same basic products sold with different name by importers). The Ministry of Finance pays the subsidies back to the plants. Prices of major pesticides are shown in Table 40 in lei and their dollar equivalent. Distribution System for Agricultural Machinery 5.75 Since land redistribution took place in Romania, the availability of agricultural tractors in sufficient numbers and at an opportune time has been put into question, considering the increase in individual farms that had to be served. In spite of a present ratio closer to one tractor to every 71 ha of arable land when the economic optimum would be 1:60, land preparation in Romania has not failed and has continued to be almost fully mechanized up to 1993. The present tractor fleet is estimated at 131,000 units, down from 165,000 in 1988 (Table 34). The annual rate of decommission is 10%, which means 13,000 tractors per year. The private sector may have a share of 26,000 tractors, many of them bought in the last three years, although some 2,000 old ones were acquired from Agromec companies. Some 78% of these private sector tractors are owned by individuals. 5.76 The capacity of the UTB plant for production reached a maximum of 85,000 tractors per year in 1981. At that time new production machinery had been acquired by the plant. Of that production 53,500 tractors were exported. In 1992 only 20,000 tractors were produced, of which 10,000 were exported. During its production history since 1947, UTB has produced 1,200,000 tractors, of which 750,000 were exported to 115 countries. UTB envisions a tractor- to-land ratio of 1:60 in the future for Romania. In Western Europe, where average farm size is 13-28 ha, the tractor-to-land ratio is 1:17. This is considered a very narrow ratio for Romania. On assumption of a ratio of 1:60 for the 14,791,000 ha of agricultural land, the number of operating tractors in Romania should reach 246,500. On the basis of arable land, which is 9,423,000 ha, the number of operating tractors should be 157,000. With an increased production of 40,000 tractors in one year, and a maintenance supply of 15,000 tractors per year, a bare minimum 1:60 ratio could be achieved in two years. UTB indicates that it has a potential present capacity of production of 60,000 tractors per year after having received a credit to invest twenty million DMarks in casting equipment. Other observers doubt this capacity. UTB can operate economically on a lower production limit of 25,000-30,000 units per year. It needs, therefore, to continue its efforts in the export market. In Table 37 is presented a projected estimation of new tractor production demand by Romania consolidated for the period 1992-2002, made by Universal Tractor S.A., an exporting company. It adds up to 486,500 units, or to an average of 48,650 new tractors per year. Universal Tractor's estimate is in addition to the 13,000 additional tractors needed for annual replacement of decommissioned units. 5.77 As is the case with other agricultural inputs, profit margins on tractors are regulated closely by the state. Prices increased 160% last year, while raw material costs increased an estimated 200% for UTB. Steel costs in Romania are high, US$320/ton as compared to GROBMAN 191 INPUT DISTRIBUTION US$250/ton in other countries. Still, labor costs are very cheap, and interlinkages and deals between companies help reduce costs. Profit margin in 1992 at the low production level of 20,000 units for UTB was a slim 1%. 5.78 UTB has developed a new distribution strategy for tractor and spare parts. The old system of tractor distribution, based on a limited number of state farms and large CAPs, saw its sales efforts performed at the factory gate and conducted mostly on a cash basis. As a larger number of potential clients appeared after 1989 and were hard to identify individually, UTB decided to engage Agromec companies in various judets as their local distributors. The Agromec pays cash for its tractors; they usually have one or more on display at any time and take orders from farmers. Farmers have two choices for buying tractors on credit: the first choice is to pay 15% down and the balance in kind (grain) over a six-year period; the second choice is to effect a 50% downpayment plus bank fee, and while the factory gets 100% of its selling price from the bank, the farmer pays the balance to the bank in cash over a six-year period. Agromecs which aspire to be dealers have to carry spare parts, must receive training at the factory on how to service the tractors they sell, and have to maintain factory-certified service for their clients. In some cases these dealers are former Agromec employees who have severed themselves from their former employment and have created private companies to provide sales and service on UTB tractors. In most cases UTB has established financial links with their dealers, supplying them with some credit and sharing with them in the profits. 5.79 While some observers claim that the market is ready for a larger share of 45 and even lower hp tractors, UTB insists that the major demand for tractors continues to be, even with new private farmers, in the 65 hp category. It appears that the opportunity to provide services, especially of trailer transportation, as additional farm income, is behind the 65 hp tractor preference. At the present time, mechanization experts interviewed in some judets claim, replacement of the tractor fleet should be greater than the traditional 10% figure and closer to 80% because of the obsolescence of units being used beyond the ten-year life period. 5.80 The fleet of tractors and farm machinery and its evolution is shown in Table 34. It is very illustrative to observe the serious decline in numbers of all types of farm machinery in Romania in recent years. It is especially noteworthy that the largest drop in numbers is in self- propelled combines for maize and tractor-drawn combines for fodder. It may be that with smaller plots of land and an increase of maize plantings in the private farmers' plots, manual maize harvest may have replaced mechanical harvest. Prices for Romanian-made farm machinery from various manufacturers presented in Table 35 as they apply to the internal market, together with their US$ equivalent price. These prices are much lower than would be charged for imported equipment, making importation of the latter uneconomical (in addition to limited by hard currency shortage). 5.81 The ratio of the number of combines to cultivated land in Romania is at present time 1:75-80 hectares of combinable crops. It should become a 1:50 ratio for normal service to be established, based on the short time available, for grain harvest in the autumn. Semanatoarea GROBMAN 192 INPUT DISTRIBUTION S.A., the combine manufacturer in Romania, has developed a new strategy for distribution, based again on the appointment of one Agromec company in each of the 41 judets for its full line of combines, seeding equipment, motocultors, irrigation equipment, and farm mills. The dealers are expected to carry spare parts, provide local service and actively promote sales. They must survey their area, determine combine and other equipment needs and prospect orders. They should participate in shows and exhibitions. Spare parts in appropriate lots are supplied by Semanatoarea to dealers to be kept in custody, as they are Semanatoarea's property until sold, at which time Semanatoarea accepts payment. As most combine repairs take place in the winter months, Semanatoarea personnel meet with their dealers in November and December and estimate spare part needs. Spares then are made available so that the repairs can start in January, when there is no field activity. Commission (3-6%) to dealers depends on volume of business. Buyers willing to acquire combines may have credit terms. These are 15% downpayment, the balance to be paid to a bank (usually Banca Agricola at 15% interest), to which Semanatoarea sends the prospective client with a pro forma invoice in order to have credit approved and distributed by the bank. Semanatoara can sell directly to juridical persons with appropriate credit guarantees. For big enterprises, combines can be reserved with an advance, and full payment for the combine may be made in the month of October in wheat grain. Mechanization Services 5.82 Mechanization services in Romania are performed by some 600 Agromec companies and by private operators. Agromecs are, by far, the major providers of mechanization services, because of their large agricultural machinery fleets (about 60 tractors average per Agromec, planters, sprayers, seeders, combines, etc.), the variety of services they provide, their linkage with Romcereal in supplying mechanization services on a low- or no-interest credit basis as part of Romcereal's package, the additional supply, delivery and field application of inputs that they provide, and, last but not least, the low tariffs they charge. The tariffs charged for Agromec services are exhibited in Table 38. Plowing and harrowing services at 25 cm depth in a medium soil, for example, are charged at the equivalent cost of US$13/ha, which is very low by any standard. Combine harvest of wheat at stated prices is equivalent to the delivery of 82 kg of wheat per ton harvested. As long as these low tariffs prevail it is going to be hard for private mechanization services operators to compete. Agromec prices for services, while theoretically fixed uniformly by MAF, allowing a 10% profit on costs (including amortization of revalued assets considered cost items), in reality can be readjusted with participation of the Director of Agriculture of the judet, and are usually "homogenized" among the Agromec companies operating in the judet. 5.83 Romcereal is the major source of financing for the operations of the Agromecs, through its credit advance system. Farmers contracting with Romcereal to sell their crop engage the services of an Agromec, for which 50% of the fees charged by Agromec are paid by Romcereal. The balance has to be paid by the farmer. Payments to Agromecs usually are made on time. GROBMAN 193 INPUT DISTRIBUTION 5.84 Additional income is generated by Agromecs in acting as distributors for fuel. Allocations of fuel are made to farmers on the basis of Agromec-recommended parameters of fuel needs for different tractors and types of operations and self-propelled combines. Agromec obtains fuel -- usually motorina from PECO, paying a 7% commission -- and distributes it to farmers and associations demand and are willing to pay for this service, charging an additional 3% commission. Another input which often is distributed by Agromecs is fertilizers. Agromecs transport the fertilizers to the farmer's site or to their own place of business from the plants or railroad stations, where farmers pick them up or have the respective Agromec perform the full service up to its application to the soil of their farms. The extra services of the Agromecs are charged at pre-established tariffs or are paid on a mutually-agreed commission basis for special cases. On occasion, seed distribution is done by Agromecs fulfilling farmers' orders. In the case of seeds, no extra commission is charged; seeds are delivered at cost (Semrom's price) to earn the good will of the farmers. In this sense some Agromecs are the closest approach in Romania, aside from some BATMAs, to multi-line input distribution dealer systems such as found in Western countries. 5.85 The recent evolution of the Agromecs could be exemplified in the judet of Tirgu Mures in Transylvania. There were eighteen Agromec companies which emerged in the judet after 1990. They further metamorphosed and consolidated into eight commercial societies in 1991 under new legislation, still with full 100% state ownership. One of the new commercial Agromec societies, the largest one, has a kind of management/service contract with the MAF judet branch. This Agromec has a social capital of four billion lei based on the value of its machinery and other inventory and assets. It has 1,500 tractors, which include 60 hp, 65 hp, 100 hp and 180 hp models; 530 combines and seed planting and other agricultural machinery. The average age of their machinery and tractor fleet is five years. In the same area there is a fleet of 600 tractors owned by private individuals. This Agromec provides not only mechanization services to private farmers and farmers associations, but repair and maintenance services. It also stocks spare parts for tractors, combines and other agricultural equipment. It has a capacity to produce, in its own machine shop, up to 25 % of spare parts, which it also can make for farmers. Prices for its mechanization services admittedly are lower than those charged by private operators. Actualized tariff for full soil preparation, including 25 cm plowing in a normal soil, come to 8,000 lei/ha, equivalent to 110-120 kg of wheat grain. The full cost of mechanization operations, including plowing, disking, leveling, fertilizer spreading, and sowing for one hectare are charged at the total equivalent cost of 250 kg of wheat grain (at 70 lei/kg). It is interesting to note that the total sales of this Agromec were 1.6 billion lei; total cost of doing business was 1.5 billion lei. Interest payments were 108 million lei, and net profit after taxes were ten million lei. The percentage of its business carried out through Romcereal was 35 %, the rest directly with farmers. In this area Romcereal has reduced activity, as only 35% of the wheat is planted with Romcereal contracts. As the Agromec sees it, their main problems are the limited capacity they have to maintain and repair their machinery and financing the replacement of tractors and other machinery. This situation bears a direct relation to the low tariffs charged for their services, which lower their capacity for profits and capitalization. GROBMAN 194 INPUT DISTRIBUTION 5.86 A number of Agromec companies rent land as an independent business activity with its own accounting. Their financing comes in many cases from Romcereal for inputs. As an example, the Tirgu Mures Agromec referred to above, operated 6,900 hectares in 1992. It intends to operate 10,000 hectares in 1993. Its production is contracted with Romcereal and input credit comes from that source. The incentive to Agromecs to get involved in farming is that there are no taxes levied on the profits generated by their farming activity. Fully 35% of the gross profits generated by this Agromec came from farming, while 40% of the profits were generated by the mechanization services. On a sugar beet production contract, using French technology, including seeds and equipment, they made a profit of 100,000 lei/ha. Their view is that rapid consolidation of land property and use will take place in Romania. Input Distribution System for Animal Feed 5.87 Production of pig feed was 62%, and poultry feed 32%, of the total feed production of 4.8 million tons in 1992. The balance was shared by cattle, sheep, and other feed. Feed production in 1989 had been close to 7.1 million tons. The sharp drop in production of feed mainly was due to disappearance of many of the large pig- and poultry-feeding operations that existed in the CAPs. For instance, 30-40% of the large units that produced poultry don't exist anymore in the Cluj-Napoca area. 5.88 Distribution on the national level follows the production figures given above; at the regional level there may be differences. For example, a large mill in Cluj reported that the distribution pattern in their area of influence was 70% poultry feed, 15% pig feed, and 15% feed for other farm animals. Most clients pick up their feed at the plant. Most feed sales are in bulk. Clients provide transport. Feed also is dispatched on large orders in bulk, by railroad cars. The Cluj feed mill had a radius of operation of 300 miles, and included sales to other judets as far away as Brasov. For example, Avicola S.A., Brasov, a large-scale poultry operator, prefers the Cluj mill feed for its quality and price over local products. In this case the customer pays the transport costs. This is the beginning of competition. 5.89 Feed prices are lower than costs. State subsidies make up for the difference. Subsidies on raw materials costs are 42.8% on wheat grain, 33% on maize, and 60% on barley. Locally- produced protein meal prices also are fixed and subsidized, at 20% of the equivalent cost of imported meals. Imported protein meals are distributed by Nutricomb and priced to the mill at the same level as the locally-produced meal, the price difference being subsidized in the national budget and payable to Nutricomb. The subsidy in this case may reach as much as 78-80%. The state fixes maximum feed prices through the Animal Feed Directorate of the Food Department of MAF, allowing a 10% gross profit margin on the costs of the mill for each feed formula. Feed mills negotiate prices with their clients below the fixed maximum price ceiling. Average poultry feed prices at present are 80,000 lei/ton; for pigs, 73,000 lei/ton; and for cattle, 67,000 lei/ton at the Cluj feed mill. GROBMAN 195 INPUT DISTRIBUTION 5.90 Feed mills are acutely aware of the challenges and pressures placed on them with the changed situation. They manifest interest in using their potential status as integrators (which they have not used up to now except in an insignificant proportion of cases) in order to contract their grain supply directly with farmers bypassing Romcereal. They do not have their own grain storage facilities but could use those of nearby Romcereal plants, paying for their drying and storage services. It is not beyond their interest to develop contractual agreements as integrators with small- and medium-sized poultry and pig producers, supplying their feed and getting paid in kind. Some are considering trucking services for feed. The production of pre-mixes and superconcentrates goes mostly to state farms, but it may expand to the private sector in the future. While some mills, such as Cluj, are setting up their own shops, they have not yet organized themselves into distribution systems that cater to the large number of new farmers with small land-holdings and a reduced number of animals or to farmers' associations. The distribution system called for this segment of the farm sector clearly is a multi-input type of private dealership, established across all judets so that dealers can be reached easily by farmers, as there is a basic difficulty for small buyers to reach the factory gate every time they need to procure a new batch of animal feed. This system could be installed by allowing feed at the dealer's place to be priced. allowing a reasonable profit margin over costs and access to Banca Agricola credit to private dealers, a.t the same interest rates allowed state integrators. 6. THE CREDIT SYSTEM AND AGRICULTURAL INPUT DISTRIBUTION* 6.01 As a consequence of the distribution of land held by former CAPs to some 5,000,000 applicants, 93% of them were allotted land-holdings with a maximum of ten ha, and received provisional recognitions of claim or adeverinta. Only 3% have been issued final titles of property with clear territorial boundaries, called Titlu de Proprietate. The average size of land- holding is two ha of arable land. Some of the beneficiaries of this land reform decided, in order to benefit from economies of scale and technical assistance, to consolidate their holdings into associations, for which they have registered officially, while others have made de facto associations, many of them with family and other ties. Informal agreements have sprung up all over the country, between lessors and lessees, without legal sanctioning or a law allowing leaseholds to occur and operate. Former owners of land which was consolidated into state farms by the socialist regime have not been treated with the same terms and have not become beneficiaries of land redistribution. State farms were retained as undivided production units to ensure a sufficient output of agricultural produce to satisfy the distribution demands for food to urban centers. 6.02 The excessive land fragmentation under accelerated repossession has created a factitious agrarian reform, as the lack of firm boundaries for the repossessed properties, which do not coincide in most cases with the original ones, and the absence of clear titles of property indicative of those boundaries, plus the imprecisions of Law 18 (regarding the use of land as collateral), make it impossible for the beneficiaries of the land reform to receive production and GROBMAN 196 INPUT DISTRIBUTION investment credit on normal terms. Recognizing the problems outlined above, the measures chosen by GOR to solve them, as well as areas of inaction, are discussed below: * Inaction on the legal front, Law 18 continues to operate, and no legal solution for use of provisional or legal titles (which are not definite regarding boundaries) has emerged as yet. * Inaction on the definition of boundaries of the repossessed properties. * Improper definition of provisional property boundaries in regard to irrigation system requirements and soil protection devices such as drainage, terracing, and water runoff- collecting systems. * Inaction in redefining water-use rights and use systematization and organization for each plot of land capable of being irrigated. The need for a water-use law in agriculture is urgent. * Positive action in implementing the system of integrators as intermediaries in the supply of credit to the farmers, which resulted from the land reform by guaranteeing the credit obtained from Banca Agricola by the integrator and transferring it in the form of inputs and cash, but subjecting it to the mortgaging of a certain part of their harvest at fixed. predetermined (and supposedly immovable) prices, In this way the integrators became collateralizers for the farmers' credit. This decision brought about, on the other hand, negative effects, as the integrators pose serious obstacles to the completion of the agrarian reform. Agrarian reform is not only land reform, but requires its complement in enhanced technology transfer to farmers and reform of the input supply produce marketing systems, both of which continue to dwell pretty much under the same conditions and submerged in the same culture that existed during the command-economy system. The role of the integrators, in their present status of state monopolies must be seen as a provisional one. The longer the present integrator system remains in its present form, the longer and more difficult it will be to remove the deeply rooted economic and organizational distrtions of the whole agricultural sector. There is nothing wrong, on the other hand, with private integrator firms being present in a truly competitive and free market economy. * Action in allocating some 60 billion lei to an annual credit advance program for inputs and operating costs to the private farm sector at subsidized interest rates (15% annual). and fifteen billion lei to farm mechanization (15% annual interest), when estimated annual inflation is 200%. This volume of credit, nevertheless, probably represents 10- 20% of the real needs of the private farm sector. It is more important to increase the volume and accessibility of agricultural credit than to subsidize its rate of interest. GROBMAN 197 INPUT DISTRIBUTION * Action in the subsidization of prices of inputs, . Inputs are over-subsidized in Romania. Subsidies range between 80% and 90% of their costs. Farmers pay a price which-is 10- 20% of the factory gate cost in the case of pesticides and fertilizers. Moreover, Romanian production costs are lower in many cases when expressed in hard currency terms than comparable inputs produced in Western countries and border prices of imported inputs. Total agricultural explicit input subsidy costs amount to 69.49 billion lei for 1993 (adding 200 million for seeds, 6.5 billion for plant protection (including pesticide distribution), 2.2 billion specifically for pesticides, 25 billion for fertilizers, 287 million for soil amelioration (including gypsum and other soil amendments), 20.3 billion for imported raw material for feed (mostly protein meal), and fifteen billion for farm mechanization. This figure does not include the direct subsidies in support of the livestock subsector: natural insemination (meaning distribution of reproduction animals) six billion lei, and veterinary sanitation and medicines, which together amount to almost nine billion lei, adding fifteen billion lei for this subsector., The total budget in explicit subsidies is, therefore, about 84.5 billion lei in 1993. Total producer subsidy, exclusive of credit to agriculture, is estimated at 142.1 billion lei. This is equivalent to one-third of the expected budget deficit for 1993. * Action in food prices and farmer income policy, GOR, as a matter of policy, contrived to lower food costs through subsidized input prices, as well as through fixing low produce prices, reducing export quotas (which acts to pressure internal commodity prices downward by not exposing internal production to foreign market pricing competition), maintaining an overvalued exchange rate (a disincentive to exports) and subsidizing the cost of credit. Incentives to producers are distorted across crops. 'Some crops have strong incentives, while others, just as important to the economy, for unknown reasons, have had negative incentives in terms of prices paid to farmers. In the case of wheat, high grain prices and low costs have been translated into a unusual and excessive (by all standards) transfer of capital to wheat farmers. Contrary to this situation, oilseed producers, on account of low prices paid for oilseeds, largely have abandoned these crops, with the result that the protein meal import bill has gone up together with the cost of its subsidies. * The National Cadastral Service hopes to receive a large international credit with which to start. It may take some time to get such a credit. We submit that if the former CAPs had their boundaries defined and registered in the former cadastre, as is expected, and geodetic and topographical benchmarks exist to define those boundaries, it would be an easy task to request the beneficiaries of the land redistribution process in each CAP to contract as a group with private surveyors, using present benchmarks. to produce topographical maps of their plots of land in agreement with their neighbors. This would be a quick-fix solution, which would immensely accelerate the issuance of final titles to property, and it could be started right away with GOR internal resources. The cost of the surveys would be borne by the new landowners and financed by long-term loans from Banca Agricola. This procedure was used quite successfully when similar agricultural GROBMAN 198 INPUT DISTRIBUTION production cooperatives in Peru broke down. Final inscription in the National Geodetic Survey and Cadastre Database, would require future minor rectifications. The Cadastre Database would include juridical recognition, based on special land courts and their judges in each judet providing registration numbers, titles, and copies of the maps. The assistance and full support of the military would be needed in releasing geodetic control points, to relate to the topographic land surveys, to the National Geodetic Survey. 6.03 Credit to agricultural producers is concentrated in Banca Agricola. Other banks have no incentives to lend to the agricultural sector and prefer to deal in shorter-term, faster-revolving loan operations. State farms and state-owned agricultural companies have no problem in finding credit. However, private farmers and associations who wish to receive credit directly from Banca Agricola have to offer solid guarantees equivalent to 100% collateral plus additional costs and interest. Special credit programs for agricultural machinery are linked to farmers with land- holdings larger than 40 ha. Single, natural persons also are subjects of special credit for agricultural machinery if they prove that they will use it to provide mechanization services to others. Consequently, a majority of private farmers who require credit to work their land must deal with integrators, especially with Romcereal, a fact which removes them from the market and freezes the prices they are paid for their produce at the contracted price, which are low and fixed, in the context of an inflationary economy. 6.04 Farmers who wish to secure inputs and ensure lower prices by buying at the factory gate or who order scarce inputs from the factory through intermediaries (Agromec, BATMA), must pay in advance the full cost of the inputs, and sometimes even transport costs to their farms, incurring higher costs of credit. These cash advances usually must be made 2-4 months ahead of delivery. For farmers who use the integrators, only 50% of the value of the contracted grain is applied as credit to pay for the cost of inputs and is financed through the system. They must finance the balance with their own resources. Accordingly, many small farmers have opted out of the use of high-technology production inputs, resulting in low yields which draw them into subsistence farming. Other farmers are able to acquire essential inputs with their own resources and no credit, although in insufficient amounts or quality, as country-wide statistics of input use testify. These farmers are, however, free to use the open market with its higher prices. Recommendations for Dispensing Credit for Input Procurement 6.05 The eleven recommendations that follow are aimed at solving the problem of financing production inputs in the agricultural sector: 1. Farm mechanization constitutes the major component of the cost of production for field crops in Romania, due to the high level of mechanization of farming there. It typically may be 55% of total cost in a wheat crop (vs. 17% for seed and 9% for fertilizer). Since 60% of the mechanization costs in the case of wheat and other small grains for harvesting services (combine operation) and are payable in grain, this component requires no financing. As the other mechanization costs could be tied to a harvesting contract, all the mechanization costs of the GROBMAN 199 INPUT DISTRIBUTION operator could be recouped at harvest. The farmer also could pay the operator of the mechanization services at the true market price of grain. Mechanization operators could become primary contractors and credit intermediaries between farmers and the banking system, having direct access to the harvest. The harvest would be directed to bonded farm or rural collection grain/tuber/cold storage facilities or Romcereal facilities for storage on the farmer's account, or for sale at market prices as the mechanization agent chose. The 600 Agromecs, or what would remain of them once privatized, could participate in the integrator system as competitors among themselves. Other integrators, especially the feed, flour, and oil mills, also could operate directly and in many cases contract with mechanization operators as their grain suppliers. These private agricultural mechanization integrators would have access to Banca Agricola and other credits in the same way that Romcereal has cornered this credit at present (as would mills, breweries and other agricultural industry processors). Romcereal then would cease to be the monopolistic intermediary it now is. 2. Legislation should be passed authorizing the immediate functioning of wholesalers and dealerships in the private sector dealing with agricultural inputs. These wholesalers and dealers should have access to preferential Banca Agricola credit and any subsidized credit -- if subsidization is to be continued -- for stocking seed, fertilizer, feed, plaguicides, farm machinery, spare parts, veterinary products, lubricants, farm tools and other products of farm use. Their profit margins should be left open to market response, although it might be necessary at the outset, while competition is not yet fully developed, to work out indicative but reasonable profit margins. 3. As in other parts of the world, dealers should be able to administer their own credit to the farmers and, integrated with food processing firms, export companies, grain mills, and seed companies, could work out simple and complex systems to dispense credit to the farmers. As is done elsewhere, an integrator firm, such as a food processor, could (after establishing a contract with a farmer) request the opening of a credit account for the farmer in a bank. The integrator also could order a dealer to supply inputs to the farmer, the value of the orders payable to the dealer at the bank, while the integrator guarantees the farmer payment for produce at the market price, and the bank is guaranteed by the integrator to recoup advances at harvest time. The bank charges interest to both the farmer and integrator, and works additionally with the dealer. These example systems, which operate in Western economies, must be allowed to operate in the Romanian context, free of monopolistic and oligopolistic constraints. 4. Farmers should be allowed direct credit on the basis of the adeverinte, which if not real property titles are at least certificates that allow the use of land. A direct farmer credit system should be instituted as soon as possible to replace the indirect, subsidized credit system dispensed through Romcereal and other monopolistic state entities -- which concentrate credit resources, block out competition, and deny free access of private farmers to the market. 5. Farm leases should be allowed based on free contractual agreements. Lessees, in agreement with lessors, should have access to credit under conditions similar to those of the GROBMAN 200 INPUT DISTRIBUTION adeverinta holders. In both cases, the bank could substitute itself as the adeverinta holder or the lessee for the period necessary to obtain repayment of the loan in case of default, as is done in other countries. 6. Because of risk of environmental limitations to farm production due to drought or other anomalies, debt carryovers should be allowed when it is determined officially that they are due to abnormal generalized circumstances, and to be amortized over a period of years. Interest rates should be constructed on the basis of actuarial tables that reflect drought probabilities, and risk factors as insurance should be introduced into the credit system to account for them. Romanian agriculture or at least part of it is sensitive to drought, and droughts are likely to occur with some frequency; therefore this factor should be considered in the formulation of credit policies. 7. In order to expand the availability of credit and to induce banks other than Banca Agricola to lend to agriculture, an incentive policy is proposed consisting of allowing banks to reduce their fixed guarantee deposit requirements and expand discounts in the Central Reserve Bank proportionately to the amounts lent to agriculture. Fixed proportions of loan volumes for the agricultural sector could be mandated in the future. 8. A warranting system should be established in Romania for non-perishable products such as grain and for others such as some fruits, potato tubers, and storable animal products. In the case of grain, the most important component of the system, bonded silos belonging to Romcereal, to flour, oil, and feed mills, to seed companies, to exporters, to farmers associations, cooperatives, individual farmers, grain storage rental companies, and to banks (as in Colombia), could receive grain for short or long term storage, charging a monthly fee. Grain would be received on the basis of standardized commercial grades and delivered in the same way. All storage receipts and deliveries would be reported to a central computer system, linked to a national grain security system, possibly managed in the future by a reorganized Romcereal. Banks and other financial institutions would issue warrants for grain stored for up to 80% of its free-market value. The warrants would constitute collateral and would be negotiable documents. Farmers could opt to reacquire their grain, paying the warrants and reap the benefit from price increases. Grain deposits would collateralize the emission of the quasi-money warrants. For this scheme to operate, the steps defined in the next paragraphs must take place concurrently. 9. Grain and other commodity markets must be freed from GOR price fixation and subsidization. A price-reporting and information system must be established, providing daily price closures in cash markets, futures cash markets, and futures options markets. Romania has the conditions to create a series of the above markets, especially a futures option market for grain and other farm products. For these markets to operate efficiently, inflation must be arrested by overhauling present fiscal policy and, especially, eliminating or decreasing subsidies. 10. While it is true that the total grain storage capacity of Romcereal is not fully utilized, and that Romcereal frees some of it -- up to 400,000 tons -- for storage services to third parties GROBMAN 201 INPUT DISTRIBUTION (charging a moderate 66 lei/ton/month), new strategic grain storage of small capacity (1,000 to 10,000 ton) should be built at farms, farm associations, state farms, and rural collection points, in some major grain producing areas. They would help small and medium rural milling operations, especially those vertically-integrated with animal feeding, and reduce transportation costs (back and forth from major grain storage centers, many located near bigger towns and cities). The reality is that most of the maize -- which is the major crop of Romania -- is stored in rural areas, only 20% being procured by Romcereal. On-farm grain storage facilities are primitive and losses of great magnitude are prevalent. New small and medium cooperative or private, secure-grain silos, located near the farmers, with warranting systems, and with combine harvest prevailing still in Romania, would be of great service to the farmers and could be repaid with the reduced grain losses, reduced transportation costs for feed grains and better prices obtained by farmers. Damming the grain flow at these countryside grain storage places at harvest time, with a warranting system, would help stabilize grain prices throughout the year. It also would contribute to orderly financing of the input distribution system through the use of warrants by farmers as collateral for the initiation of the autumn wheat and small-grain plantings and even the spring crop plantings. 11. Romcereal should be phased out as a major credit intermediary and its role changed while it waits for a proposed privatization. During the phasing-out period for Romcereal, which should be of no more than two years, the reorganization proposals for the dispensation of credit for procurement of inputs, presented above, should be fully promoted and established. 7. PRICE RELATIONSHIPS 7.01 Prices of both agricultural commodities and the inputs and services needed to produce them continue to be controlled by the state. Intervention of the MAF (Departments of Economy, Finance and Prices and Protection of Competition) and the MEF limits maximum prices at which inputs can be sold, fixes the amount of subsidies on inputs after consulting with the individual producing firms, allowing them a maximum of 10% profit, and also determines separately prices to be paid for grain and other farm commodities by Romcereal and other integrators (Romlacta, sugar beet mills, the tobacco monopoly, Semrom, vegetable fiber textile mills, etc.). Official prices for farm commodities and for inputs are the same all over the country, regardless of location. Transportation costs needed to equalize prices for commodities moved between judets (for example, inter-judet grain movements by Romcereal) are absorbed by the state. 7.02 Romania formerly exported upwards of three million tons of grain annually, on account of comparative advantages. Restrictions of export of agricultural commodities were imposed after the decline of production, in order to forestall internal deficits. The state has allowed private grain markets to start operating, as an expansion of farmer's markets, although their size and organization are not regulated, but has limited -- by not aiding -- the revelation of real prices in the internal market. Internal farmers' markets have freedom of operation, but their price GROBMAN 202 INPUT DISTRIBUTION discovery process is limited by the volume of the market they are able to tap in the case of each commodity. In the case of grain, credit for its procurement at harvest time resides predominantly in Romcereal. It manages its linked promotional, low-interest input credit system, tied to procurement contracts, with such large volumes of credit, that it influences, with this factor a downward trend in the prices of the free grain markets. Private traders do not have access to financial resources of an order of magnitude that would make them significant players in the market. 7.03 Even so, Romcereal is finding its share of the grain market diminishing to the level of 50% in wheat and 20% in maize (it still retains some 90% of the oilseed market). This is probably due to the wide spread between official and free-market prices. Official prices are 70 lei/kg for wheat, while internal free market prices are 80-90 lei/kg, although they have been known to spread up to 150 lei/kg. C&F Constanta imported wheat prices may be around 87 lei/kg at official exchange rate (April 1, 1993) while at an estimated real exchange rate the C&F price would be around 108 lei/kg. 7.04 The distortion in prices is manifested in a serious manner in the oilseeds. At last harvest time (Autumn 1992), the official farm procurement price of sunflower seed for oil-crushing relative to wheat grain was 1.2 times. Contrary to this low price ratio, the world market price ratio at this time is in the range of 2.2-2.4 times. This situation motivates very major shifts in crop planting decisions by the now-independent private farmers, as has happened with the oilseed crops. These decisions also affect the planning of the production of seed for the various crops and more expensive seed carryovers, and losses in the case of seeds of oilseed crops (which have short germination holding periods, and which cannot be prolonged in Romania because of the absence of specially built (cool and dry) seed storage facilities). Even though internal prices of cereals have been moving up during 1992 and are now closer to international market prices they still lag behind them. The core justification for these lower official prices paid by government lies in the lower input prices which the government has fixed through its subsidization policy. The state further subsidizes the final price to consumers. The subsidies for food and agriculture added up to 294 billion lei in 1992 (23% of the Agricultural GDP). They are estimated to reach 328 billion lei in 1993, accounting for 77% of the budget deficit. They are no longer sustainable. 7.05 The economic situation of the firms producing inputs, whether fertilizers, seeds, agricultural machinery or services, or concentrated feeds, is very weak. Even though the accounting procedures used show them having slim profits, it can be seen clearly that they have not been able to make sufficient profits and build reserves to allow them to renew their equipment, reinvest in research and development, improve the professional and income status of their personnel, or expand. It is even doubtful that they would be able to subsist with their present business orientation and structure in a competitive environment were they left on their own. This outcome is the result of policy criteria of reducing prices of inputs to the farmers to well below prices in the international market. The actual cash profits at 10% gross margin allowed to the input agro-industry on sales, after taxes and government take-home dividends, GROBMAN 203 INPUT DISTRIBUTION usually leaves them 1 % on revenues. These slim revenues are influenced by low selling prices and have not allowed, in general, a sufficient level of capitalization, resulting in economically unhealthy firms. 7.06 "Farm policy windfall profits" are being realized by Romanian farmers in excess of farmers' expectations elsewhere in the world (Table 13). The price control and subsidization policy has had the effect of shifting the terms of trade between urban and rural sector towards the former, with the state trying to balance the shift with further subsidies to urban sector food bills. It constitutes a major policy decision for the GOR to decide at what level, and at what cost, it wishes to reestablish equilibrium. Recommendations 7.07 It is recommended that a readjustment of prices relative of inputs to farm produce prices be effected in Romania, to eliminate present distortions. Produce prices should be allowed to reach border prices. Some commodities already are getting close to that point. Input prices, however, are greatly distorted downwards. They need not be, especially for locally-produced fertilizers. Low selling prices are not conditioning a higher fertilizer demand, as supply is very scarce due to production bottlenecks. A similar situation occurs with locally-produced pesticides, supply of which is limited equally by lack of foreign exchange required to buy raw materials. The pricing vs. demand situation can be also extended to mechanization services and seeds. If the state were to reduce subsidies to account only for the profit component of the manufacturers' selling prices, without subsidizing any part of the costs, input prices still would be lower by far than imported inputs, and the state would save billions of lei. Farmers very likely would continue to buy their inputs at the higher prices, provided credit was available to them and that realigned market prices for farm commodities would still allow them reasonable profit. Any protection policy aimed at supporting inefficient farmers and creating in them a dependence on state subsidies must be strongly discouraged. Nonetheless, even under a scenario of price liberalization, and with a proviso of a strong effort to promote higher technology levels in the farming practices of the new farmers through agricultural extension, supported by income incentives and credit, it is expected that a majority of farmers will be able to sustain acceptable income levels and the sector as a whole to hold its own in its terms of trade with the urban sector. 7.08 Should the government decide to phase out input subsidies in a gradual manner, the gradualism should be fast -- no more than two years, and preferably less -- in order to reach Year 3 with zero subsidies. Delays in curtailing subsidies, while submerged in an inflationary economy, may result in a defeat of the program, as budgetary demands will continue to increase, will themselves breed further inflation, and later will be harder to discontinue politically. The commitment should be serious, firm, well-promoted, and announced publicly. Pricing policy adjustments for agricultural inputs and commodities, and freeing of the markets, ought to be implemented concomitantly for them to take their full effect. To build them into an effective body of policy decisions, the credibility in the "culture" of the command economy, still retained GROBMAN 204 INPUT DISTRIBUTION in some sectors, needs to be challenged openly and its faults remembered, demonstrated, and predicted in the present context. Soundly-integrated alternative policies, and not just their individual policy components, must be defined in terms of expected outcomes. 8. PRIVATIZATION OF THE INPUT DISTRIBUTION SYSTEM 8.01 Back in August and September 1990, GOR announced a broad policy framework of agricultural reforms. It included divestiture and privatization in the agricultural sector of the majority of state entities, market and foreign trade liberalization, price and credit system liberalization, encouragement of foreign joint ventures, and reform of the land property system. It appears that, two and a half years later, only the latter objective shows clear signs of positive accomplishment. 8.02 As part of the above-decided policy process, policy-makers in GOR confront difficult choices in tracing a course of action regarding the goal of overhauling the agricultural input distribution system. It would involve the adoption of a strategy, during the transition period, for attainment of well-decided intermediate objectives. As it stands, present agricultural and food policy has concentrated on reaching the goal of reducing the cost of food to the urban (mainly industrial, mining, technocratic, and bureaucratic), politically more-vocal sector. This the state has tried to do without affecting the income of the recently-reformed rural sector and without. decreasing the standards . of per capita food spending and utilization. Heavy subsidization of the prices of inputs and agricultural services to their producers and deliverers, and subsidization to food processors to reduce the final processed-food prices (dairy products, bakery products, oil, and processed animal products) have been resorted to as the chief policy instruments. 8.03 GOR is aware that the cost of subsidization no longer is sustainable, as it is the primary source of the fuel that feeds inflation. Maintenance of the present policy also is fundamentally incompatible with the reform -of the economy, which the present government advocates. The cost of explicit subsidies to inputs and services to farmers is expected to reach 172.4 billion lei in 1993 -- slightly more than half of the total subsidies of the sector -- and 8% of the total GOR- planned revenues. With the addition of subsidies to credits used to buy agricultural inputs, the total explicit subsidies targeted for inputs will reach 232.4 billion lei. This figure is equivalent to 10.8% of projected fiscal revenues in 1993. 8.04 The vision of policy-makers has continued to be influenced by a framework of old political considerations, including equity principles above economic pragmatism, to which some degree of political expediency and/or opportunism have been added. GOR undoubtedly is aware that invoking and acting on flouted principles will entail a future political cost, as unchecked inflation will continue to erode the possibility of finding an intermediate course of action leading out of the present distressing situation. One of the major policy contents in this vision is the GROBMAN 205 INPUT DISTRIBUTION subsidization of the cost of inputs to such low levels that.they.protect even'the least efficient of farmers. This policy, we submit, is in error as it tends to maintain excessive high government costs while it increases the "real" social costs of production. If one of the intended major aims of agricultural policy is capitalization of the newly-emerged private farm sub-sector, it can be done in a more judicious manner, fostering structural reforms in the input delivery system, reducing to a minimum the social cost of government interventions, while still supporting the farm subsector with an acceptable spread between costs of production and price of commodities. 8.05 For many years the ownership and regulation of the,agricultural input delivery system has been a key policy instrument of the state in Romania. This was applied to a centrally- planned command economy system, in which free market forces had no relevance. The continuation of this policy, while paying lip service to its extinction, no longer is tenable in a free market economy. Indeed, the continuation of this setting may vitally affect the outcome of all the economic reforms because of the key importance of the agricultural sector and the high percentage of the population that makes its living from it. In seeking to solve policy issues GOR has but one choice in regard to its policies on the input delivery system, and that is to pursue actively its structural reform -- and not partial, but full privatization. 8.06 The course of action recommended for overhauling the agricultural input distribution system in its general context goes through the following stages: 1. Establishment of a new legal framework extending Law 31 to the agricultural sector with clear and specific provisions, allowing the development of private business organizations (trading companies) dealing in the marketing and distribution of agricultural inputs, and providing them with vigorous incentives. These business organizations, in the many forms allowed by the law, shall be unhindered by the state in the ways they choose to conduct business activities, and free to fix the profit margins they may decide they need in order to operate efficiently, while complying with all the requirements of the law. A private input distribution system is the backbone of a functional agricultural system. Because experience in free market economy agricultural sectors has shown its decisive importance, the input delivery system in all its forms and components should be provided with incentives and similar provisions and 'guarantees to those given to farm producers. 2. Actions to dismantle and privatize the present state-managed farm input distribution system in all its aspects should be accelerated. The state managed input distribution system includes: * The BATMA system of stores * The Agromec companies * The pesticide distribution system of the Inspectorate for Plant Protection and Proplant * Semrom S.A. * Unisem S.A. * Other integrators in the public sector GROBMAN 206 INPUT DISTRIBUTION 3. Romcereal R.A. is a special case. It should cease to operate as an integrator. Its new role should be that of a coordinator at the national and judet level for grain distribution and marketing operations in grain markets, as facilitator, gatherer and analyst of grain statistics in the internal and external markets, and as a credit intermediary for facilitating the sale of its storage facilities and the building of new ones. All of its storage facilities ultimately should be transferred to the private sector, except for 10-15% of capacity employed for strategic reserves and market regulation purposes. In its. new role it would be a Romanian counterpart version of the Commodity Credit Corporation in the U.S., with the roles the latter organization took over in the transitional years after World War II, taking advantage of its experience in fostering private-sector handling of grain storage but devoid of the enormous problems of the latter in handling huge grain stockpiles. 4. Law 31 and Foreign Investment Law 35 are basically good approaches to promoting private investment, though precise regulations to the law and amendments to some of its articles these legal instruments could improve it. In addition, a specific Seed Law needs to be enacted, modifying the proposal recently presented to Parliament. Appendix A includes a proposal for modification of the conceptual contents of the project that is before parliament, which is very weak in its promotional component while it indulges in excessive controls and the dispensation of penalties. Similar laws, regulations and orders also should be enacted for promotion and regulation of the production and distribution of plaguicides, animal feed, and veterinary products. Appendix A contains practical matters which an investor would contemplate if buying into a seed company in Romania. Their enumeration and analysis reveal a series of bottlenecks that may affect investment, and which must be removed. This case might apply in a related manner to other fields of investment in other farm input supply agro-industries. The State Ownership Fund 8.07 The State Ownership Fund (SOF) was created in order to preside and supervise over the privatization process in Romania as the state agency in charge, according to Law 58 of September 1991. The privatization process of state-owned enterprises has had a slow start. It has been initiated with a first stage which includes 162 small companies, most of them trading companies. SOF claims that this will give them experience in the handling of the privatization process. As SOF unfolds its privatization program, it appears that some parameters have been fixed. One of them is that in public offerings, 10% of the shares of any state enterprise will be retained for a special offering to workers at a discount of 10% on the base price. Companies considered to be of strategic importance and which will require large-scale future investment are exempt from the former provision. These companies may apply for a special status. Parliament, by special law that may allow them to be listed on the Bucharest Stock Exchange so they may procure needed capital. SOF retains the income of 70% of the shares sold, which it may use in some cases to rehabilitate companies prior to being offered for privatization and to support the cost of the whole restructuring process. GROBMAN 207 INPUT DISTRIBUTION 8.08 SOF has as its main objective the selling of state company shares. It admits, however, that this process is handicapped by several factors: * Legislation incomplete for a market economy * Absence of an operational securities market * Need for amendments to Law 35 (foreign investment), being considered in Parliament * The need to develop a mutual fund investment system * The lack of a modem accounting law; one is expected next year * A modified commercial law, as the present one is not considered to be suitable for the protection of the interests of small shareholders * Participation of the banking community in financing deferred payments for shares in the privatization process 8.09 The SOF retains control on the 70% of the shares belonging to the state in all state enterprises of the country, while the remaining 30% of the shares were issued by GOR to the population at large. They may be used optionally by each individual to effect an investment in a company of choice, either directly or though mutual funds. This is an approach favored by SOF. The Private Ownership Fund is charged with holding the 30% of the private shares assigned to the population at large. This Fund has branches which act in different regions of the country. These shares ("Public Shares") when they finally become tradable due to the privatization process, may enter the future stock market and acquire real value, as has occurred in countries with similar historic situations. 8.10 The SOF needs to assess its options, as it appears that some projects still are under consideration. This is of critical necessity, specifically in regard to the privatization of agents of the agricultural input distribution system. Some of the final decisions and those under consideration by SOF are the following: * The privatization of Agromec companies has been decided. A specific methodology for this has been developed at MAF, taking into consideration the special interest of small land-holders. It was intended, as of March 1993, that it would be made public in three months and published in the "Monitor." There is interest in foreign capital investment. This process should be implemented within a period of six months. * In the case of agricultural research, seed activities, and other institutions related to inputs in the agricultural sector, the state intends to remain an actor. How, and to what extent, has not been specified. Arguments for the state remaining in these activities have been forwarded on the grounds of its knowledge of Romanian agriculture, experience in seeds, and other general but imprecise reasons. * A bill on intellectual property protection is in Parliament. GROBMAN 208 INPUT DISTRIBUTION 8.11 SOF can provide information and legal advice on the privatization process to interested parties. It is, furthermore, capable of negotiating forms of payment on shares with interested parties, including credit for payment of shares on installments. Agromecs 8.12 The situation of the Agromecs in regard to privatization has been decided by GOR. According to the State Ownership Fund, the system of 600 Agromec companies will be up for privatization some time in 1993, most likely within six months (of April). 8.13 As a consequence of the privatization process, it is expected that some Agromecs will disappear through consolidation or simply because their continued operations will not be warranted without subsidization in some areas. This is true where there are no large areas suitable for mechanization, as in Transylvania's montane areas and others with high concentrations of small farmer land-holdings. In these areas private operators with one or more tractors will have comparative advantages because of lower management costs. Agromecs, in the absence of subsidy payments, may find what others have found in other parts of the world, which is that wheel tractor pools not supported by large-scale crawler tractors used in leveling, terracing, ditching, rural road building, and similar activities, cannot by themselves support a profitable machinery pool. That is possible only with low cost, family-type management. Careful analysis will be required of the size and mix of new private agricultural machinery pools to be retained in each area in relation to the market for agricultural machinery services, cropping patterns of the area, and competition with smaller operators. 8.14 A number of Agromecs may retain their service components for tractor and machinery maintenance in the areas they serve, as constitutive elements of tractor, combine, and farm machinery dealerships, to which spare part distribution may be added. These Agromecs are strong candidates to become the core of the future Romanian multi-input dealerships or private "agro-service centers." They already perform distribution functions for inputs such as fertilizers. They could be institutionalized as dealers of other inputs as well, such as seed, feed, pesticides, and veterinary products. Semrom S.A. 8.15 The future of Semrom S.A. and of the seed industry in general is confused at this time. Clear policy decisions need to be made in this regard. The options are either to develop a vigorous seed industry in the private sector or to retain a monopoly. A mixed solution, such as allowing a private seed industry to operate next to Semrom, in its present form, or even next to a sized-down Semrom, will not work. The coexistence of private seed industry next to state- owned seed industry operations has not worked anywhere in the world during a process of reform. It only prolongs the agony of the state-owned firm, demanding continuous subsidies and other forms of life support, and delays the time when the private sector achieves full GROBMAN 209 INPUT DISTRIBUTION consolidation and capitalization and is able to invest in further expansion which benefits the whole country. 8.16 The development of a seed industry in the private sector in Romania is feasible. The market is sufficiently large to admit some 10-12 medium-sized companies and several dozen smaller ones. The proportion of the seed market now being tapped by Semrom at a full market value and under normal circumstances probably could be valued at more than US$500 million per year for about 600,000 tons of field crop seed sold per year. The balance would be seed traded by state companies and seed saved by farmers; most of the latter does not now enter marketing channels. The final internal and export market potential under a private setting can be seen to be much larger. 8.17 New seed legislation has been presented to Parliament (Appendix A). The former Seed Law No. 13, of October 1971, outlines a state-owned, controlled and operated system. The new seed law should define at the outset the objective it pursues, which is the formation of a vigorous private seed industry. The articles that follow need to be inserted in the legislation, abiding by this guiding principle. Because of linkages that start with research, and follow with variety testing, variety registration, variety list restrictions, seed quality control, seed certification (compulsory or noncompulsory), seed production contracting, seed processing and storage, seed marketing and distribution, the full process needs to be well described and the rights and boundaries of the private sector vis a vis the state to be spelled out in detail. This is necessary because there is no experience in Romania with a system that allows freedom of operation to an industry as complex as the seed industry. The experience of Semrom in this context is irrelevant to the needs of a private seed industry. New seed legislation of a promotional type must be the cornerstone of the reorganization of the seed industry in Romania. 8.18 It is recommended that the state develop a National Seed Administration or a Seed Division of the Ministry of Agriculture with promotional, statistical, quality control, variety testing and registration, variety protection, extension, and training functions. It is further recommended that a national seed trade association be formed and recognized as the interlocutor to the state seed administration. Further, it is recommended that a National Seed Advisory Council be formed with representation of the seed industry, the state, and farmers. 8.19 Semrom should be privatized at the level of its component Agrosem branches. In some cases facilities could be leased if no bids are presented for outright purchase. This action should take place in coordination with other actions being recommended, and should be terminated within the next two to three years. Continuation of Semrom's activities in certain Agrosems, for which parties present bids, may be envisioned. In these cases, management contracts for interim periods of time could be defined. Semrom. should be fractionated into a number of units comprising one or more judets. The study of the fractionation should be undertaken as soon as possible. The fractions should be put up for bids, with ample advertising to draw the interest of parties interested in investing or developing joint ventures in Romania. GROBMAN 210 INPUT DISTRIBUTION Unisem S.A. 8.20 Unisem S.A. should be privatized. A study should be made, as for Semrom, to define the fractionation of the company into viable units which could be capable of operating independently. These should be put up for bids. 8.21 The present mission also endorses the opinions expressed in detail concerning the recommendations on seeds of the World Bank Missions contained in the respective reports of February 23, 1991 (Agricultural Sector Working Papers Vol. II), and January 28, 1993 (Agricultural Prices, Subsidies and Marketing Review), which still are applicable at this time. R.A. Romcereal 8.22 Romcereal performs a number of services to society, including roles as: * Credit intermediary * Supplier of integrator services, including facilitation of input acquisition * Grain procurement operator * Organizer of the marketing channel for the officially-priced grain market through presence of a "purchasing power" * Supplier of grain-drying and storage facilities for its own grain as well as for other clients * Grain supplier to flour, feed and oil/meal milling processors * Initiator of imports of grain and protein meal * Grain redistributor among judets * Manager of the national grain fund (food security reserve) * Manager of primary grain statistical information It has, in effect, become the largest state agency and by far the largest user of Banca Agricola credit. It also is the major wholesale channel for the distribution of fertilizers, seeds, and pesticides. It is the major financier of mechanization services. Its effective command of the input distribution system in Romania, as long as continued, will paralyze private sector development in its areas of responsibility. 8.23 Romcereal figures effectively in MAF's strategy primarily as a problem solver organization. It used to procure grain from the CAPs, which supplied some 50% of its annual total volume of business. With the disappearance of the CAPs and their replacement with millions of small land-holdings and some associations, the state gave Romcereal all the tools and means necessary to recapture the lost source of supply. This included the strategy of credit intermediation, input acquisition facilitation, in exchange for provision of a market security, even if at reduced contract prices. Romcereal must be seen, therefore, in its relation to the new private farm sub-sector, as a stopgap solution. Its prevalence should continue only as long as it takes to develop alternative financing, input distribution, and marketing systems. In spite of GROBMAN 211 INPUT DISTRIBUTION all the powerful financial and organizational tools received by Romcereal, its share of the grain market, as well as the total volume it procures, has fallen considerably. Farmers are holding on to grain in growing numbers, primarily as a protection against inflation. In Table 57, for example, is illustrated the falling share of Romcereal in Brasov. In Cluj, as another example, the maximum volume of grain bought in one year by Romcereal was 200,000 tons. Before the revolution it procured 70,000 annually. It now procures between 30,000 and 40,000 tons/year. 8.24 No definite decision has been made concerning the privatization of Romcereal, as has been indicated by various government officials and specifically by the SOF. The network of activities which Romcereal has woven, and the dependence it has established of the private farming sector on its continuation, may appear to some as hard to disentangle. Helping this view is the bureaucratic resistance to change linked to a pervasive culture of government intervention. Some views even were advanced to the mission to the effect of Romcereal's expansion by absorption of Semrom, and plans were being made in some Romcereal judet branches to start, in 1993, financing seed production for growers in competition with Semrom. 8.25 Alternative input distribution channels are now even being established in Romania. BATMAs, while still state-owned enterprises, are in effect input distributors. Agricultural machinery and tractor and combine factories have established dealerships through Agromec companies. Pesticide importers are establishing their own wholesale distribution centers. New companies like Agrofarm, Sibco, Brimex, and Fitofarm, are operating, setting up distribution nationally or regionally. However, these efforts are very minor compared to the financial resources that Romcereal has at its disposal to keep itself dominant, either directly or indirectly, of the seed, fertilizer and pesticide markets. 8.26 It is proposed that Romcereal through stages of disengagement from its present functions and transformation. This process, due to the size and complexity of functions for which Romcereal is responsible, necessarily would have to be conducted over some time and in stages. We have specified these major stages and have linked them to other necessary, preceding, or parallel actions that would enable the transfer of Romcereal's functions in an orderly manner, in Table 42. Ten proposed actions are discussed below: 1. For a period not to exceed two years, Romcereal should continue performing its general services but provide no new ones, allowing farmers increasing options of direct financing, direct purchase of inputs from distributors, and free market access. 2. During the transition period, Romcereal shall cease to offer interest-free loans to farmers. All farm input distributors shall have access to the same credit conditions as Romcereal gets from Banca Agricola. Romcereal shall cease operating as a wholesaler or retailer for farm inputs; all the inputs it orders shall go with purchase orders to private input dealers, who may provide additional credit or get paid immediately by Banca Agricola or other credit suppliers. All subsidies presently given to or dispensed by Romcereal shall be gradually reduced to zero at the end of the transition period. GROBMAN 212 INPUT DISTRIBUTION 3. State-owned factories, in the transition period, shall support the evolving private input distribution system by starting to operate with wholesalers, minimizing or curtailing small order sales at factory gates. 4. Romcereal shall, in coordination with MAF, Banca Agricola and other banks, develop and legalize a grain warranting-system. Its grain silos and flat grain storage facilities shall expand the present provision of optional bonded grain storage services to farmers, farmer associations and companies, grain-handling companies, seed companies, and grain millers, banks and other financing agencies. Grain stored at Romcereal shall serve as collateral for warrants issued by banks for 80% of the market value of the grain.. Farmers also shall have the option to sell grain at full free market price to Romcereal at harvest time, whether or not they are contractors to Romcereal. At their option they should be able to repurchase the same volume of grain sold, minus shrinkage, from Romcereal at the original market price, up to six months from date of sale with the additional payment of a monthly fee (including interest) for the grain storage services. Grain warrants will be recognized and guaranteed by Banca Agricola and other financial agents as negotiable financial instruments. They may be used as collateral for loans to farmers to start new agricultural campaigns. 5. The grain-warranting system will necessitate the establishment and authorization of grain spot and future wholesale cash markets, and the full liberalization of grain prices. The functioning of grain brokerage offices will have to be authorized. The establishment of an internal grain futures option market or the tying of the Romanian grain trading system to the new Globex computerized worldwide 24-hour daily, futures trading system (being developed by the Chicago Board of Trade together with the Mercantile Exchange), should be analyzed immediately, and an early decision made for instituting a system in Romania for ensuring grain- price hedging and stabilization. 6. Concomitantly with the former measures, a nationwide grain and other commodity price collection and reporting system shall be developed. It will collect information in the grain markets on a daily basis on volumes transacted and prices paid per ton spot, daily average, their high-low spread, and at closing time. This information shall be transmitted to a central office (equipped with a computer system) in MAF, processed during night time and diffused to radio, television, and newspaper media so it can reach farmers, markets, and chambers of commerce nationwide in early morning hours. It also will include international futures markets' closing prices and current' ocean freight costs, world and local interest rates, and currency conversion rates. Chambers of commerce in major towns and MAF,local representatives in all judets shall compile and keep, records on grain prices and movements available and updated for easy access by users. 7. Romanian grain-grading standards should be developed or revised to adjust them to international standards, especially to U.S. standards, if international futures options trading is to take place with Romanian grain. Grain standards are also necessary for efficient implementation of the warranty program. These measures should help Romania to gain early GROBMAN 213 INPUT DISTRIBUTION grain price stabilization during the transition, and regain at an early date its traditional position as a grain exporter. 8. During the transition a privatization program should be developed and announced for transfer by sale of Romcereal facilities to the private sector. The grain silos and flat storage facilities should be sold out to independent grain storage operators, grain trading companies, grain milling companies, farmers' companies, and associations or cooperatives, insuring that no concentration of ownership that may produce potential oligopolistic effect takes place. 9. In the privatization process Romcereal may be allowed to retain under its control. and ownership up to about 15% of its present grain storage facilities. These would be used for food security purposes, and as. a reserve for limiting potential excessive grain price fluctuations. Romcereal could effect purchases from -farmers or in the market at current market prices to form its reserves. It could also sell part of its reserves for market regulation purposes. In this context Romcereal would become a de facto Grain Control Authority or an adjunct to one, with functions similar to the Commodity Credit Corporation in the U.S., but presiding over reasonably small and manageable grain reserves. As the free market system for grain consolidates in Romania, it eventually may be considered that Romcereal is not needed any further and could easily disappear. 10. With the orderly establishment of the programmatic stages and actions outlined above, and with an emergent private sector-government partnership, the phasing out of Romcereal and the replacement of its functions with a new systems of credit, input distribution, and marketing, the farming community not only will be comforted and protected during the transition, but will be able to reap considerable future benefits. Manufacturing Companies 8.27 The recommended final fate of state companies dealing with the production of fertilizers, tractors and farm machinery, and plaguicides, Which are in the industrial sector, should be their outright privatization. This action would be consonant with the overall policy trends of the present government and the orientation of disengagement of the state from production activities. For the ten fertilizer complexes, with more than 10.2 million tons per year of product capacity, and a commendable 8.2 millions ton of annual product output in the pre-revolution years (1985- 89), privatization should not be difficult. Such a move would require, in order to be successful, coupling with guarantees of access to hard currency to purchase raw materials, freedom from price controls, and freedom to export a proportion of their production in accordance with historical trends in order for the factories to earn necessary hard currency for acquiring spares, for maintenance, and for purchase of raw materials. Several fertilizer factories would need to renovate their installations, as the Amonil plant has done. These renovations should be left to the new owners to effect. In the meantime, fertilizer over-subsidization should be discontinued. Fertilizer plants should be able to sell not only to their present clients but to private wholesalers in preparation for the disappearance of Romcereal. Fixed profit margins punish the more GROBMAN 214 INPUT DISTRIBUTION efficient plants; they should be relaxed gradually during the transition and become entirely free of government intervention within a two-year period. 8.28 The UTB-Brasov tractor factory is a special case. As a vertically- and horizontally- integrated plant, covering 150 ha of factory space, it produces most of the components it needs. It has a virtual monopoly on all small, medium, and large farm tractors from 23 hp to 102 hp (Table 56). It is complemented by the Craiova tractor factory, an independent operation that produces larger, articulated agricultural tractors, but which caters to very large farms, Agromecs, and at this time almost exclusively to the state farms or mixed agricultural companies that resulted from their modification. While a number of foreign tractor manufacturing firms have visited UTB to discuss a possible joint venture agreement, none has resulted so far. At present the consulting firm Ernst and Young has been retained to offer recommendations on the future of UTB. A similar situation occurs with the combine and agricultural machinery manufacturing firm Semanatoarea S.A. Both firms have been quick in adapting to marketing with the appointment of full service dealers in all judets. These either are Agromec companies or private companies formed by former Agromec employees. Because of the essentially monopolistic nature of these enterprises, the special studies commissioned should give light on how to proceed in their cases. 8.29 There are six major plaguicide manufacturing companies and several minor ones in Romania. Their privatization should pose no problem. These companies would be able, when in the private sector, to compete among themselves, producing and formulating locally- manufactured products from their own or imported raw materials. As in the case of fertilizers, plaguicides should cease to be subsidized at the end of the transition period. In the meantime, their subsidy structure should be dismantled gradually. 8.30 The privatization of concentrated feed mills, flour mills, and oilseed mills should be fostered and activated so it can take place as soon as possible. These organizations, when in the private sector, would be active components of the upward and downward stream of flow of agro- industrial products, and would find and easy way to interact among themselves and with input agro-industry in a free-market environment. In particular, the feed mills would use the input dealerships and would collaborate to establish their own networks and work with them in regaining their former markets. These firms could all, to a larger or smaller extent, become private integrators, working with other elements of the private sector such as seed companies to bring new products, higher productivity, and better and more stable pricing to the markets. GROBMAN 215 INPUT DISTRIBUTION Appendix A: Present Limitations to Investment in the Seed Industry Legal Limitations 1. Neither the existing Seed Law nor the new Seed Bill spells out rights and obligations of the private sector or boundaries of responsibility with the state institutions. Neither do they help to promote in any way the development of a vigorous private seed industry with full freedom of operation. 2. The General Investment Law (Law 35), requires special authorization by the state for foreign investment. For foreign enterprises it limits the transfer of profits. It does not contemplate incentives for long-term research in the variety development typical of seed companies. 3. Variety Protection or Breeder's Rights legislation is not yet instituted. Intellectual rights protection for Patents, and Utility Models (Petty Patents) in the Genetics field is non-existent and in other areas not yet fully developed. 4. The Seed Law bill presented to Parliament falls short of being anywhere near a promotional seed industry law. It is more like an imitation of old-fashioned conservative "seed quality control" laws of Western countries copied often by developing countries. The present bill is incomplete in its contents and concentrates on technical matters while ignoring the central point of the restructuring of the system. It is very weak in support of an emerging private sector and has very little relevance to major problems that need to be solved in developing a seed industry from scratch in a socialist economy in transition. 5. The definition must be made in legal terms in both the industrial and agricultural legislation, that the seed industry can be interpreted as belonging to one or the other or jointly to both sectors for the purpose of benefitting from present and future promotional legislation. This situation has had to be corrected by the legislation of some countries because a gray area was left in the UNIDO nomenclature of activities, which had ignored the seed industry and listed it in neither sector. 6. Commercial Law requires modifications and adjustments. In particular, Articles 4, 12, 13, 17, 20, 74, and 78, of Law 31, the mission considers, are either restrictive, inconsistent with other articles, or need clarification in terms of a new, better-defined business environment and should be revised. 7. The Seed Industry shall be understood as individual seedsmen (private seed producers selling seed on their own); seed research, producing, processing, marketing, and distributing companies, engaged in any or all of the previously-mentioned activities; cooperatives or farmers associations who specialize in seed production, seed growers (contractors who grow seed for others); seed wholesalers and retailers, and production departments of state research stations which produce GROBMAN 216 INPUT DISTRIBUTION Elite and Super Elite seed for sale. Seed-industry members engaged in seed production should be recognized for all purposes in legislation as agricultural producers, with the same rights to preferential credit as farmers. This has been done in other legislation. Technical Limitations 1. Excessively-long official variety testing requirements (three years) imposed on a company's own testing program (probably another three to four years), may delay considerably at the outset the possibility of private companies entering the market with their own products in order to create a truly competitive market. Testing requirements are linked to variety registration in an Official Variety List. Varieties not listed cannot be marketed in the country nor seed produced for export. The latter seriously would limit Romania's possibilities as a seed exporter. 2. The requirement of inclusion in an official variety list before seed is allowed to be marketed does not exist in the U.S. or many Latin American countries. It is typical of old, unchanged legislation retained in some Western European countries preserving archaic state centralism. In these countries it does not affect old, established seed companies. The system of variety lists tends to protect companies already in the market and discourages the entrance of new companies, while in fact being almost irrelevant to the protection of farmers, who often are conservative and do not risk testing new varieties in large areas of their fields whether the varieties are recommended by the state or not. On the other hand, the non-enforcement of Variety Lists allows for quick variety turnover, including local and foreign new-variety testing, licensing, and adoption, and the possibility of a company quickly becoming a producer of seed for the local and foreign markets. Experience has proven that relaxation of this requirement fosters seed-industry development. Cases in point are the quick seed-export development of Turkey, the dynamic expansion of short-stemmed new Basmati rice varieties in Pakistan, and of sorghum hybrids in Latin America. 3. Compulsory Seed Certification is not conducive to investment by private companies in countries that force it. In those countries -- if "Seed Certification" in its true specific interpretation means, as it should, control of genetic identity -- it forces seed companies to turn parental inbred lines over to the certifying agency. This, in a competitive context such as expected to develop in Romania, would not be accepted by seed companies, as there would be no assurance that their genetic creations would not land in the hands of competitors. In those countries which certify seed of hybrids without asking for parental seed delivery, seed certification has no real meaning and should be eliminated anyway. In many countries, including the U.S., hybrid seed seldom is certified (less than 2%) and only for the export market, destined to countries which still demand certified hybrid seed. For self-pollinated varieties, on the other hand, certification might be interesting to seed companies with breeding departments, and which have created the varieties as a means of additional protection, as it would reinforce their control over the marketing of seed. Therefore, the seed certification option should be left open. It is not in the present or proposed legislation. GROBMAN 217 INPUT DISTRIBUTION 4. All seed, regardless of origin or producer, whether in categories of Super Elite, Elite, II, 12, or hybrid, should be subjected to quality control as a consumer protection system. This quality control should be exercised primarily by the seed companies, which will label or tag the containers holding their seed so as to comply with the minimum legal standards in effect for the respective species and category. The state, through its appropriate Seed Quality Control (not Seed Certification) agency, will inspect seed containers in the market place at intervals to check that labelling is correct. This scheme will necessitate that seed other than those listed in the above categories and which are expended in the market be labelled with two new optional categories: Common and Authorized. At present, there is a void in the legislation as Common seed is not recognized, while tens of thousands of tons of seed, especially of small grain, are traded informally in Romania without any seed quality control. The new, private, non-certified hybrids could,correspond to a new category of Authorized seed. These also would require seed quality labels as indicated above. None of these considerations are present in the seed law or new bill. The present system administered by the Seed Control Inspectorate could be left to continue with appropriate modifications introduced as indicated above. 5. Open access should be given -- on equal terms to locally-owned and foreign or joint venture seed companies established in Romania -- to germplasm and improved breeding material developed by the state research stations. Seed companies should be allowed to produce, for themselves and for others, Elite seed originating in Super Elite seed produced by state research stations. They could buy Super Elite seeds from state research stations. Commercial Limitations 1. Price and profit control on seeds, in effect at this time, must be discontinued. 2. Competition, of private seed firms, seed-producing cooperatives, or independent seedsmen, with present state companies (Semrom, Unisem, and Romcereal) is an impossible proposition. Coexistence with them is out of the question, as the negative results of imperfect competition or commercial-type incompatibilities with state entities engaged in seed production, enjoying state protection and with their added state distribution channels, are easy to predict. The state system will have to be phased, as a whole, out of the seed industry. It should remain only at the state level in functions of control, regulation, promotion and technical support, and as an overall administrator of a new national seed system. 3. Private sector seed wholesalers and dealer companies or individuals are not organized yet and must be developed under a minimum of restrictions and regulations. They should, as all private agricultural input wholesaler operations and dealerships, be freed from the impossible restriction of "anti-speculation" legislation. 4. Communal centers for input distribution should be freed from the task of distributing inputs physically. Their agronomists and technicians should use their time in agricultural GROBMAN 218 INPUT DISTRIBUTION promotion and extension to the communities they serve. Their advice to farmers should be of an impartial and truly technical nature. 5. Credit should be supplied by Banca Agricola and other banks to seed companies, seed wholesalers, and dealers for stocking seed inventories under the most favorable conditions available. 6. The future of Semrom and Unisem should be a series of companies resulting from a careful division and privatization of single or blocks of plants and other assets. In the interim period, the sections of these companies not yet privatized should be removed from direct state control and put under trust and independent management or management contracts, allowing them to operate in profitable manners in order to attract additional bidders. 7. Incentives should be built into the system to develop a seed export business in most new companies. Other Barriers 1. Seed quarantine regulations constitute, in effect, a potent barrier to business. They have a history of having been used in an unwarranted manner in many places. Seed quarantine is a necessity in every country but should be administered judiciously and carefully. 2. Barriers to importation of basic seed should be eliminated. The use of foreign basic seed is sometimes needed to start new variety or hybrid local seed production programs or to produce seed for export. 3. Importation of seed for testing purposes should be relaxed. Registered seed companies which have qualified technical personnel in their research sections should be given special, permanent import permits. 4. Access to foreign currency in the banking system to seed firms to purchase equipment, materials, chemicals or basic seeds from foreign sources should be prioritized either by specific legal action or by other policy means. Table 1 AREA 0 PRINCIPAL CROPS IN ROVA"IA X 1000 HA ------------- -- - - - - - - - - - - -.- - - - - - - - - - - - CROP YEAR 1980 1987 1988 1989 1990 1991 -m-----------m----m----m--- --m--em--- --------- ----------* ---------- ---------- -------- TOTAL 9569.5 9648.3 9700.2 9846.8 9402.1 9197.3 GRAIN CEREALS 6468.6 5987.0 5907.2 6027.1 5704.0 6049.0 Wheat and Rye 2279.4 2399.3 2414.7 2359.0 2292.7 2217.1 Barley, 6,2 row 809.5 666.1 764.0 767.8 749.0 1017.7 Oats 50.9 76.3 91.6 105.7 144.3 209.0 maize 2287.6 2787.1 2579.4 2733.4 2466.7 ;575.0 Sorghum 21.3 12.0 7.1 10.5 0.2 3.8 GRAIN LEGUMES 108.6 296.0 309.9 311.3 129.5 81.2 Peas 12.5 103.1 93.1 96.9 52.0 53.4 Beans 94.6 180.0 204.5 197.5 72.0 46.2 FIBER CROPS 107.3 102.8 113.1 123.2 38.4 25.2 Flax 70.9 67.1 69.1 70.3 21.3 10.8 Hemp 3S.S 39.3 36.3 40.1 16.6 14.0 OILSEED CROPS 992.3 941.0 991.7 1071.6 64.9 642.9 Sunflower 507.6 474.1 465.9 433.7 394.7 476.8 Rape 14.3 12.0 11.9 19.8 13.1 8.8 Soybeans 363.9 358.6 413.6 512.2 190.2 108.0 Flax, Oil 82.2 7.8 74.3 78.6 49.9 47.6 Castor Bean 12.5 39.3 24.0 26.3 5.5 3.0 INDUSTRIAL CROPS 297.6 305.3 295.1 302.5 187.3 216.9 Sugar beets 237.7 268.0 248.3 255.9 162.7 201.6 Tobacco 43.6 34.4 35.2 34.4 16.8 9.9 Chicory 0.9 3.7 3.4 6.4 0.3 KEDICINAL/AROMATIC PLANTS 37.2 36.2 41.6 27.4 26.5 POTATOES 284.6 317.0 335.8 351.4 299.6 234.9 VEGETABLES 297.8 259.8 266.9 253.8 216.0 195.4 Tomato 74.6 62.6 58.0 52.2 50.6 45.9 Dry Onion 38.7 31.2 29.7 28.1 27.2 24.5 Dry Garlic 8.0 8.0 8.7 13.6 9.7 8.6 Cabbage . 30.4 23.8 26.9 22.6 27.2 28.0 Green Peppers 21.8 25.9 26.5 29.7 23.0 19.0 Edible Roots 21.9 21.9 19.9 17.5 1.2 17.1 WATERMELONS AND MELONS 25.7 26.5 23.4 33.6 47.7 FODDER CROPS 850.1 1100.3 1118.0 1149.2 1962.1 1352.1 Alfalfa 260.3 371.2 364.6 364.1 442.1 449.0 Clovers 136.8 125.8 127.1 126.4 153.7 122.6 Annuals for hay 148.8 196.5 238.6 248.4 464.0 417.3 Maize for silage 44.1 94.6 560.5 22.6 Fodder roots 76.3 80.4 76.0 76.0 84.9 59.7 STRAWBERRY 9.2 11.7 11.4 12.2 6.8 4.0 VINEYARD 217.5 213.4 223.6 225.3 Table 2 PRODUCTION OF PRINCIPAL CROPS IN ROMANIA, X 10001*ON CROP YEAR 1980 1987 1988 1989 1990 1991 GRAIN CEREALS 19366.5 16289.4 19285.9 18379.3 17173.5 19306.6 Wheat and Rye 6339.8 6712.9 8631.6 7935.2 7379.0 5558.9 Barley, 6,2 row 2348.7 2491.5 3202.3 3436.3 2679.6 2950.7 Oats 47.0 119.8 129.4 167.8 234.0 258.2 Maize 10563.3 7526.9 7182.2 6761.3 6809.6 10497.3 Sorghum 29.0 12.5 8.6 7.6 3.5 6.0 Rice 38.7 115.5 131.6 70,3 66.5 31.4 GRAIN LEGUMES 99.1 255.4 261.5 255.4 112.1 79.5 Peas 14.9 125.9 119.5 98.5 49.4 32.3 Beans 83.8 120.2 134.9 143.6 57.5 46.0 FIBER CROPS 270.6 262.9 250.7 141.1 125.3 23.7- Flax 134.7 116.3 113.4 127.2 53.2 15.4 Hemp 135.9 146.6 137.3 113.9 72.1 8.3 OILSEED CROPS 1306.7 1159.5 1069.4 1034.3 739.3 823.4 Sunflower 800.6 746.7 705.0 655'.8 -56.2 612.0 Rape 18.9 7.7 12.0 18.9 10.9 8.8 Soybeans 434.8 361.2 295.1 303.9 141.2 178.6 Flax, Oil 44.0 38.7 49.7 48.9 28.0 22.3 Castor Bean 2.4 4.4 5.8 6.6 1.6 0.6- INDUSTRIAL CROPS Sugar beets 5297.5 5217.2 4868.6 6771.1 3277.7 4702.7 Tobacco 37.3 33.1 35.8 27.5 14.2 23.9 Chicory 5.4 9.8 30.3 16.6 0.6 MEDICINAL/AROXATIC PLANTS 26.6 32.8 33.3 20.5 20.9 POTATOES 3942.3 4141.5 3631.6 4420.3 3195.6 1872.6 VEGETABLES 3338.7 3736.3 4096.9 3726.6 237.0 2213.6 Tomato 11980.0 1194.3 1085.6 1011.3 813.6 692.8 Dry Onion 281.8 305.4 326.8 412.7 225.4 218.5 Dry Garlic 20.5 27.2 33.6 46.6 30.5 32.2 Cabbage 830.8 815.8 911.2 877.3 551.9 616.5 Green Peppers 174.6 269.8 294.0 253.3 182.0 166.8 Edible Roots 216.9 286.8 258.7 251.9 158.6 193.0 WATERMELONS AND MELONS 120.6 430.9 498.3 215.7 389.6 740.5 FODDER CROPS 13353.0 15844.0 18139.0 18057.0 12964.0 15229.0 Alfalfa 7478.1 10132.1 11436.0 11131.7 8057.2 9661.2 Clovers 2645.6 2490.6 2987.2 2937.1 1926.0 2054.3 Annuals for hay 5922.5 6538.6 8420.7 9705.2 6882.6 5645.8 Maize for silage 4689.0 4827.2 5621.0 6096.6 7520.9 5390.4 Fodder roots 2986.4 3090.1 3244.8 4094.2 2575.0 2139.3 ТаЫе 3 CONBUKpTION Оу CAENIG[. PBATILZ3EAH IN АОКАIIIА Х 1000 liT ОУ ACTIVE 6L8l16NT У8АА Н.Р.К .М �D106 К20 1960 3.90 2:60 1.80 1.70 1955 аВ.90 9.3о 7.10 3.30 1яе0 76.50 2а.70 ве.е0 3.00 1яб8 аеь.а0 1{а.90 110.10 11.80 1я70 694.3о збб.яо 103.ао аа.?О 1975 9а8.7о 871.8о з1в.в0 аа.60 lяао 1,аоа.яо 61я.1о ве3.оо 1оо.во 1яв1 1,6]4.д0 860.10 55в.S0 163.з0 lява 1,ваl.во я11.ао ая2.бо sз7.во lяеа 1,з72.7о 7ез.зо зя.яо а2я.3о lява 1,авв.во ьао.яо 37o.s0 ' a77.io lява 1,з7а.3о 7os.7o , ввз.ао sa7.�o lяеб 1,3яя.7о soo.op ♦7о.е0 3аа.яр 19в7 1,]11.70 69я.б0 збе.00 ав.10 lяее 1,3за.7о 7оо.ео з7о.ьо аь7.зо 1989 1,267.30 718.80 з41.з0 228.в0 1990 1,а98.00 766.а0 332.30 178.R0 Avaceqe 19е0-1990 1,з76.в0 7вб.а0 а01.з0 а17.70 1991 1ва.1о 183.30 111.а0 17.60 lяяа 365.00 а60.00 170.00 ]4.Оо t1991 о! Avereqв а0 4• ♦1 11 19е0-1яя0 Алnиаl Opeloun 1,1а0.00 вОО.о0 ]00.00 19яа ТаЫе 4 PAODUCTZON. СОН8UКРТ10И AHD БХРОАТ ОР РЕАТ1й12ЕА8, ROKANIA Х 1000 Кт YEA7t тУРl1 PПODOCTZON ZNTH7tNAL @%РОRт t 61DOAT 'О CAN8U1(PTION PAODUCTION 1984 N 3.191.7 771.в 1,]90.'S б].б Р]Ов 787.6 459.1 310.2 19.{ К20 111.7 22В.1 61.1 в4.7 ТОтbй l,090.3 1,138.6 1,760.В в7.р 19sв и s,3и.в �б].б 1,в2v.1 ыл Р20О 849.2 {94.4 ]]8.7 79.9 К20 11].1 731.1 66.0 38.♦ ТОТАй 3,173.8 1.689.1 1,811.8 36.0 1987 Н 7,094./ 773.2 1,]бв.1 68.1 Р20в 666.] в15.в 369.6 40.5 К20 1]в.9 150.7 7].б 56.6 тотлй а,ая4.7 i,ово.9 1,аа7.а sв.я 1966 N 1,128,4 799.6 1,]30.8 6.1.6 Р205 776.3 •19.о 71].9 4].1 Х20 139.0 285.0 61.5 вв.3 TOTAL 2,992,7 1.303.7 1,718.9 57.8, 1989 N 2,033.0 665.7 1,з17.3 39.8 Р205 6<8.0 329.] 293.9 13.0 К20 112.о 16в.3 70.9 58.1 ТОтАй 2,80в.0 1,1в8.В 1,882.0 Sб.в 1990 Н 1�2в9.р 765.2 C6S.0 35.6 ➢20в 387.0 325.0 50.8 13.1 К20 107.0 1]З.9 21.8 30.2 TOTAL 1,7в4.0 1,236.1 517.4 29.7 1991 К 871.0 188.0 671.6 81.6 Р20! 218.0 116.0 11в.0 ' S1.3 К20 60.0 19.0 ]8.0 76.0 . тОТАй 1.091.0 323.0 823.9 7S.S 1992t1 1,08в.0 36з.0 7SS.0 89.а P20D 260.о 16в.0 106•О в0.0 К30 62.0 26.0 27.0 в1.9 тотлй 1,396.о вs3.о 88а.о a3.s 199] Н 1,315.0 630.о 688.0 в2.0 РАОо1ЧК Р205 363.0 2в3.о 110.0 11.0 К30 а7.0 23.0 4].О 62.7 тОТАй 1,737.0 900.0 837.0 вб.2 Table 5 COMPARATIVE USE OF FERTILIZERS, ROMANIA AND EUROPEAN COUNTRIES YEAR 1989. KILOS/HA OF ACTIVE MATERIAL COUNTRY N p K TOTAL N.P.K. EUROPE 112.7 58.8 60.8 229.3 (AVERAGE) ROMANIA 1989 67.3 37.4 22.0 126.7 1990191 36.2 21.9 5.1 63.2 1991/92* 24.1 12.3 1.9 38.3 1992/93** 81.8 32.9 6.3 121.0 HOLLAND 467.2 81.6 101.0 649.8 BELGIUM 240.2 106.1 161.0 507.3 GERMANY 206.2 88.2 118.8 411.2 U.K. 209.2 62.0 74.6 345.8 FRANCE 135.3 75.8 100.5 311.6 CZECHOSLOVAQUIA 125.4 91.2 94.0 311.1 HUNGARY 123.1 65.7 88.0 276.8 POLAND 102.9 63.9 78.5 245.2 DENMARK 146.7 35.8 56.4 238.9 BULGARIA 132.4 58.7 27.1 218.2 AUSTRIA 92.6 51.4 67.8 211.8 NOTES: 1.INCLUDES ARABLE LAND, VINEYARDS AND ORCHARDS AGRICULTURAL YEAR, 2NID SEMESTER PLUS FIRST SEMESTER (JULY-JUNE) PRELIMINARY ESTIMATEJNCLUDES 2ND SEMESTER 1992 PLUS PROGRAM FOR FIRST SEMESTER 1993 2. SOURCE FOR DATA OF OTHER COUNTRIES FAO STATISTICAL ANNUARY Table 6 NITROGEN AND PHOSPHORUS FERTILIZATION IN MAIZE FOR OPTIMUM ECONOMIC RESULTS. IN KG/HA OF ACTIVE SUBSTANCE, N AND P OPTIMUM DOSE EFFICIENCY OVER UNFERTILIZED LOCATION SOIL TYPE N P205 MT/HA % FOR NON-IRRIGATED LAND FUNDULEA CAMBIC CERNOZIOM 121 31 1.30 25.70 LOVRIN CAMBIC CERNOZIOM 114 69 1.72 23.80 PODU ILOAIE CAMBIC CERNOZIOM 128 65 2.20 46.10 TURDA CLAYEY CERNOZIOM 114 35 1.84 47.40 SIMNIC BROWN-RED CLAY-ILUVIAL 83 42 1.03 23.20 ALBOTA LUVIC (CLAYEY PODZOL, 128 71 2.07 62.10 PSEUDOGLEIC) TIMBURESTI SANDY 96 32 1.91 111.70 FOR IRRIGATED LAND BRAILA CAMBIC CERNOZIOM 180 80 1.39 44.70 PODU ILOAIE CAMBIC CERNOZIOM 180 40 0.93 29.70 TIMBURESTI SANDY 192 64 1.40 118.10 SOURCE: C. VASILICA IN FITOTEHNIE BY GH. BILTEANU ET AL. EDITURA DIDACTICA SI PEDAGOGICA, BUCURESTI, 1991 Table 7 PHOSPHORUS FERTILIZER SUPPLY COMPARED TO OPTIMUM IN KG/HA OF P205 1990 1991 1992 OPTIMUM AVERAGE 75 75 75 COUNTRY AVERAGE 37 12 18 HIGH USE JUDETS Braila 55 15 29 Constantca 54 26 28 Prahova 49 . 39 36 Teleorman 48 13 19 Mures 47 22 36 Arges 45 19. 26 lasi 44 7 17 LOW USE JUDETS Hunedoara 13 2 9 Gorj 17 2 6 Maramures 18 3 5 SOURCES: MINISTRY OF AGRICULTURE, ROMANIA. ТаЬ1е 8 PBATZLIEEII DRICB AND COST EVOLUTION. FACTORY САТе aUBBIDZZED pRICE РАСТОЯУ СО8Т 6088тDIEATIOн 4EZ / ТОК LEI / TON IN � ОР нОSТ ха Но но Нс На ЯЕСЕНТ ООв? РАСТОЯУ 30/10/90 1356/91 239/91 •64/91 766/91 в12/92 Аихомтии иттялтЕ <3а� м� до4гентх а,л. сялкоvА х 4,в3о s3,3oo 1s,zoo 21,боо 6s,4oo 115,ооо а1.3 PROD 1,вб1 O,OS9 5,01в 7,129 20,�}94 37,95• Агохияев в.А. ттяаи нодев н •,взо s1,7oo 1з,ьоо 1в,2во в7,ооо 1ов,яоо а3.о ряос 1,вв3 з,ав1 4,ае8 6,3а3 1в,в13 35,28о Тияни в.А. Тя. илаиnЕсе и 4,взо 11,воо 15,ооо 1я,2оо вя,lоо 1оя,ооо 82.s pROD 1,46� 3,795 6,950 б,337 19,lOS 35,974 Агоенти а.А. р. мЕлит и ♦,4зо 1з,2оо 1s,7oo 19,5оо ы,воо 97,зоо ео.о PROD 1,462 в,356 b,183 6,337 20,594 32,112 NITAANONIA а.А. ГАОАЯАВ н 4,410 17,430 62,3в5 n1,SOo ряОр 1,66� 5,751 20,876 30,85д AКONIL 8.А. BLOBOZZA N 4,4]О 68,в00 1зв,800 pnon 1,вв� 23,вл0 ♦o,4ss pREA (aбt N1 тwсвкх в.А. csuтova и 4,1ао я,яоо 1z,9oo 19,3оо вs,soo 1ов,аоо 82.а PAOD 1,923 4,554 5,9з0 а.87В 25,438 50,ОбВ АгониЯеs а.А. ттяси нvяеа н ♦,1ао , 1s,ooo 1s,zoo 1а,або 5а,7оо 1о2,1оо е3.о pnon 1,923 S,ssp б,$з2 в,49s 25,16] 4в,ябб ТиЯНU В.А. TR. NACURELS Н {,1а0 10,70р 14r000 19,200 55,000 96,200 85.6 ряод 1,я2з �е,я31 в,44о в,в33 а,зоо вв,253 ASOC1i2N $.А. Р. ннАиq� Н 4,1а0 1i,200 15,000 17,30о а8,300 1о2,70о /3.0 рАОД 1,923 6,61] Ь,900 8,050 26,818� 47,242 aOPQAT 8.А. a�GU н 4,180 11,800 13,200 17,800 59,800 97,а00 62.о ря0О 1,я3] а,428 6,073 8,188 27,SO8 4в,98в Анонку 8.А: вLО50ЕтА И б•1а0 12,200 15,900 31,300 64,000 132,600 •�.О Ряод 3,я23 5,вi3 7,зi• я,79в 3я,вао во,яяв игтяосл4 (2вв и� D04JC8IN 8,А. СЯЛIОУА К 5r900 13,бОо 17,700 14,400 69,90о 136,800 82.3 ря00 1,653 з,808 6,958 Ь,8]3 19,573 з8,304 Аъохияеs а.А. ткяаи нияеа н 5,яоо 1а,аоо 17,ьоо sз,ово бs,зоо s2з,aso в1.а ряоа а,вs3 а,оз2 а,я28 ь,лв2 1а,аьв ав,в7в ТУЯКи 8.А. ТА. NACORELe И В,900 14,400 1а.200 ]2,SO0 70,190 131,700 83.0 pROD 1,662 4,OS2 5.09в 6,]00 19,709 1в,87в АZОСвiК а.А. D. NPJIMT н 6,900 15,200 1'�,900 32,s00 72,000 11з,В00 ео.3 Р3ЮD 1,643 4,258 5,013 6,272 30,1ЬО 31,80{ иотвi рятсеа лмл совтs АЯЕ Ат РлстопУ сАтЕ гоя Реятт4каея ти вvск РЯ2GЕ3 AND COST8 РОА BAGOED PERTILIZERa АЯЕ 9i мтаНЕЯ LABT pRZCEa AND СОат9 АЯЕ ST2LL СцЯЯЕКТ вилдкнеs оР сасиаrа з то е яеРед то онсаннв Ртхтна Рятсиs IN СО4ииN 3, N � DRLCE / СО8Т ОР FEATILI2Eя EN TERl18 ОР АСттVЕ aUABTANCs DROD � PR2CE/ COST ОР РЕЯТZLтгЕя А9 АСТОЛL PHYBICAL ЕнD PAODUCT ТаЬ1е 9 pERTZLIE$А PAIC6 AND СО8? eVOLUTZON. глСтОRУ aATS 8UB82DIieD pAICE ГАСтОАУ СОвт 8Ue6LDIZATLOtl LЕк / ТОи LEI / ТОИ IM 1 OI КОвт ио !4а На КС аа RECENS CDBT глСт'ORY 70/10/90 1l5в/91 779/91 664/91 7вв/9l 617/97 соирг.йх геяТl�кsвяа , слsв ог 1s-1в-15 NSTRIC ACID ATSACx аос.тсаки а.л. сялкаvл н в,1�о 1Т,воо' 71,аоо ]1,аоа sl,aoo 1яо,ооо v2ов 7,вТо в,Тво 1е,воо 7о,ооо вэ,воо 12ь,воо к2о 7,sso в,2оо 1а,ооа 15,soo 67,7оо 1ов,]оо DAOD 1.566 5,212 В,190 10,100 79,025 67,7BS Вб.0 лwкvnц а.л. ткяаи нияеа и а,12о sа,1в0 1Т,Тоо 75,в1о ве,9оо iТв,е]о v7ов s,aTO в,аво 1в,боо 19,sво вв,аоо i�7,воо к7о 7,aso e,5so 1],боо 1е,iва е7,ооо ео,еоо vяос 1,5вв в,вiв �,бвв в,9�в 7в,вов во,ова ев.о TtlANU 8.л. ?А. Кл6URELE И в,120 17,в00 i1,э00 76,70о в9,000 170,000 р206 7,вТ0 11,ЬоО 22,ТОО 26,000 в9,]00 119,900 к20 7,CS0 0,600 14.000 1S,T00 6],16в 9в,900 pAOD 1,вбб в,вв0 В,Тр0 10,1в5 7в,Т1Т SA•в70 в].О COMPLE% rSRт2LIELRa (DLAISMONIUК PHDBPRл?е 8INOL$ AND TRIDLв BUPER?H08PaATL) 8ULP8URIC лС2а лТТАСК TUANV В.л. Тя. 1[AG[1ABLL N э,бRа 10,600 1],в00 1Т,200 в],600 9],7ОО в1.в D20a 5,800 17,600 ]В,400 еб,100 В9,4оо 7�1,ео0 ВО.О к2о 7,лво в,воо 1а,опо 15,7оо а],еое яv,аоо вв.в ркоо 2а,]os i7�,эio во.i аогвsгт а.л. влсr.и or а,бво 10,аоо 1s,ooo 1а,ов9 в7,9оо яо,оао а].в р2ов в,воо 1в,зао эв,ооо ав,вао аб,]оо аоа,вао �v.� ряоо 7s,вов 1оя,5ео Тв.а нотв� ркксвв лио Совта ляв лт глстояv алтв гоя ггяттькьея влааео к.лвт рятсва лмо соата ляе втк[.к, еияявит aswasиaa ог еосиыв ] то в яегвА то аееяеев Ркхкиа Рякеав Zи COLUlа1 2, N , р205, iC20 � РА2Се J СО8т ОР PEAYLLкZLя вИ теА%в ОР лС?ТЧв aU88TлNCt pAOD � рякСЕ/ СО9Т ОР rEATILIbeR Аа ACTUAL PHYBLCAL LND pAOOUCS IN ТАЕ Слвб оР aULP{tUAZC лС2О лТТлСк rвATiL22SRa , ТЯЕ 8ХлкРLЕ PAODUCT Ia аклюгонкгм РнавРнлте (1о-бв-о� ТаЬ1е 10 аоававоаавлте rвяткак:екв авкев лмn wвт кн АонлнкА РАС70АУ COST 8U88IDY глстовv алтs РАтсв кн �ez / гон кн свк / том кн � or совт 1л на sa вс на на , ГАСТОRУ 30.10.90 17вв/91 279/91 •61-91 776/91 412/92 втнааЕ виаsАаноsамте ооwлЕк Аонаовто®кн в.л. v.сллиал ' �b;9во 1а,аоо 2в,о9о зs,аоо 97,ооо 197,ооо ва.о Реяткссаzх а.л. нлvоnляк �a,9so 1s,воо 2о,воо ]з,зоо 97,аоо 1аз,ооо вв.7 xlr7WtOx2л 8.л. РАОААА8 'з•990 16,000 ва•в00 183,300 BIADLB BUaeAPКOSPHATE CAANl1[.ATED 16\ 910'1 ROMP08POCHIК 8.А. V.CALUCA а,зв0 17,100 71,180 в0,]00 10в,000 20в,000 в0.• PEATZf.c71IК 8.л. MAVODARк в,3в0 17,100 2В,500 39,400 306,000 19в,000 в0.1 TAIPLE 8UataxOBaHATE aOWDEA 48i Р203 AoxsosPO®кн в.л. v.сллиол в,воо 2о,ооо 7в,в�о .а,ооо и2,ооо 2ао,ооо во.о rеяткtевкн в.л. илvоиляк а,воо 1а,воо дв,воо 4з,еоо 12s,ooo 22о,ооо ео.з rAIALE вUРЕRаКОВРНАТЕ aRANl1LATED вбt Р20в RОКРОвРОСЕIМ 8.л. V.CALUOA 6,290 7t,000 76,9в0 д9,000 1]1,000 256,000 ,в0.9 PEArSLC8IM 8.л. NAVODAAL в,290 19,90О 37,ВОО <6,ВОО 1]1,000 202,7р0 вО.е BZ CALCIUК анОванАТС ROltP08POCAIx 8.А. V.CALUOA � в,100 73,000 ♦1•600 вб,600 178,000 7в0,000 в1.в нОТЕ81 РпIСЕв AND СО8т8 АА6 РОА РЕА?ILI2EA Ix HULK. BAOOED PEATILSZEA IS 3?О St HIOHER IN CDSr xODiPIED СО8т8 вУ DЕСАвЕ ♦1]/92 AaaLY ►ROx ОСТ 13, 1992 ТаЫе 11 nкатЯквитzои ов игтлооеи гвятксlааяв вц аиоетв 2л Lвrы о! Nliroqeп JUOLTB 1990 1991 1993 TON N Ко/ЕА TON И КО/НА . TON N КО/ХА TOTAL 7В1,400 !1 + 153,300 16 359,82♦ 36 ALBl� 6,926 67 1,513 19 ♦,93{ 36 AAAD 33,д56 бб 6,081 23 11,593 ]3 ААОЕ9 11,656 126 6,1В0 30 13,167 77 ВАGЧ 10,137 57 3,275 1д б,бб2 36 НIЕОП дб,бОд ВВ 3,713 12 9,709 33 вкатnzтsА илвА0о 4,676 ве ео9 в в,а7в •е HOTOBEANI 17,039 69 1,066 4 3,367 13 HRJ180V 13,017 110 1,6]9 16 6,397 37 BRAILA 33,25� 95 4,37] 13 13,696 60 9U3AU 17,в59 60 1,063 в 5,OS8 10 CARAB�HEV. В,890 68 1,796 1] 3,216 77 GW3U8Z 35,660 86 7,396 17 1В,709 бб CLUJ 13,676 бб 1.766 9 8,137 36 CON�TANIA вб,909 96 9,473 д0 18,068 34 соvлвиА в,3дб 9в д,sаа д9 6,167 бб DIIФOV2TEA 13,364 7д д,936 16 7,263 42 DOL7 39�689 В1 В,76В 16 18,8д2 39 CALAT2 дб,�61 84 3,180 6 0,837 17 скоясти 'д1,79s ев ,3,аов 1л � s,6sя а3 СоЯJ t,S87 68 900 9 5,310 3д нАдаиzтА 9,913 107 блs а s,s6s дв ноиЕnолкА 3,1ав 3s вв1 6 1,79• 1о ZA[AMITZA 24,д36 70 8,709 17 11,763 36 глвг s6,64a soa 1,63а 7 7,бев 3д NARAMUREH 3,394 40 ♦73 6 1,809 16 MEEEDIHтZZ 1],123 70 ].в31 .18 7,217 39 ниятв дб,16о 1ов 7,бе9 3s 13,766 а7 NE]U1TZ 10,696 61 1,733 10+ 8,317 09 о�т 3я,бs1 1о1 1o,6ss ав 36,oes ва DRJIHOVA 1д,б7д 101 3,133 11 7,315 80 8АТО КААЕ � 3].160 10t 7,513 33 10,i99 46 9AWJ 11•]30 91 2,Од1 17 3,333 37 BIBIO 11,065 121 1,811 16 3,ОВ3 вб SUCEAVA В,907 69 1,772 10 6,116 36 ТЕLЕОПКА!{ 38,360 76 9,308 30 14,В13 33 тI„Iв 'f0,198 91 1],633 3S 30,735 36 ти�,сЕл гs,е3а вв д,sбб 9 6,1ьо 16 VLgLUZ 19,313 70 1,031 6 5,662 д0 vгкЕА в,вв3 77 д,о33 sa 7,661 ве vяАнсЕА 9,39в ба 1.�16 6 3,би 3а аисvнеsтг 9,7яб в• 3,37я д1 а,вsв s♦ ОТЕЕА NZN28TRIE8 1В,006 800 д0,199 ТаЫе 12 DZ3TRIHtri'ION О! рн03РНЛТЕ F6ATI4Z2ER8 ВУ JUDBTB In lвгtiв ot Р205 JUDLTB 1990 1991 1992 Ton p20S К4/НА Ton Р205 КС/нА Son D205 Ко/иА TOTAL ]53,200 37 111,296 12 16S,61S 18 ALBA ],722 28 1,в16 11 ],117 26 ARAD 11,]09 33 ],191 10 6,2g9 12 ARC88 7,712 45 ],3]S 19 б,{97 26 BAGU 7,221 60 В97 S 2,671 16 BIAOA 8,363 27 2,666 8 1.95] б HIBTRITIA иА8АЧD 2,301 23 672 5 1,09♦ 11 BOT08HANZ 9,3]2 ]3 1,795 6 2,96] 10 внлsоv б,ssв 3е 1,76в 1s 2,s31 21 BAAILJI 18,695 66 5,108 13 9,926 29 8o2AV 7,882 ]О 1,001 6 2,521 10 CAAAB-BLV. ],059 23 582 4 36] 3 CALARA3I 17,7о9 62 7,009 18 10,526 29 CLUJ 7,011 31 1,06] 5 2,036 10 соиагАигsА 25,861 56 12,5i4 2в 1],з96 2в COVABxA 3,077 ]б Вд9 10 1,8]9 21 DIMHOVIT2A 3,673 , э0 1,661 9 2,836 16 OoIJ 13,Оз] 33 5,317 11 6,379 16 oAWT2 10,569 зб з,б95 12 2,078 7 сгnясги 9,16s зв ,2,z29 9 з,бsе 1з WRJ 1,705 17 227 2 'S97 6 xARCBITA ],665 ]9 ]11 3 1,186 1] tlUиCDOARA 1,220 13 190 2 813 9 2AiДКZTSA 12,9]7 38 6,876 14 3,822 16 IA3I 11,102 46 1,670 7 6,211 17 MA7W4UAe8 1.532 18 252 3 629 S MEHLDIM'2I 3,596 30 1,1]б 6 1,729 9 MUREB 10,671 67 4,8SS 22 6,072 зб нелнтт б,леа зе 2,ies 1з в,1оо зо ог.т 1в,ао9 а7 7,о]7 1е 12,z98 3s PRAHOVA 7,215 69 5,781 ]9 6,283 эб BATtl иАRЕ 7,3]1 36 2,519 11 ]87 18 9ALAJ з,837 з1 607 ] 1,253 10 328IU 4,2в{ 37 866 7 1,762 1S SUCLAVA S,3D6 30 1.082 В 969 5 TLLeOAMAN 22,928 68 6,069 13 6,981 19 TIMIS 18,665 зб 7,7Вз 16 6,029 11 TULCEA 11,210 40 2,597 9 2,283 8 VC3CUI 9,з91 ]6 1,098 ♦ 1,689 6 VILCLA 3,016 2] 1,004 13 1,з72 18 VRJINCG 1,799 ]3 1,17] 8 2,911 10 висияевтг 6,os6 з5 1,sь3 1в 2,1зs 1я отная нкикsтякев б8а я.з21 Table 13 PRODUCTION COSTS AND RETURNS FOR WHEAT PER HECTARE CONTRACTED BY ROMCEREAL, VASLUI. ITEM UNIT COST TOTAL PERCENT LEI LEI PLOUGHING 9,300 9,300 11.92 DISKING, TWICE 1,925 3,850 4.94 SEEDING 2,300 2,300 2.95 WHEAT SEED, 250 KG/HA SEEDING RATE @ LEI 54/KG 54 13,500 17.31 SEED TREATMENT 200 200 0.26 FERTILIZER 5,400 6.92 NPK 300 KG/HA OR 18 SSP 300 KG/HA @ 8 L/KG + 2,400 AMM. NITRATE 250 KG/HA @ 12 L/KG 3,000 HERBICIDE 600 0.77 HERBICIDE APPLICATION 925 925 1.19 TRANSPORT (WATER AND CHEMICA 16,000 16,000 20.51 MECHANICAL HARVEST ESTIMATED YIELD = 3,000 KG/HA @ 12% OF YIELD = 360 KG EQUIV. @ 70 L/KG 25,200 25,200 32.31 78,000 99.07 'INCOME: YIELD 3000 KG WHEAT @ 70 L/KG = L 210,000 NET PROFIT: L21 0,000 - L78,000 = L 132,000 EQUIV TO 169% OVER INVESTMENT EQUIV TO 1,115 KG OF WHEAT/HA SOURCE: ROMCEREAL R.A., VASLUI, ING MANOLE ION Table 14 RATIO OF PRICE OF FERTILIZER AND GRAIN PRICE IN LEI RATIOS YEAR PRICE KG N KG P205 KG WHEAT KG MAIZE W/N C/N W/P M/P NOTE 1986 2.94 4.00 1.00 0.80 0.340 0.270 0.250 0.200 11/1991 (1) 13.22 20.45 8.00 10.00 0.605 0.756 0.390 0.489 (2) 11.47 0.697 0.872 411992 (1) 13.22 20.45 25.00 23.00 1.890 1.740 1.220 1.120 (2) 11.47 2.180 2.000 9/1992 (1) 13.22 20.45 40.00 40.00 3.020 3.020 1.960 1.960 (2) 11.47 3.490 3.490 4/1993 (1) 13.22 20.45 70.00 70.00 5.300 5.300 3.420 3.420. (2) 11.47 6.100 6.100 (3) 19.90 43.00 3.520 3.520 1.620 1.620 (4) 18.93 3.700 3.700 PRICE NOTES: (1) PRICE EX FACTORY FOR AMM. NITRATE BULK AND TRIPLE SUPERPHOSPHATE BULK DECREE 1355/91 DEC 1990 (2) SAME EXCEPT FOR UREA EX FACTORY BULK (3) SAME AS (1) BUT FOR DECREE 464/91 PRICES NOV 1991 (4) SAME AS (3) EXCEPT FOR UREA EX FACTORY BULK Table 15 ESTIMATION OF NITROGEN ADDED TO SOIL AS MANURE IN ROMANIA (KG/HA OF N) QUANTITY APPLICATION N CONTENT IN % OF HUMID MANURE APPLIED FREONCY T/HA YEARS 0.2 0.4 0.6 0.8 1.0 1.2 1.4 10 1 6.6 13.2 19.8 26.4 33.0 39.6 46.2 2 3.9 7.8 15.6 15.6 19.5 23.4 27.3 3 3.0 6.0 9.0 12.0 15,0 18.0 21.0 20 1 13.2 26.4 39.6 52.8 66.0 79.2 92.4 2 7.8 15.6 23.4 31.2 29.0 46.8 54.6 3 6.0 12.0 18.0 24.0 30.0 36.0 42.0 30 1 19.8 39.6 59.5 79.3 99.0 119.0 139.0 2 11.8 23.4 35.1 46.8 58.5 70.2 82.0 3 9.0 18.0 27.0 36.0 45.0 54.0 63.0 SOURCE: Data extracted from Z. Borlan, Cr. Hera. Tabele si Nomograme Agrochimice. Ed. Ceres. Bucharest. 1982 NOTE: The application frequency refers to intervals in years between applications Table 16 . ECONOMIC OPTIMAL RATE OF N APPLICATION IN AMMONIUM NITRATE FORM FOR WHEAT AND FOR MAIZE ON A SOIL WITH N INDEX OF 3.0% (*), AND WITH P AND K NOT LIMITING UNDER VARYING PRICE/COST RATIOS OF KILO WHEAT/KILO N YIELD EXPECTATION PRICE/COST RATIO PER KG WHEAT/KG N 0.20 0.34 0.68 1.02 1.36 1.72 ECONOMIC OPTIMUM RATE N IN KG/HA WHEAT, 4000 KG/HA WITHOUT CORRECTION (1) 78 102 137 156 170 182 WITH CORRECTION 80 102 114 104 114 110 WHEAT, 6000 KG/HA WITHOUT CORRECTION 107 136 174 195 211 224 WITH CORRECTION 109 136 141 130 420 122 PRICE/COST RATIO PER KG MAIZE/KG N 0.17 0.272 0.544 0.816 1.088 1.36 ECONOMIC OPTIMUM RATE N IN KG/HA MAIZE. 5000 KG/HA WITHOUT CORRECTION 66 92 129 151 166 178 WITH CORRECTION 72 92 111 119 122 134 MAIZE, 7000 KG/HA WITHOUT CORRECTION 101 133 178 205 214 239 WITH CORRECTION 110 133 113 160 163 163 SOURCE: Information supplied by Dr. Z. Borlan, March 1993 NOTES: (*) N index refers to Nitrogen potential in soils: varies from 0.5 to 5.0% (1) Corrections are applied considering the abnormally low prices prevailing at this time for fertilizers in Romania, as well as their availability Table 17 . COMPARATIVE PRICES OF FERTILIZERS DOMESTIC PRICES DOMESTIC PRICES LOCAL COST IMPORTED COST SUBSIDIZED AT SUBSIDIZED AT UNSUBSIDIZED OF FERTILIZERS FACTORY GATE (1) FACTORY GATE (2) FACTORY GATE BULK C&F BAGS C& PRODUCT LEI/TON US$/TON LEI/TON US$/TON US$/TON US$/TON US$/TON AMMONIUM NITRATE 6,541 10.99 4,640 7.80 66 185 UREA 8,706 14.63 5,610 9.43 89 120 135 CAN 6.466 10.87 4,440 7.46 65 115 130 NPK (15-15-15) 9.740 16.37 5,220 8.77 102 175 DAP (16-48-0) 23,606 39.67 10,230 17.19 200 155 170 SSP (18% P205) 7,182 12.07 3,310 5.56 65 TSP (46% P205) 21,980 36.94 9,770 16.42 196 145 160 NOTES: (1) Prices based on Decree HG 464/91. Actual prices in the market adjusted more to this reference. (2) Prices according to decree HG 1355/91. (3) All domestic fertilizer prices, bagged. (4) Price/cost equivalences calculated at official rate of 595 lei per US$. end of March 1993. Table 18 Fertilizer Production, Consumption. Export Year Production Consumption Export 1985 3,090,500 1,458,600 1,760,800 1986 3,273,800 1,689,100 1,831,800 1987 2,894,700 1,440,900 1,647,200 1988 2,992,900 1,503,700 1,728,900 1989 2,865,000 1,158,800 1,582,600 1990 1,744,000 1,103,100 386,800 1991 1,146,500 323,000 823,500 1992 1,396,000 553,000 886,000 1993 1,737,000 900,000 837,000 Note: For 1993 estimates on April 1993 for whole year Table 19 ECONOMIC OPTIMUM DOSE OF FERTILIZERS UNDER ASSUMPTION OF FERTILIZER COST AT BORDER PRICE NITROGEN] N KG/HA N Index EXPECTED YIELD T/HA % 2 3 4 5 6 8 0.5 60 92 119 143 165 200 1 46 78 105 130 151 188 1.5 35 67 95 117 139 175 2 25 56 85 106 129 165 2.5 10 50 75 98 120 157 3 8 44 68 92 114 150 P2057 P205 KG/HA Available P205 EXPECTED YIELD T/HA p.p.m. 2 3 4 5 6 8 5 36 57 76 94 108 128 10 23 45 65 82 96 115 15 10 34 54 70 85 105 20 0 24 44 60 75 95 ITTI.A NITROGENI N KG/HA N Index EXPECTED YIELD T/HA % 1 2 3 4 5 0.5 55 90 122 143 160 1 44 89 110 133 150 1.5 35 70 101 123 140 2 30 64 93 116 133 2.5 21 55 86 110 126 3 19 52 81 102 120 P205 KG/HA Available P205 EXPECTED YIELD T/HA p.p.m. 1 2 3 4 5 5 30 65 95 120 142 10 5 43 75 100 122 15 1 27 57 83 105 20 0 14 43 69 90 SOURCES: Extracted from Nomograms of Z. Borlan and Cr. Hera. Tabele si Nomograme Agrochimice. Ceres. Bucharest 1982. NOTES: Based on Urea at border price of US$135/ton, equiv. to Lei 205/kg TSS at border price of US$ 160/ton, equiv. to Lei 243/kg Maize at Lei 60/kg; Wheat at Lei 70/kg Cost per Kg N Fertilizer/Price Wheat ratio = 2.93 Cost per Kg N Fertilizer/Price Maize ratio = 3.42 Cost per Kg 0205 Fertilizer/Price Wheat ratio = 3.47 Cost per Kg P205 Fertilizer/Price Maize ratio = 4.05 These ratios are for N the same as existed in 1982 and were used in Borlan and Hera's Nomograms, For P205 and wheat there is difference of 0.53 and for maize 1.00. Table 20 SEED DISTRIBUTED BY SEMROM S.A. IN 1992 IN TONS. JUDETS WHEAT BARLEY OATS MAIZE SUNFLOWER SUNFLOWER FLAX SOYBEAN AUTUMN AUTUMN SPRING HYBRID VARIETY HYBRID OIL ALBA 5,594 858 124 658 11 151 ARAD 6,184 3,234 812 1,980 150 10 1,033 ARGES 5,546 1,236 443 757 23 50 90 3 BACAU 6,043 3,283 438 1,008 31 121 BIHOR 7,297 3,798 1,597 1,337 47 41 32 139 BISTRITZA 1,516 181 397 118 1 2 BOTOSHANI 5,611 1,714 407 1,413 37 76 10 2,072 BRASOV 3,683 2,206 845 202 14 BRAILA 20,858 26,861 514 2,599 33 231 137 6,257 BUZAU 7,565 2,052 263 1,910 172 118 591 CARAS-SEV. 2,925 467 281 307 28 CALARASI 15,588 3,867 752 2,904 275 2,746 CLUJ 4,811 260 364 453 20 96 CONSTANZA 24,944 7,100 611 2,795 77 254 615 742 COVASNA 2,352 629 234 119 35 DIMBOVITZA 3,779 662 155 708 5 34 5 901 DOLJ 23,864 14,394 1,652 2,814 340 97 184 2,815 GALATI 16,135 3,672 1,308 1,715 69 111 62 i 661 OIURGIU 6,898 1,883 83 1,110 193 75 897 GORJ 1,999 280 90 259 3 HARCHITA 1,471 272 203 38 IUNEDOARA 2,205 318 302 210 1 IALOMITZA 16,117 5,173 935 2,492 3 268 185 1,355 IASI 5,713 3,349 173 2,469 86 31 1,429 KARAMURES MEHEDINTZI 3,494 941 140 446 58 82 44 MURES 6,135 2,793 1,389 815 17 349 NEAMTZ 6,271 1,485 706 788 13 109 OLT 20,047 5,773 0 2,387 25 329 15 40 PRANOVA 8,785 1,374 137 1,099 30 82 SATU MARE 6,422 1,232 1,333 845 14 56 275 SALAJ 1,353 241 430 178 16 SIBIU 4,012 2,027 1,070 517 12 17 SUCEAVA 2,092 92 432 211 4 TELEORMAN 12,220 2,940 332 3,660 72 351 37 648 TIMIS 12,199 9,932 1,380 3,484 273 114 1,344 TULCEA 6,618 2,809 793 1,509 103 56 818 354 VESLUI 7,317 3,369 319 1,870 47 79 1,069 VILCEA 2,155 60 77 299 VRANCEA 6,740 752 239 1,305 5 44 8 BUCURESTI 5,470 3,850 219 630 64 34 852 TOTAL 310,026 127,621 21,979 50,418 1,237 4,181 2,582 27,200 DISTRIBUTED BY SEMROM PERCENT 82 58 60 54 62 62 78 51 NOTES: SEED DISTRIBUTED BY SEMROM ITSELF IS SHOWN AS PERCENT OF SEED PRODUCED BY SEMROM SUNFLOWER SEED TOTAL HYBRID AND NON-HYBRID AS PERCENT OF ALL SUNFLOWER SEED DIST CALCULATIONS BASED ON DATA SUPPLIED BY SEMROM Table 21 SEED DEMAND AND SUPPLY BY SEMROM S.A.. ROMANIA IN TONS SPECIES DEMAND SUPPLY 1990 1991 1992 1990 1991 1992 WHEAT. AUTUMN 468.673 394.236 383.814 404.096 359.806 377.338 WHEAT. SPRING 9.915 11.970 809 8.821 11.738 267 RYE 14.270 7.281 7.142 12.325 4.259 5,838 TRITICALE 2.606 728 398 2.271 433 303 BARLEY. SIX ROW. AUTUMN 181.661 195,819 264.556 165.478 1111.347 219.810 BARLEY. TWO ROW, AUTUMN 26.452 23.977 27.625 22,186 12.266 17.915 BARLEY, TWO ROW. SPRINQ 35,860 27.437 43.813 22.328 18.682 14,964 OATS - 55,911 44,108 92.604 28,297 26.27 36,1113 RICE 17.125 7.309 3.914 13.669 5.723 2.C60 RAPS FOR OIL 1.256 2.015 1.067 354 1.058 912 FlAX FOR OIL 13.991 11.185 8.200 7.115 11.171 3.320 CASTOR DEAN 2,034 938 274 1.149 857 184 CLOVERS 4,300 1.600 1.839 4.019 1.107 096 FORAGE PEAS 3.800 1.688 1.403 3.700 1.827 788 SOYBEAN 102.364 90,666 81,569 60,525 47.396 53,400 CHICKPEA 4.560 3,561 3,158 1.283 1.465 2.912 SUNFLOWER 17.667 17.144 14.130 8.231 10.142 8.679 HYBRID MAIZE 162.299 150.337 144.206 100.132 81.223 92.910 MILLET 1.942 1.907 J.980 1.269 425 1.535 SORGHUM FOR GRAIN o 49 114 82 28 65 FIELD PEAS 66,863 31.573 22.615 47,727 23.192 11.119 MABARIGHE 353 255 397 233 157 9.1 SUDAN GRASS 36 297 318 328 181 235 SORGHUM X SUDAN FL. 231 68 593 206 45 432 RYEGRASS, ANNUAL 1.104 660 099 606 78 100 PERENNIAL GRASSES 1.800 1.363 1.417 1.230 600 273 OTHERS 13 5 5 10 1 SOURCE : SEMROM S.A. Table 22 OPERATIONAL CAPACITY OF AGROSEK PLANTS, 1992, TONS JUDETS OCESSING DRYING STORAGE D PROCESSED AND SOLD/ YEAR TONS T/DAY TONS WHEAT BARLEY BARLEY OATS MAIZE FIELD SOYA SUN OIL 6 ROW 2 ROW HYBRID PEAS BEAN FLOWER FLAX ALBA 11,129 60 11,129 10,450 2,960 2,227 600 2,000 20 0 0 0 ARAD 26,611 160 26,611 20,964 7,039 2,713 1,200 3,000 150 1,000 150 50 ARGES 18,886 60 18,886 10,692 4,631 500 500 625 0 0 62 200 BACAU 4,115 4,115 6,093 2,107 600 600 1,200 0 0 0 0 BIHOR 19,153 160 19,153 15,740 4,000 900 2,000 1,500 500 50 0 70 BISTRITZA 3,078 3,078 2,261 500 439 500 0 0 0 0 0 BOTOSHANI 17,195 160 17,195 12,000 4,000 3,000 1,400 1,400 0 2,500 50 50 BRASOV 9,786 9,786 4,646 2,155 3,700 400 0 0 0 0 0 BRAILA 37,153 160 37,153 17,450 8,686 400 850 4,000 350 5,000 300 250 BUZAU 22,248 160 22,248 12,000 3,850 400 880 3,000 400 600 380 0 CARAS-SEV. 7,275 7,275 1,210 40 0 600 0 0 0 0 0 CALARASI 44,700 160 44,700 23,050 7,050 2,500 500 4,000 1,000 3,000 200 0 CLUJ 11,961 60 11,961 6,432 830 5,000 500 600 100 500 0 0 CONSTANZA 27,451 160 27,451 25,000 8,360 2,000 1,500 3,000 1,500 1,600 400 600 COVASNA 5,532 60 5,532 3,020 2 1,800 200 0 0 0 0 0 DIMBOVITZA 8,385 100 8,385 4,500 4,000 0 480 1,080 50 360 90 0 DOLJ 36,426 60 36,426 26,000 10,000 200 1,000 2,310 200 1,320 470 0 GALATI 19,700 160 19,700 16,500 4,500 200 750 4,150 300 2,000 400 300 GIURGIU 9,320 9,320 6,000 3,210 450 500 1,500 200 800 210 0 GORJ 3,669 3,669 3,068 732 0 284 0 0 0 0 0 HARGHITA 8,488 60 8,488 2,517 482 1,200 300 0 0 0 0 0 HUNEDOARA 6,660 30 6,660 2,450 500 400 400 0 0 0 0 0 IALOMITZA 34,869 200 34,869 18,858 9,350 610 2,000 3,500 1,600 2,000 350 250 IASI 18,441 160 18,441 8,000 3,400 0 350 2,800 300 1,500 59 0 MARAMURES MEHEDINTZI 19,512 60 19,512 8,315 2,200 100 400 0 35 100 75 140 MURES 16,591 60 16,591 10,511 3,014, 2,000 1,500 825 50 0 0 0 NEAMTZ 10,875 60 10,875 8,780 1,967 1,200 1,300 750 600 240 0 0 OLT 38,968 160 38,968 21,.823 10,678 318 1,000 3,000 700 1,500 1,000 100 PRAHOVA 10,815 60 10,815 9,000 2,200 85 350 500 260 350 120 SATU MARE 10,089 10,089 8,460 3,798 1,800 2,000 450 0 400 0 SALAJ 3,293 3,293 2,050 500 500 800 0 0 0 0 SIBIU 11,642 60 11,642 4,800 1,800 1,500 600 150 0 0 0 SUCEAVA 5,820 5,820 4,007 50 1,070 415 200 20 0 0 TELEORMAN 24,252 160 24,252 15,280 5,110 640 1,450 5,870 1,050 1,740 750 400 TIMIS 24,603 200 24,603 13,080 5,010 2,550 3,000 3,500 600 2,000 0 100 TULCEA 12,920 60 12,920 6,000 2,000 0 600 1,000 700 400 150 800 VESLUI 15,970 60 15,970 11,440 3,150 0 300 3,000 150 500 100 150 VILCEA 3,602 3,602 3,600 200 0 100 0 0 0 0 0 VRANCEA 15,554 60 15,554 7,600 2,300 300 1,300 2,000 200 300 700 0 BUCURESTI 3,911 3,911 3,100 1,500 - 0 100 30 0 300 0 0 TOTAL 634,648 2,930 634,648 396,747 138,571 41,302 33,509 60,940 11,035 30,060 6,016 3,460 SOURCE: SEMROM S. A. Table 23 COST OF PRODUCTION OF HYBRID MAIZE SEED, IN LEI/TON COST ITEM 1992 1993 (9) INDEX 1993/1992 SUPPLIES (1) 4,306 15,071 3.50 SALARIES 3,497 5,351 1.53 SOCIAL COSTS (2) 609 1,145 1.8 AMORTIZATION 243 243 1.00 FUEL 6,473 11,457 1.77 ELECTRICITY 716 1,360 1.90 INTEREST ON INVENTORY (3) 9,875 54,438 5.51 INTEREST ON FARMER'S 6,103 LOAN FOR INPUTS (4) SHORT TERM PRODUCTION CREDIT (5) 18,646 TRANSPORTATION, TRUCK (6) 2,202 7,024 3.19 TRANSPORTATION, TRAIN (7) 1,610 3,091 1.93 PACKING, LABOR 438 569 1.30 OTHER COSTS 14,122 17,252 1.22 RESEARCH TAX (8) 1,650 PENSION TAX 6,600 TOTAL COSTS 44,091 150,000 3.40 PROFIT PRECHARGED AS COST 10% 4,409 15,000 3.40 TOTAL (10) 48,500 165,000 3.40 NOTES: (1) Includes sacs, labels, chemical seed treatment (2) Social security, unemployment comp., insurance (3) At 55% commercial interest (4) Loan for inputs to farmers; appears as a non recoverable cost (5) Own operational costs credit, at commercial 55% rate (6) From field to processing plant, and from plant to other Judets (7) Railroad transportation to other Judets (8) A 2% tax levied on Agric. Sector enterprises to support Agr. Research (9) Intended prices to be negociated with seed producing contractors for Spring 1993 plantings (10) Total Cost including a precharged profit is called "Comision" COST EQUIVALENCE: AT 600 LEI/US$ i -s$ 275.00 / TON OFFICIAL RATE AT 700 LEl/US$= us$ 235.71 / TON STREET RATE AT 750 LEI/US$= us$ 220.00 / TON STREET RATE Table 24 FINANCIAL INDICATORS OF SEMROM S.A. IN CURRENT LEI x 1000 YEAR INCOME EXPENSES PROFIT CREDITS RATE OF DEBITS INTEREST 1990 4,559,352 4,495,096 64,256 11,871,644 2% 8,388 1991 8,829,218 8,542,354 286,864 4,710,625 9% 17,210 1992 34,244,959 33,541,278 703,680 22,484,652 28 % 96,650 1993 84,086,000 83,468,000 618,000 43,386,000 55% 100,000 NOTES: (1) There is no existence of fund transfers between societies (2) Social Capital of SEMROM at 31/12/92 was 17,602,792,000 Lei equivalent to US$ 29,337,986 at the official exchange rate of Lei 600/US$ (3) The Fiscal Year for SEMROM is July to June Table 25 PRICE STRUCTURE FOR CEREAL AND TECHNICAL PLANT SEEDS PRICE IN LEI/KG, SPRING 1993 PRODUCT BIOLOGICAL CONTRACT COMMISSION TOP INDIC. CATEGORY PRICE PRICE CEREALS Common Wheat, SE 42 31 73 Rye. Triticale E 33 31 69 11 35 26 61 12 30 26 56 Spring Wheat SE 56 51 107 E 51 51 102 11 48 43 89 12 40 43 83 Barley SE 37 28 65 E 33 29 61 11 29 24 53 12 25 24 49 Two row Barley Fall SE 39 32 71 E 36 32 68 11 33 25 58 12 28 25 53 6-row Barley Spring SE 45 45 90 E 41 45 86 11 37 38 75 12 32 38 70 Oats SE 38 47 85 E 35 47 82 11 32 38 70 12 28 38 66 Grain Sorghum Female inbred line LC 210 118 328 Male inbred line LC 174 118 292 Variety seed 11 26 26 52 Hybrid seed Fl 80 64 144 Maize Inbred line sized,treated seed Group a LC 330 223 533 Group b LC 300 223 523 Group c LC 280 223 503 Groupd LC 270 223 493 Single cross sz, tr Group a HS 330 223 533 Groupb HS 300 223 523 Groupc HS 280 223 503 Groupd HS 270 223 493 Commercal hybrid Group a 165 165 330 Groupb 150 165 315 Groupc 135 165 300 Group d 120 165 285 Groupe 110 165 275 Table 25 (...continued) PRICE STRUCTURE FOR CEREAL AND TECHNICAL PLANT SEEDS PRICE IN LEI/KG, SPRING 1993 PRODUCT BIOLOGICAL CONTRACT COMMISSION TOP INDIC. CATEGORY PRICE PRICE OIL CROPS Sunflower, Variety SE 72 98 170 E 67 98 165 li 61 82 143 12 56 82 138 Sunflower, inbred lines Female LC 400 170 570 Male LC 305 168 473 Hybrid seed Group a 230 145 375 Groupb 190 145 335 Groupc 153 145 298 Groupd 130 145 275 Raps forO SE 42 38 78 E 36 36 72 11 32 30 62 12 27 30 57 Soybean SE 87 70 157 E 80 70 150 11 73 58 131 12 65 58 123 TREFOILS Alfalfa SE 600 405 1005 E 560 405 965 11 530 343 873 12 500 343 843 Red Clover SE 550 380 930 E 510 380 890 11 480 319 799 12 450 319 769 White Clover SE 700 444 1144 E 630 444 1074 it 600 377 977 12 570 377 .947 FORAGE GRASSES Sorghum x Sudan I1 60 58 119 Perennial Ryegrass SE 132 109 241 E 108 109 217 11 97 90 187 12 84 90 174 Timothy and others SE 144 116 260 E 126 116 242 11 110 95 205 12 91 95 188 FODDER SPECIES Forage beets mongerm line 950 474 1424 Forage beets monogerm hybrid 500 218 718 Forage beeis multigerm hybrid 450 218 668 NOTES: The species and prices listed in this table are a selected group tram a larger list included In ORDER No 7 PT of the Ministry of Agriculture of 24/2/93 NOTATIONS: SE= Super Elite seed; E= Elite seed; 11 = First Multiplication seed 12= Second Multiplication seed. The two previous categories are equivalent to Certified 1 and Certified 2 seed. LC= inbred line; Fl= hybrid seed; HS= single cross seed. TOP INDIC. PRICE = Ceiling Price allowed. Negotiated price below this price is allowed Table 26 PRICES OF VEGETABLE SEEDS IN ROMANIA LEI/XG ELITE 11 PFF, H PEPPER, THIN 26,000 . 20,000 . GROUP I. PEPPER, THIN 17,500 17,000 GROUP 2, OTHER VARIETIES PEPPER, LONG 15,500 .13,300 PEPPER, HOT 13,500- 9,300 BELL PEPPER, GR. 1 (TITAN) 28,000 22,500 BELL PEPPER GR. 2, OTHER VARIETIES 17,500 15,300 PIGMENT PEPPER 11,665 8,550 ARPEGLE BEANS - 230 100 CUCUMBER, PERENNIAL 13,665 11,635 SUMMER CUCUMBER FOR SALAD 3,375 2,800 HYBRID CUCUMBER 28,335 77,000 THYME (CIMBRU) 1,243 CAULIFLOWER (CONOPIDA) 17,676 15,376 CHICORY 1,900 ONION 760 600 PU4PKIN 1,477 1,315 ZUCHINI 950 810 FIELD BEANS 230 190 KHOLRABI (GULICARE) 950 480 HORSE RADISH 840 ORACH LOBODA 1,110 868 LOVAGE (LEUSTEA14) 1,178 L,INTE 50 45 MARULA 670 510 MAERIC 670 MORCOV CARROT (MORCOV) 1,530 1,300 PEAS, GRADE I, (ICALNITZA 110, PRIMAO - 150 140 PEAS, GRADE II, OTHER VARIETIES . 140 130 WATERMELON GR. 1, BICHITA 7,,375 6,075 CRIMEAN , SWEET, BABY SUGAR WATERMELON GR.2, OTHER VARIETIES 6,510 5,225 SWEET CORN 183 265 LEEK ([PRAZ) 2,000 1,150 PATRUNJEL RADICINA ROOT PARSELY 8,135 6,555 PATRUNJEL FRUNZII, LEAF PARSELY 3,500 2,900 PUSTIRNAC 920 150 RADISH (RIDICI LUNA) 2,100 1,600 WINTER RADISH (RIDICHI VARA-IARNA) 600 400 REVENT 650 380 FIELD LETTUCE GR.1 2,168 1,668 PELUL NORD, SILVIA, , VARIETIES IN DEMAND FOR AUTUMN LETTUCE GR..2, HOMS, BENA-SCIURI 2,568 2,068 SUMMER VARIETIES SPINACH 185 160 TOMATO GR. 1 (ROMA) 33,015 31,745 TOMATO GR. II ( UNIXAO, DASIN, 19,945 16,820 VIDRO 553, ROMA VF, BUSAN 22) TOMATO GR . III (OTHER VARIETIES) 169,655 11,825 3 HYBRID FIELD TOMATO ( IN 50, IOANA) 153,445 TALINA 4,300 3-,800 TARHOM 1,100 710 GARLIC, AUTUMN OVER 35 MM 550 FROM 30-35 KM 500 GARLIC, SPRING OVER 35 MM 600 FROM 30-35 MM 550 SUMMER CABBAGE 5,200 4,276 EARLY CABBAGE 3,265 2,400 FALL CABBAGE 4,756 3,100 RED CABBAGE 3,100 2,150 POTATO 143 123 UNISEM S.A, PRICE AUTHORIZATION OF MIN. OF AGRICULTURE OF 17/02/93 Table 27 WHEAT AND RYE PRODUCTION. DEUVERY AND SEED RETENTION IN JUDET BRASOV AVERAGE () SPECIFICATION UNIT 1987 1988 1989 1990 1987-90 1991 1992 ARABLE LAND IN CROP PRODUCTION HA 118,542 118,342 118,342 117,543 118,192 117,402 118.175 OF WHICH PLANTED TO WHEAT AND RYE HA 25,306 24.995 23.816 28,417 25,633 24,048 16,639 OF WHICH RYE HA 2.200 2,098 2,497 2,067 2,215 2.384 601 WHEAT/RYE PERCENT OF ARABLE LAND 21 21 20 24 22 20 14 AVERAGE YIELD KG/HA 3,564 3.138 3,610 3.126 3,350 2.153 2,400 TOTAL PRODUCTION OBTAINED TON 90,202 78,445 85,984 88,820 85,863 51.773 39,934 TOTAL DELIVERED TO STATE TON 67,640 56,242 56,760 49,064 57,432 17,883 7,629 DELIVERED TO ROMCEREAL TON 64,000 53,000 53,000 45,000 53,750 15,183 3,837 DELIVERED TO SEMROM TON 3,640 3.242 3,780 4.064 3,682 2.700 3.792 PERCENT OF TOTAL PRODUCTION 74 71 66 5S 67 35 18 DELIVERED TO STATE PRODUCTION KEPT BY FARMERS TON 22,562 22,203 29,204 39,756 28.431 34,153 32,305 OF WHICH USED FOR OWN SEEDS TON 7,108 7,281 8,222 8,963 7,894 3,094 3.300 TOTAL USED FOR SEED TON 10.748 10,523 12,002 13,027 11,576 5,794 7,092 APPARENT SEEDING RATE (1) KG/HA 90.80 8890 102.10 9390 11096 4900 NOTES: (*) AREA REALIZED BY 31 AUG 1992 (1) BASED ON USE OF SEED PRODUCED AND NEXT YEAR CROP AREA Table 28 MAIZE HYBRIDS PRODUCED AND SOLD BY SEMROM HYBRID TYPE GRAIN GROWING SHELLNG YIELD RANGE POPULATION RECOMMENDED - HYBRID PERIOD PERCENT TONIHA PLANTS/MA AREA SUCEAVA 95 DC F 80 6-8.7 75000 MOLDOVA-TRANSYLVANtA SUCEAVA 97 3W F VE 80 6.2-9 75000 ID TURDA 125L 3W DL E 77 6,7-8.7 70000 ID SUCEAVA 99 SW F VE 80 6.1-10.3 75000 10 TURDA 100 DC F E 78 5.4-9.5 70000 ID SUCEAVA 98 3W F VE 80 4.5-6.5 70000 ID PODU ILOAIE 101 3W F VE 80 8.9-9.6 75000 ID PODU ILOAIE 110 SC 0 VS 81 8-10.4 75000 ID FONDULEA 102 DC F VE 79 7.2-8.6 75000 ID 4.2-6.6 75000 SOUTH PLAINS/ SUCCED.CROP SUCEAVA 108 3W F Ve 78 0.7-10.0 75000 MOLDOVA-TRANSYLVANIA TURDA 160 SC 0 E 77 7.8-8.3 70000 ID- WEST TRANSYLVANIA TURDA 200 DC 0 E 80 6.5-9.0 70000 MOLDOVA-TRANSYLVAN-SOUTH TURDA 215 SW F M 79 7.2-11.0 65000 MOLOOV-TRANS-OLTIMOLT-BANAT TURDA 250L SW SD M 79 7.7-8.7 65000 MOLDOVA-TRANSYLVANIA TURDA 260 SC 0 M 80 8.11,3 45000 ID FUNDULEA 270 DC 0 M 82 6.2NI-10.21R 55000-70000R MOLD-TRANSYLV-SOUTH PLAINS FUNDULEA 320 SC 0 ML 81 8.5-10.5 Nt 55000 SOUTH PLANS-WEST PLAINS 10.0-14.1 IR 70000 FUNDULEA 322 SC 0 ML 79 8.0-11.4 NI 55000 NI SOUTH PLAINS AND SOUTH HILLS 9.5-13.5 IR 70000 IR FUNDULEA 340 SC D ML 80 4.7-12.1 NI 55000 NI SOUTH AND WEST PLAINS 9.3-14.5 IR 70000 IR FUNOULEA 376 SC 0 ML 83 7.0-11.9 NI 50000 NI SOUTH AND WEST PLAINS 9.0-14.5 IR 65000 IR FUNDULEA 378 SC 0 ML 82 7.5-11.3 N 50000 NI SOUTH AND WEST PLAINS 10.2-14.1 R 65000 IR FUNDULEA 345L SC DL ML 79 6.5NI-12.OIR 5000N-700001 SOUTH AND WEST PLAINS FUNDULEA 365 SC P ML 79 7.3-4.5 NI 50000 NI SOUTH AND WEST PLAINSARRIGATED 11.3-14.4 IR 65000 IR LOVRIN 400 SC 0 L 79 7.0-12.0 NI 45000 NI SOUTH AND WEST PLAINS 9.5-13.8 IA 60000 IR FUNDULEA 410 SC 0 L 62 7.2-12.5 NI 45000 NI SOUTH AND WEST PLAINS 8.615.6 IR 60000 IR FUNDULEA 412 SC 0 L 79 7.3-12.2 NI 45000 NI SOUTH AND WEST PLAINS 10.6-14.4 IR 60000 IR FUNDULEA 420 3W 0 L 80 7.5-11.1 NI 45000 NI SOUTH AND WEST PLAINS 9.8-15.8 IR 60000 IR |PIONEER HYBRIDS 11 MONA (P X9756) SC SF VE s 6.5-11.2 75000 MOLDOVA-TRANSYLVANIA HELGA SC 0 E 81 8.2-11.5 70000 10 OEA (P 3839) SC SF E 81 7.3-9.5 70000 - 10 IRLA (P X5783) SW SP E 80 7.5.10.10 70000 10 AND WEST PURA (P 3615) SC 0 5 62 7.6-11.5 50000 SOUTH,WEST,HILLY AREAS IRRIGATED AND NON-IRRIGATED EVA (P 3901). SC 0 M 82 8.5.10.0 NI 55000 NI SOUTH AND WEST PLAINS AND 10.5-14.5 IR 70000 IR MOLDOVA PIONEER 3976 Sc D M 81 5,8-12.3 NI 55000 Nt SOUTH AND WEST PLAINS AND 9.6-13.1 IR 70000 IR ALL HILLY AREAS VOLGA (P 3475) SC 0 ML 84 6.3-12.0 NI 50000 NI SOUTH AND WEST PLAINS AND 9.5-15.0 IR 65000 IR ALL HILLY AREAS PANONIA (P 3737 SC 0 ML 80 6.8-10.0 NI 58000 NI SOUTH AND WEST PLAINS AND 0.8-14.3 IR 70000 IR MOLDOVA AND TRANSYLVANIA FULVIA (P 3747) SC 0 ML 82 8.4-10.9 NI 50000 NI OLTENIA, MOLTENIA AND 9.8-13.0 IR 65000 IR WESTERN PLAINS LUANA (P 3377) SC 0 L 81 7.3-12.4 NJ 45000 NI SOUTH IRRIGATED AREAS 9.1.15.9 A 60000 1R NOTES: HYBRID TYPE: SC-SINGLECROSS; 3W-THREE LINES: DC-DOUBLE CROSS GRAIN TYPE: F-FLINT; SF-SEMIFLINT; D-DENT: L-HIGH LYSINE VEGETATIVE PERIOD: VEiVERY EARLY; E-EARLY; M=MEDIUM; ML-MEDIUM LATE; L-LATE YIELD AND PLANT POPULATIONS: NI- NON IRRIGATED: IR- IRRIGATED PIONEER HYBRIDS LISTED ARE THOSE PRODUCED AND MARKETED IN ROMANIA BY SEMROM Table 29 MAIZE HYBR(DS PLANTED IN ROMANIA, 1990 HYBRID 1 TYPE MATURITY o 0 THERMAL Y1ELD Q/HAJ SHELLING 100 GRAINJ ADAPTED u-DAYS UNITS RQ POTENTIAL % WEIGHT G TO ZONE Suceava 95 (HD) aorista 137-145 1000 53-82 79-80 285-350 iV-Vi Suceava 99 (HT) aorista 137-145 c> m 65-95 79-81 340-370 iv-VI Suceava 108 (HT) aorista 145.-151. g 41-84 76-80 250-310 IV-vi Podir- Iloale-101 (HT) aorista '132 o 67-98 79-81 3001345 IV-Vr Fundulea 102 (HD) aorista 142-151 4 - 54-74 - 79-81 240-300 1-VI Mona dentiformis 130-140 55-95 80-82 290-320 IV-VI Turda 100 (HD) aorista 147-155 1000-1100 56-99 79-82 300-345 II..V Turda 125 L (HT) dentiformis 130-150 8 1,67-103 75-79 240-270 II-V Turda 199 (HT) aorista 130-150 . 75-109 79-84 260-310 H-V Podu Iloaie 120 (HD) dentiformis 148-156 o,54-74 79-81 270-310 I-v Dea (P 3839) (HS) 146-150 q, 65-111 79-83 260-330 II-V Irla (HT) - 141-150 ,;79-99 78-80 270-350 H-V Turda 200 (HD) dentiformis 147-160 1200-1300 63-97 77-83 210-290 i-Iv Turda 215 (HT) aorista 123-151 ,,75-99 78-79 210-280 1-iV Fundulea 270 (HD) dentiformis 140-160 ,, 61-110- 79-82 200-270 i-iv Fundulen 308 (IID) 135-168 41-118 78-83 200-280 i-iv Fundulea 320 (IIS) -1,35-163 j ,,8-4 8-2 20-0=-t <D-82-1,12 30-82 240-300 [- tv Eva0 (P 3 001) (ä S) ,, 123-t100 ,08-1 81-84 310-370 1- iv Panontu (P 3 737) (IS) ktlitifirilts 123- 115 60 - 12c, 70-M4 270-310 1- IV Pioneer 3 978 (HS) ., _ 136-148 ,60- 10r 70-83 200-280 l- ty Lovrin 390 (HS) dentiformis 137-147 1300-1400 60-110 80-85 305-370 I1 Lovrin 400 (HS) 139-150 ,-,, 60-128 79-81. 240-310 1-11I Fundulea 378 (HT) - 138-145 c ,, 60-112 79-81 240- 300 1-n Fundulea 380 (HT) 138-146 1 ej . 63-120- 79-82 240-300 1- 1 Fundulea 412 (HS) - 145-152 3 . ,, 85-130 77-79 220-300 I-IU Fulvia (P3 747) (HS) 135-141 n «, 63-130 81-83 240-300 I-II Volga (P 3 475) (HS). __ 132-150 , 65-130 81-83 350-370 Fundulea 418 (HD) dentiformis 145-156 S.r>. 1400 80-150- 78-81 340 1-I1 Fundulea 420 (HT) - 145-156 o '. 80- 143 79-82 240-320 1- 1 Luana (P 3 377) (HS) - 145-156 808 -180 8.82 275-350 1-11 Hibrizi pentru floricele Fundulea 625 (HS) [ everta 135-141- ) 1 000 33-59 80-84- 1120-170 Perlat 624 (HS) everta 135-143 ( ,, 40- 60 80-84 1120-170 .COMMERCIAL SEED DEMAND, SUPPLY AND DISTRISUTION FOR CEREAL AND OIL SEEDS, SEMinOM Table 30 1990 1990 1990 1992 1990 1992 1992 CROP Area, Ha Planting Potential seed Estimated seed Estimated seed Semrom seed Semrom seed Semrom seed X 1000 rate Kg/H demand tons demand tons demand tons supply tons supply tons distributed tons WHEAT AND RYE 2297.7 260 597.402 492,858 391,765 425,242 383,443 396,747 MALZE 2466.7 25 61,667 162,299 144,208 109,132 92,910 60,940 BARLEY. ALL 749 235 176,015 243,973 335.794 209,992 252,694 179,873 OATS 144.3 140 20.202 55,911 92,604 38,297 36,893 33.509 SORGHUM 5.2 is 78 98 114 82 65 RICE 39.9 280 11,172 17,125 3.914 13,669 2,368 SOYBEANS 190.2 110 20.922 102,364 81,569 60,525 53,400 30,060 SUNFLOWER 394.7 5 1,974 17.667 14,130 8,231 8,679 6,016 FLAX FOR OIL 49.9 85 4,242 13.991 8.200 7,115 3,326 3.460 TOTAL 893,674 1,106,266 1,072.298 872,285 833.778 710,605 NOTES: t. Potential seed demand based on 1990 area and planting rate 2. Estimated seed demand from Semrom estimations for each year 3. Distributed seed from actual Semrom figures adding all judets Table 31 IMPORTS AND EXPORTS OF SEEDS, SEMROM S.A. (IN TONS) 1990 1991 1992 TYPE OF SEED IMPORT EXPORT IMPORT EXPORT IMPORT EXPORT SPRING WHEAT 2,896 5,341 SPRING BARLEY 5,205 992 959 OATS 564 80 120 RICE 6,290 HYBRID MAIZE 2,514 4,533 2,221 2,788 367 4,994 PEAS 1,991 SOYBEANS 231 1,570 3,307 12 SUNFLOWER 1,084 1,914 CASTOR BEAN 196 FORAGE BEETS 1,383 445 ALFALFA 1,919 275 RED CLOVER 890 151 FORAGE PEAS 923 MILLET 206 WINTER BARLEY 230 CHICK PEAS 880 SOURCE: SEMROM S.A. Table 32 VARIETIES OF SOYB~A CULTIVATED IN ROMANIA (1990 Coor of seed f leiptcm cogen I %1 In u trcly flow Cttloarea coup G perl#offlor Pod olo, Toegument ii pk [km V q/klkOt i1 o 1oy list Pod PoleIol Precoce 90 Romånia 1979 00 violacce cenu§ie cafeniu galben galben 60- 80 12-14 200-210 18-27 -38-43 19-4- deschis Altona - Canada 1966 00 Violce ro§catt cafene galben negru 50- 80 10-13 160-210 15-28 43,2 21.8 Atlas Romånia 1986 0 albä cenusic. cafeulie galben galbegå 80-100 12~-15 130-200 20-35 41,1 18,9- 42,3 19,6 WIlkin SUA 1972 0 albå CCnuiC galben negra 60- 80 12-15 160 15-31 39,6- 17,9- 40,9 18,7 Tomis Româänia 1981 1 violacce roScutä rOiaticA galben galben 50-103 10-15 190 25-32 36-40 19-24 Evans SUA 1974 1 alb cenu-ic maro galben galben 70- 90 12-15 140-180 25-35 38-42 18-24 Stil Romnia 1988 1 albä ceausie cafenic gulbei galben 70-120 10-18 130-240 30-40 33- 17- 44,8 24,5 Flora Romånia I l violacee ro§catå calenie galben cenusu 70- 90 13-15 120-160 25-33 33-42 19-25 Lena Romånia 1988 II violacce cenu§i catcenie galben marn 65-120 10-19 130-230 25-45 36- 17- 42,9 24,5 Iodgson SUA 1974 11 violacee cenu5ie maro gaiben galben 70- 90 12-15 130-180 28-35 38-42 18-24 Danubian Romrna 1982 11 albe ro5catå cafenie galben negru 70-108 10-18 145-210 28-40 38-44 18-24 Amsoy 71 SUA 1971 III violacee cenu4ie catenie galben galbet 80-140 14-17 160-220 25-40 32-42 19-24 Ilfov Romnia 1990 00 alb - - galben brun 70-115 12-15 160-800 18-33 43,4 18-21 Beeson SUA 1968 III violacee cenu4ie cafenie galben cenusiu 95-120 12-15 170-190 25-35 32-44 18-21 Diamant Romånia 1987 00 violmcee ro.catä carenie galben nengrå- .67- 93 14-17 162-181 23-32 38,5 20;3 Table 33 UNISEM BUSINESS FIGURES FOR 1992 (IN X1000 LEI) YEAR BEGIN END ACTIV (ASSETS) FIXED ASSETS 420,119 3,207,215 STOCKS 3,053,122 9,409,292 CURRENT ASSETS (ACTIVE CIRCULANT) 4,003,764 9,813,218 TOTAL ASSETS (TOTAL ACTIV) 4,597,928 13,320,148 PASIV (LIABILITIES) SOCIAL CAPITAL 981,768 3,819,307 RESERVES 773,386 433,683 TOTAL OWN CAPITAL 1,088,051 4,617,610 OBLIGATIONS (ACCTS. PAYABLE) 1,279,567 1,542,468 SHORT TERM BANK CREDIT 1,807,087 6,435,789 TOTAL BANK CREDIT 1,990,735 6,480,116 TOTAL LIABILITIES (TOTAL PASIV) 4,597,928 13,320,148 PROFIT AND LOSS FIGURES TOTAL INCOME 3,275,000 11,179,211 TOTAL EXPENSES 3,159,280 10,879,496 OF WHICH FINANCIAL EXPENSES 150,000 987,158 GROSS PROFIT 115,720 299,715 TAX (45%) 51,924 134,721 NET PROFIT 69,746 164,994 PERCENT GROSS PROFIT ON INCOME 3.53 2.68 PERCENT NET PROFIT ON INCOME 2.13 1.48 Table 34 ROMANIA. PARK OF TRACTORS AND FARM MACHINERY YEAR TYPE OF EQUIPMENT 1988 1989 1990 1991 Farm tractors 165072 151745 127065 132761 Tractor drawn plows 86922 83286 73159 73384 Mechanical cultivators 34179 35386 27339 23868 Mechanical seeders 43282 43608 35778 34988 Chemical fertilizer spreaders 16419 15596 10810 9871 Mechanical sprayers and dusters 21918 20083 14991 14088 Combines for cereals Self-propelled 45166 44799 35813 34497 Combines for Maize Self-propelled 16203 17195 4882 3117 Combines for maize tractor drawn 4067 4115 1261 572 Combines for fodder tractor drawn 14294 11596 3932 2627 Balers 19680 23252 21706 20663 Arable land per tracto 61 62 74 71 Source: Romanian Statistical Yearbook, 1992 Table 35 DESCRIPTION AND PRICES OP ROMANIAN MADE AGRICULTURAL KACJINERY PRICE PRICE DESCRIPTION LEX us$ 1 TWO FURROW MOUNTED PLOUGH P2 TYPE 153,000 257.14 2 THRER FURROW MOUNTED PLOUGH PP3-30 171,700 288.57 3 TWO FURROW MOUNTED PLOUGH WITH ADJUSTABLE WORKING 310,500 521.45 WIDTH P2-VA 1 4 TRREE FURROW MOUNTED PLOUGH WITH ADJUSTABLE WORKING 443,160 744.8. WIDTH P3-VA TYPE 8 MOUNTED PLOUGH WITH 5 BODIES AND ADJUSTABLE WORKING 1,200,600 2,017.82 WIDTH Ps-VA TYPE 6 UNIVERSAL DISC PLOUGH WITH TWO DISCS PDU2 TYPE 157,300 264.37 7 UNIVERSAL DISC PLOUGH WITH THREE DISCS PDU3 TYPE 184,100 309.41 8 UNIVERSAL DISC PLOUGH WITH FOUR DISCS PDU4 TYPE 250,000 420.17 9 OFFSET PLOUGH FOR ORCHARD PDLMS-25 TYPE 10 VINEYARD CULTIVATOR PLOUGH PCVMI, a TYPE 205,100 344.71 11 VINEYARD CULTIVATOR PLOUGH PCVM2, 2 TYPE 2434700 409.58 12 CARRIED REVERSIBLE PLOUGH WITH TWO BODIES PRP2 TYPE 582,000 978.16 13 CARRIED REVERSIBLE PLOUGH WITH THREE BODIES PRP3 TYPE 801,600 1,347.23 14 CHISEL PLOUGH WITH FIVE RIGID TINES PGS TYPE 205,650 349.63 15 CHISEL PLOUGE WITH SEVEN/NINE RIGID TINES P07/9 TYPE 355,700 597.82 16 SEMI-MOUNTED SPREADER FOR SOLID CHEMICALS MA3,5 TYPE 863,300 1,450.92 17 TANDER WHEELED TRAILER SPREADER FOR SOLID CHEMICALS 1,386,000 2,329.41 MA-6 TYPE 18 MANURE SPREADER WITH HORIZONTAL HELICAL SHREDDENG 1,792,000 3,011.76 19 TWO WHEELED HYDRAULIC THREE WAY TIPPING TRAILER 744,100 1,250.59 RO-1 TYPE 20 TANK TRUCK RCI, 8 TYPE 660,600 942.18 21 TANK TRUCK RC3, 6 TYPE 1,293,600 2,174.12 22 VIBRATING SUBSOILER HAS 60/1 TYPE 415,600 698.49 23 PNEUMATIC SPACING DRILL SP4 TYPE 370,575 622.82 24 PNEUMATIC SPACING DRILL SPC4 TYPE 403,480 678.12 25 PNEUMATIC SPACING DRILL WITH FERTILIZER EQUIPMENT SPC4FS 560,650 942.27 26 PNEUMATIC SPACING DRILL SPCd TYPE 597,300 1,003.87 27 PNEUMATIC SPACING DRILL WITH FERTILIZER EQUIPMENT SPC6FS 711,900 1,196.47 28 PNEUMATIC SPACING DRILL SPCS TYPE 717,000 1,205.04 29 PNEUMATIC SPACING DRILL WITH FERTILIZER EQUIPMENT SPC8FS 852,200 1,432.27 30 REAR MOUNTED SEED DRILL SUP1S 396,600 666.55 31 REAR MOUNTED SEED DRILL SUP2L TYPE 553,950 931.01 32 REAR MOUNTED SEED DRILL SUP29 TYPE 707,100 1,188.40 33 DISC HARROW FOR VINEYARDS GPV121 TYPE 151,350 254.37 34 DISK HARROW FOR VINEYARDS GPV11 TYPE 270,000 453.74 25 OFFSETTING DISK MARROW GDD1,3 TYPE 234,850 394.71 36 OFFSETTING DISC HARROW GDD181 TYPE 337,850 567.82 37 MOUNTED DISC HARROW GDP 251 TYPE 335,100 563.19 38 SEMI-HOUNTED DISC HARROW GD3, 2HE TYPE 499,100 825.82 39 MOUNTED DISC HARROW GD 323 TYPE 362,100 608.57 40 TRAILED DISC HARROW GDV 2 TYPE 754,500 1,268.07 41 TRAILED DISC HARROW GDV 2,4 TYPE 761,300 1,279.50 42 TRAILED DISC HARROW GDV 2,6 TYPE 819,300 1,376.97 43 HEAVY DISK HARROW GDC4, 2 TYPE 1,706,400 2,867.90 44 HEAVY DISK RARROW GD7 TYPE 2,130,650 3,580.92 Table 35 (...continued) DESCRIPTION AND PRICES OF RONANIAN MADE AGRICULTURAL MACHINERY PRICE PRICE DESCRIPTION LEX US$ 45 LIGT ROTARY CULTIVATOR FUU 1,25 TYPE 306,850 515.7. 46 ORASSLAND ROTARY CULTIVATOR FPP 1,3 TYPE 424,440 713.34 47 MIDDLE ROTARY CULTIVATOR FUN-1,6TYPt 518,400 871.26 48 MIDDLE ROTARY CULTIVATOR rU*2 TYPE 650,250 1,092.86 49 VINEYARD ROTARY CULTIVATOR FV 1,5 TYPE 259,250 603.78 50 INTER-ROWS ROTARY CULTIVATOR FPR-3 TYPE 446,150 749.83 01 INTER*ROWS ROTARY CULTIVATOR FPR*S TYPE 675,100 1,134.62 52 INTER-ROWS ROTARY CULTIVATOR FPR*7 TYPE 919,150 1,544.79 53 ROTARY HARROW ORC-1,5 TYPE 616,500 1,036.13 54 ROTARY HARROW ORC-2 TYPE 796,700 1,342.35 5 ROTARY HARROW GRC-2,5 TYPR 969,850 1,630.00 56 REAR-MOUNTED ROTOR MOWER MCP 1,s 243,200 406.74 57 REAR-HOUNTED ROTOR MOWR MCP 3 276,500 464.71 S SLANT SAKE GO 3 255,200 429.04 NOTESa PRICES ZX FACTORY FOR DOMESTIC SALES IN LI EQUIVALENT US$ PRICES AT OFFICIAL EXCH. PATE Or 505 Lt8/ US DOLLAR DATE 30/KARCU/1993 SOURCES S.C. UNIVERSAL TRACTOR, BUCHAREST Table 36 IMPORTED EQUIPMENT REQUIRED FOR MANAGING A 1,000 HA IRRICATED FARM MODULE (500 RA MAI9E, 250 HAS SOYBEANS, 250 HA WHEAT) UNITS UNIT PRICE TOTAL PRICE us$ us$ L DISC JOHN DEERE 335 2 21,972 43,944 2 CULTIVATOR JOHN DEERE 1010 4 14,904 59,616 3 RAU MULTITILER 1.5 30,874 46,311 4 ULTRANULCHER 1.5 17,316 25,974 * MODULAR CEREAL PLANTER 1 15,000 15,000 6 BALL SOIL COMPRESSOR JOHN DEERE 5.0 L.5 6,711 10,067 7 RAKE CYLINDRICAL BALLS 1.5 2,002 3,003 A COMBINE ADAPTED TO HARVEST MAIZE 1 140,000 L40,000 (INTERNATIONAL HARVESTER CO.) 9 SEEDER RENXKER FOR DIRECT SEEDING IN STUBBLE 1 32,000 32,000 10 SEEDER RINIKER FOR DIRECT SEEDING IN RIDGES 2 31,000 62,000 TOTAL 437,915 SOURCEs MONSANTO EUROPE S.A. SECTOR 1, BUCHAREST NOTEs EQUIPMENT PRICES CALCULATED LANDED IN ROMANIA EQUIPMENT SELECTED FOR MINIMUM TILLAGE FARM OPERATION TRACTOR REQUIREMENTS CALCULATED AT ONE PER 120 HA Table 37 PROJECTED DEMAND OF TRACTORS IN ROMANIA TYPE OF FARMING AREA IN TRACTOR SIZE HA . UNDER fROM 35 FROU6O OVER TOTAL 35HP TO 45 HP 10 100 HP 100 HP ARABLE LAND 9,423.000 62.940 156.174 184,448 11.438 415,000 NAIIURAL GRASSLAND 4,778.000 12.000 12.000 ORCHARDS 297.000 4.211 20,352 35.060 877 29.000 CRAWLERS INCLUDED VINEYARDS 213,000 17.316 11,845 300 643 30.500 CRAWLERS INCLUDED 1OAL 486.500 SOURCE: UNIVERSAL IRACIOR S.A. Table 38 SELECTED TARIFFS CHARGED aY AGRONEC FOR FARM MECHANIZATION SERVICES OPERATION UNIT TARIFF LEI/UNIT APPLICATION OF CHEMICAL FERTILIESRS HA 750 APPLICATION OF ORGANIC FERTILIZERS HA 9,720 PLOWING TO 26 CH DEPTH LIGHT SOIL HA 5,885 MEDIUM SOIL HA 7,435 HEAVY 80OL HA 8,685 PLOWING TO 30 CH DEPTH LIGHT SOIL HA 7,500 MEDIUM SOIL HA 9.410 HEAVY SOIL HA 11.630 PLOWING TO 20 CM DEPTIE + HARROWING LIGHT SOIL HA 5,275 MEDIUM SOIL KA 5,320 HEAVY SOIL HA 7,530 PLOWING TO 25CN DEPTH + HARROWING LIGHT SOIL MA 4.605 MEDIUM SOIL HA 7,990 HEAVY SOIL MA 9,410 PLOWING TO 30 CM DEPTH + HARROWING LIGHT SOIL HA 8,066 MEDIUM SOIL HA 9,920 HEAVY SOIL $A 12,265 PLOWING To 25 CM DEPTH + HARROWING + ROTOTILLING EN MEDIUM SOIL FINING UP TO 5 CH DEPTH HA 8,020 FINING UP TO 10 CM DEPTH lA 8,195 FIXING UP TO 15 CH DEPTH HA 9.670 PLOWING IN VINEYARDS HA 3,705 PLOWING AND HARROWING IN VINEYARDS HA 4,305 PLOWING IN ORCHARDS + HARROWING HA 8,980 UPTURNING MEDIUM SOIL TO 25 CM HA 8,000 BREAKING UP (DEEP TILLING) 50-60 CN HA 60,385 DISING + HARROWING * LEVELING "A 2,640 DISKING + HARROWING + FERTILIZING + APPLICATION OF 8ERBICIDES HA 4,200 SEEDING WITH BREED DRILL HA 2,125 SEEDING WITH SEED DRILL + FERTILIZING HA 2,640 SEEDING WITH HOPPER SEEDER - 70 CM ROWS HA 2,125 SEEDING WITH HOPPER SEEDER - 46 CM ROWS HA 2,640 SEEDING WITH HOPPER SEEDER - 70 CH ROWS + FERTELEZXNG/ HA 2,505 SEEDING WITH HOPPER SEEDER - 45 CM ROWS 4 FERTILIZING/ HA 3,140 SEEDING WITH HOPPER SEEDER - 70 CN ROWS + FERTILIZING PLUS APPLYING HERBICIDE NA 3,680 PLANTING POTATOES uA 6.930 APPLICATION OF HERBICIDES WITH MET-1200 HA 925 APPLICATION OF HERBICIDES WITH MET-2500 HA 1165 SPRAYING OF INSECTICIDES - 250 LT/HA HA 1.710 DUSTING Or INsECTICIDES A 1,625 SPRAYING AND DUSTING IN VINEYARDS HA 3,945 SPRAYING FRUIT TREES KA 3,945 COMBINE HARVEST OF WHEAT,RYE,TRITECALE TON .720 COMBINE HARVEST OF BARLEY TON 5,515 COMBINE HARVEST OF OATS TON 7,195 COMBINE HARVEST OF MAZ2E TON 6980 COMBINE HARVEST OF RICE - UNDER 3000 KG/HA TON 6,660 CONBINE HARVEST OF RICE - OVER 3000 KG/HA TON 8,205 CDMBINE HARVEST OF SOYBEANS - UNDER 2000 KG/HA TON 5.125 COMBINE HARVEST OF SOYBEANS - OVER 2000 KG/HA TON 5,245 COMBINE HARVEST OF SUmpLOWER TON 11,600 MECHANICAL HARVEST OF POTATOES TON 14,430 THRESHING WITH STATIONARY COMBINE QRAINSTACKS TON 8,720 MOWING FORAGE CROP HA 1,975 SELF-PROPELLED HARVESTING FORAGE TON 765 TRANSPORT WITH TWO TRAILLZAS HOUR 2,125 LOADING TRAILER WITH MECNANICAL MEANS TON 110 ТаЫе 39 L нРОRтЕD цгD rORКOWTEp Рl6TICZDtв SN ROMANIA рносост Асткvе нАнигАСтnяsн сяоv соитяоt кианsnгЕтгr ►ояниг.лтон sииотекDЕд Аясивн ♦ав Ряоакеvоиааог, + ствА аекаУ ВлnсеУ енУакрне аяжтикв геиРАОРтивтнSи WREAT дЕLктитВ08РОRLUК PUCCZNIA, 9CPTORIA RTNCHOBPOYIUи кирАет im вс гситяклгог, :ст wяеАт, ВЕЕт енvвкРие, вЕРтонкА vосскикА Сон3АТЕ CU1GN CYKOXAHLL р0 PONT VINEYARA9 PLABиOPARA VITICOLA CU80� + иАNЕВ CUA2ATL 90 WP СУнОХАN1[. DU PONT РОТАТО РВУТОрнТОяА ГОLРАУ, •OroD г'Е!lOXAPROPETS[, 1Ч1ОlТ68#I?1 РОТАТО DнУТОРВТОПА ТОКАТО ALTEW7AAIA SOLANI сисvивея РвеоооРепоиовrvнА ACROOAT NS DIMETONOн1 ♦ 88ELL РОТАТО NANOOZEB PEYTOpRSORA Аtент гивкиаос ь ои РоИ7 wпsлт вяrвкряв, аеРтонгА сАнввиnАZги говлятvи POLYAAN DY МЕТZнА11 �О 1 бАвг тОВАСС0 DERON08POAA тА�АСIКА РОТАТО АLТЕниАЯLА sO4AN2 ONZON PERONOSPOAA DEBSRUCI'Он Я2SOLEX TOLCLOPOд MLтBYL 6UNL7'01(О РОТАТО RBтEOCTONIA 80LANI BAиCOSLB в0 WP NAIICOZE6 i0� вАИАСЯЕи APPLE, РяОИв VENTUR2A,PIAYBтIOMA тОМАТ0 ALTEЯNARIA вОLц1т CALIDAи вС 19.5 iPEODIONEь ннОНЕ Р'Ot7LLN0 VIHEYASWд BdlAYTI9 CINSREA GII96NDл22% иlнlвJ �4ЕС D80CLOAAE кАрlтввнти BUHrVOWEA 6С[.ЕАО'PLti2A,BOTAYT26 fABEAT, ЕАУвтр86, sELКLитoBPORIOK вARLEY 8Е9SОнтА, DOCCIиIA,F11вAAlUN CитNODIN Ртд OXICHкNOLEAT СУ UCT SURDA ЧНЕАт днЕD тнЕАти6МТ. SILLEт2A вРоятлк вв РяосиьонАг еВЕатиа ВАяг.ЕУ енrвкрне анлиzикв Ват.нтитноаронкvИ яУисаоаРоnкои аеелькв ро�Уялк со�к иrгкнлИ воь вАвг Ротлто РеУтоРвтояА киrевтлtrв BUNL � DINZCONAZOL 8VNlTOMO APPLE VЕиТОнтА, PODOHPRBEA BA1lLEY U82LA00, RELNIHтE08POR2Uи BAAVO 600 CLOROTALONIL 6ТОтеСП дЕЕТ СЕА008РОАА BET200LA тОИАТ0 рВУТОРЕТОМ, CWO08PORIUК ALSEЯXARIA, BEPTORIA, BOTAYTIS ONIOq DERONOHPORA D68тнОСтОА АРяоы зввn Иатлtлхк:, сгвА оекоУ вихвсоавя рслвхооонв нАг.вткятк тоилто vхтектг иввляилиин релв РвноноаРояА рквк веикт иитvедвАг. Ряогксонлгог. + сквА atzaY вАяtеУ вЕЕа тнаАт�гвит ттлвеидАгос + ивткк.Аао иvоА тнлълг.т аек,ититноsронкои вР. нкnонк� �swP ивтА�.лхкь зв� еквА аекаУ аокс тявтииг рвУторнтопА вР. РяЕtиов аР vяосяtояаъ + асавятно свnвлts ивттглао ИиDл, неtигитн, GABENDbSZM . BEED тALATNENT TILLETIA рнеvгсОя и РяоРАиосАяВ асяаятко веет ввни тявлтхнит vеавтлвs.ед vхтетаИ, РеноновРояА Аrиали ее vкялдогОS Иоеснsт vеавтлвс.ед vлатоив . ИАисwкт ри илисогев 2ьв + г.л.к.и Ротлтова рВУторвтснА хигsатАмв CU OXICHLORIDe VINEYAADS DLABКOPARA VLTICOLA ттоИАн v ткоrлИАт 2ot + с.О.р.Р. сЕнелс,а еnУвкрнЕ, рисскнгл MANC02EB 66� APDLE, VIN6YAAD8 VAFIOUS тт[.т аео ес РяоРтrnилго[, сгвА аегаУ wнелт, Вевт vAнtoua вкитеzА, оялаЕА vЕавтлвг.вв vлнкоив KARATHANB FN67 DZNOCAP ROF[и Б НАА9 VARIOUB VARZOUв Table 39 (...Continued) I KPORTED AND FORMULATED PESTICIDES IN ROMANIA PRODUCT ACTIVE MANUFACTURER CROP CONTROL INGREDIENT FORMULATOR HERBICIDES MISTRAL SL950 NICOSULFUROif XCX MAIZE ANNUAL XONOCTS S. HALEVENSC, PHXZOXES PIVOT 100 Le IMAZATAPYR CYANAMID BEANS ANNUAL XONOCTS SOYBEAN AND DICOTS DUAL 000 KXTALACHLOit OLTCHEM %CP DEETS ANNUAL MONOCOTS CIS& GEIGY GRODYL AXIDOSULFU]RO" HOECHST WHEAT DICOTS BARLEY AGX4 100EC PROPAQUXZArOP CIDA GEIGY ONION, DEAN ANNUAL'HONOCTS PEPPERI PERENNIAL WEEDS SOYBEAN S. aALEPENSE RHIZON2 SUNFLOWER TITUS as pr RXXSULrumom Vu Pon? POTATO ANNUAL XONOCOTS TRXTLUROK 46 TRXFLURALIN OLiTCHIM RV BEAN ANNUAL XONOCOTS KAKHTRSHXM SUNFLOWER DUAL 960 METOIACULOR OLTCKXX RV BEET ANNUAL XONOCTS CXBA GEXGY/ XCP TBXYLURXX 4SEC TRXYLURALIN MMMTZSHXX SUMPL40WER ANNUAL f(ONOCTS AGAN DEAN TOPIK 0602C C04 40 OR/LT CXB& 6EXGY WHEAT AVENA FATUA FRONTIER 720CC DINETHANX0 SANDOZ MAIZE ANNUAL HOKOOOTS SOME DXCOTS DAVIS 16WG TRXSULFURC;N CrBA. OZIGY WHEAT ANNUAL OXCOTS FLUOROGLYCOPAN BETANAL ETROFUMAZXT/ SHZRIN4 BEET ANNUAL DICOTS PROGRESS PRZNOMEDXPHAH/ DESMZDXPKAM FOCUS ULTRA CYCLOXIumn BASIF BEET S.HXLZVZHSZ RHIZOMES OTHER CROPS AGROPYRON PERENNIAL GRASSES FURORE SUPER rENOXAPROPETrL HOSCUST SUNFLOWER ANNUAL XONOCOTS BEET ANNUAL GRASSES S. KALEPENSZ GALLANT SUPER HALOXYrOP NETRYL DOW CLJLNCO VARIOUS GRAXIMZAE IN GENERAL ESTER ISOMER R FROM REEDS AND CYNODON DXCTYLON GzSAQARD 5OWP PROMETAIN CXSA GRIGY SUNFLOWER MONOCTS AND ANNUAL PINUS, POTATO, PEAS DXCOTS COSATRIN 50 PU PROmwTRrx APRECHrX S.A. VEGETABLES COTTON ROU=UP GLITOSAT MONSANTO MAIZE MONOCOTS. ANNUAL DICOTS S. KALEPZNSE RHIZOMES PXXXXXTRA METOLACHLOR + CXBA GRIGY MAIZE GRAMINEAE AND S. HALEPXNS2 ATRAZIN APRECHXM S.A. FROM SECD XCEDXX 2,4-D SALT CHINOPAR S.A. WHEAT DXCOTS 40CP-AM 75WO TRXSULFURON CXBA GEIGY WHEAT DrCOTS GRJLKOXONS PAR&QUAT ICX/ SINTZZA S.A. KAIZE. MONOCOTS, DXCOTS PASTURES 2,4-D SAME 2,4-D /ACID CHINCOMPLZX CEREALS ANNUAL DICOTS TELL 75WG PRrMXSULFURON CXBA GEIGY f(AZZE S. HALEPENSE RHXZCXZS LASSO ALACHLOR KONSAJffO KAIZZ MONOCTS AND SORE SUNFLOWER DICOTS Table 39 (...continued) I KPORTED AND FORMULATED PESTICIDES IN ROMANIA PRODUCT ACTIVE MANUFACTURER CROP CONTROL INGREDIENT FORMULATOR INSECTICIDES, ACARECIDBS, NEHATICZDES FURADAN 35s CAROUrTA FMC MAIZE AGRIOTES SP. DECIS 2,5EC DELTAETRIN ROUSSEL UCLA VARIOUS VARIOUS. KARAWE 2,5BC L CIRALOTRXN ICx VARIOUS VARIOUS THEONEX 35 EC ENDOSULFAN 35% MAKHTESHIM POTATO APHIDS PYRINBX 48 EC CL0mPIRFOS MAKUTESHIX POTATO LEPTXNOTARSA SUM ALFA 2,5EC ESFENVALERAL SUMITOMO FRUIT, WHEAT VARIOUS OLTCMH R.V. VEGETABLES ECOTEC BACILLUS ROUBBEL UCLAT ., VINEYARDS LOBESIA BOTRANA THURZYCrEffszS ULTRACXD 20 EC NETHDATION CRA GEzGY TOMATO TRIALEURODES PRONT 400CS PLURATIOCARS CIBA GEIGY MAZZE, BEETS AGRIOTES, BOTHNODERES LARVIN 375 TBIODICARS RHONE POULENC VINEYARDS LOBESIA BOTRANA ALSYSTXN 25 WP TRxFLUMURON BAYER VINEYARDS LOBESIA BOTRANA DEC18 50 cE DELTAMETRZN OLTCRIM POTATO LEPTXNOTA2SA ROUSSEL UCLAr PEGASUS 250 DAPANTLURON CIBA GEzGY TOMATO TRIALEURODES TRIGARD 75WP CIROMAZIN 75% CIBA GEIGY -TOMATO LIRIOXYZA NISSORUN 5CE HEXYTHEAZOX OLTCsIM RV CUCUMBER TETRANICUS URTICAE NIPPON SODA VINEYARDS THXOtAN 35 EC ENDOSULFAl HOECHST VEGETABLES VARIOUS VEGETABLES, FRUIT KOTRRINE GRAIN DELTANETRIN + ROUSSEL UCLAF CRAIN SYTOPRELUS,TRIBOLZUR PIPERONIL BUTOXXDE POTATO DROSOPHILA KUNULUS 3 80% SULPRUR BASP APPLE PODOSPHAERA,UNCINULA VINEYARDS TERRAFURAN CARSORURAN SANACHEM MAIZE TANYMACUS BOSTAQUICK CE HEPTENOrOS HOECHST VARIOUS APHIS AFUCAX CE PIRASOFOS HOECHST VEGETABLES VARIOUS APOLLO 50 SC CL*ENTEzN SCHERING FRUITS PAHONYCaUS VEGETABLES TETRANYCHUS MITAC AMITRAZ SCHERING FRUIT PANONYCHUS, PSYLLA TETRANYCHUS BASANID DAZOMET BASF VEGETABLES NEMATODES TOBACCO DAZONET DAZOMET CHINCOMPLEX ID. ED. PHOSTOXIN AL PROSPHrDE DEGESCH GRAIN SXTOPHILUS,TRIBOLXUK Table 40 DISTRIBUTORS AND PRICES OF PESTICIDES EN ROMANIA PRODUCT PRESENTATION PRICE LEf/ L/KG PRICES US$/KG/LT OATEt1/2/93 DISTRIBUTORS CIDA GEICY SERVICES/ AGROFARM S.R.L HERBICIDES AGIL 100C 1 22,500 37.82 CARACARD ASO COE 25 8,700 14.62 DUAL 500EC 5 5,900 9.92 GESAGARD 3OWP 20 3,800 6.39 PRIXEXTRA 500FW .4 x 5 7,800 13.11 TELL 75WG + EXTRAVON 0.04 796,000 1237.82 LOGRAN 75WG 0.01 286,000 648.74 SATES 18WP 0.2 69,000 115.97 0.00 FUNGICIDES 0.00 APRON 358D 20 24,200 40.84 BENXT UNIVERSAL 4.75 d. 50 Price in May RIDONIL 25 WP 20 18,900 31.76 RIDOKIL PLUS 48 WP 1 7,900 13.28 RIDOXIL MS 72 WP 25 7,900 13.28 TILT 250 EC 5 24,000 40.34 TOPAS 100 EC 5 24,000 40.34 So 250 EC 1 74,900 125.88 INSECTICIDES/ ACARICIDES NEORON 500 EC 50 9,900. 16.64 ULTRACID 20 EC 5 6,900 11.60 ULTRACID 40 EC 5 9,800 16.47 TRICARD 75 WG 1. 239,000 401.68 PROKET 400CS 5 25,500 42.86 PRORLT 66603 50 27,000 45.38 DATE11/3/93 OISTRIBUTORt SXBCO AGROVET S.R.L. DECXS 2.5 1 12,840 21.55 K'OTSRINE GRAINE 38,840 65.28 K'OTERINH 25 FLOW 34,280 57.61 THIODAN 25 5,320 8.94 SOSTAQUICK 17,440 29.31 KUFAST 2. 106,990 179.82 0.25 115,560 194.22 BRESTAN 60 14,710 24.72 DEROSAL 50 10,700 17.98 AFUGAN 35 9,575 16.09 PURA SUPER 16,685 28.04 FURORE SUPER 9,810 16.49 AFA.LON 50 9,720 16.34 ILOXAM 26 5,040 8.47 BASTAL 14 SL 8,550 14.37 CRODYL 75 353,100 593.45 BARAKI 34,880 56.62 BUTOX 32,260 54.22 PRELUDE SP 17,335 29.13 APOLLO 49,435 83.08 MITAC 7,705 12.95 SPORTAK 14,765 24.82 NORTRON 9,630 16.18 SETANAL 9,630 16.18 PuOEMIX 7,650 12.86 PREVICUR 17,335 29.13 PHOSTOXIN 22,110 38.84 RUBIGAN 12 23,590 39.65 Table 40 (...continued) isTRIBUITORB AND PRICas or PESTICIDES IN ROMANIA PRODUCT ACTIVE SUBsTANCE PXICE LE/ TON PRICE: US$/TON SBIXDIZ2ED PRICES - DATES 31/3/93 DIBTRZIBUTORs NINISTRY OF AGRICULTUR13 AND POOD OEERAL DIRECTION OP PESTICIDE COlT0L SUPPLIERA or INTERNAL SOURCE. CMINCOPLEX a.A., DURSESTI CAPTADIN 50 PU CAPTAN 50 t 185,452 311.68 CXIPTODIN 2.5 PTS ETHYL Na CliLOIZDE 2.5% 49,120 82.55 DAZONET 90 OR DASONET 90% 85,600 143.87 r.B. 7 ETSYL aO CULORIDE 189,150 317.90 LZNDANB 40% XCEDIN POBTE 23 EXTRA 2,40 +DICAMBA 132,910 223.38 ICEDIN SUPER 39 EXTRA 2,40 + DICAXBA 289,580 486.69 ONEFON VUR 30 TRICLORFON 30% 120,730 202.91 ONEFON VUR 35 TRICLORPON 35% 138,600 232.61 ONEFON VUR 35 a 105,860 177.92 OlEON 90 TRXCLORFON 90% 171,730 288.62 ONEON O 50 928,000 1,559.66 ONIETION 100 VAPAN 42,910 72.12 ONEVOS 31.5 CE DDVP 31.5 79,000 132.77 oozEx 50 Pu ATRAZINS 50% 212,900 357.82 puB 25 45,700 76.81 SANMOM 37.5 EXTRA 216,440 363.83 SARE DNA (TNA) 40 EXTRA 2,4D DNA SALT O4% 51,300 86.22 SZMADON 50 PU SINAZINE 50 236,400 397.31 TIRADIN 75 T IURAN 75% 126,100 211.93 TIURAN 75 PU TIURAN 75% 134,100 225.38 TRIDAL 76.2 CAPTAN 76%, NUARINOL 2% 283,300 à76.13 ZZRAN 75 ZIRAM 75% 111,500 187.39 OLTCKxN RN. VILCEA ANVIL 5 SC MEXACONAZOL 50 O/LT 1,360,000 2,285.71 DECIS 2.5 CE DELTAMETRIN 755,000 1,268.91 DIZZOCAS 60 CE CE 80% BUTILATE 137,920 231.80 DUAL 500 CE NETOLACLQR 500 O/LT 226,000 379.83 ERADICANE an EPTC 160,000 268.91 ILLOXAN 28 CE DICLOPOPNETZL 284% 380,000 638.66 NECLORAN 35 CE ALACLOR 35% 129,500 217.65 NECLORAN 48 ALACLOR 48% 177,600 298'.49 OLEOKALUX 3 25% QUINALYOS 364,350 612.35 OLTICARB 75 CICLOAT 750 O/L 204,000 342.86 OL,TTOX 50 224,000 376.47 ORDRSAN 72 NOLINATE 720 G/L 203,000 341.18 OREDON 75 MOLINATE 751 256,000 430.25 PIVOT 100 LC IKAZETAPYR 100 O/L 1,225,000 2,058.82 STAN 36 PROPANIL 360 G/L 137,000 230.25 TOPSIX 70 PU TIOPANAT METSYL 70% 675,000 1,134.45 TRtFLURON 24 TRIPLURALrN 240 G/t 90,000 151.26 U.S.-1 MINERAL OIL 50,000 84.03 Table 40 (...continued) DISTRIBUTORS AND PRICES OP PESTZCIDES in ROMANIA PRODUCT ACTIVE SUBSTANCE PRICE LEZ/ TON PRXCEs US$/TON SUBSIDIZED PRICES DATES 31/3/93 DISTRXBUTORr MqINISTRY OF ACRICULTURE AND FOOD GENERAL DIRECTION OF PESTICIDE CONTROL SUPPLIERS OF INTERNAL SOURCE. CHZMOPAR a.A DODESTI, BUCHAREST F.B.- 7 ETHYL MERCURY 274,400 CHLORIDE + LINDAMH BINTOR (SINTEZA S.A.) ORADA CARSETOX 37 CE ALATRION 37% 133,500 224.37 1 LT 159,000 267.23 SIMORATOX 35 CE DMETROATE 35% 159,300 267.73 1 LT 181,000 304.20 sxNTQX 40 CE ETION 40% 210,000 352.94 1 LT 244,000 410.08 DIMEVUR 42.5 DINETROATE 42.5% 1,240,000 2,084.03 SICAPA S.A., TXRNAVENI POLESULF BA 45PU BA SULPHATE + SULPHUR 11,800 19.83 SULr NUZABIL 80 SULPHUR 80% 14,900 25.04 SULY PULDERE SULIPBUR 951 6,600 11.09 U.C.T. S.A. TURDA TURDA CUPRAL 50 PU CU OXICBLORIDE 71,500 120.17 So% METALLIC CU 0.00 ffDROXIDO Cu 20 CU BYDROXZDE 75,200 126.39 CUPROZXR 50 CU OXXCHLORIDE CONTAINS 96,700 162.52 28t NETALLIC CU + 14% ZIRAX ANpLUN, S.A., ELATNA SULFAT DR CUPVU COPPER SULPHATE 97-98% 60,100 101.01 WITh 24.5% METALLIC CU SOURCESI 1. LISTA PESTICIDEOR SE A ALTOR PRODUSE DE UZ FITOSAMITAR AVIATE IN ROMANIA. 1992. MAA. COXISXA XNTERMINISTERIALA PENTRU AVXZAR.A PESTICIDELOR 2. CIBA GEICY SERVICES LTD, SIBCO AGROVET S.R.L., PRICE LISTS 3. NAA. DIRECTIA GENERALE PENTRU CONTROL PESTICIDELOR, PRICE LIST 4. LISTA PgSTICIDELOR AVEZATE LA SEDINTA SIN 21 DECEBRIE 1992, MAA. Table 41 RECEPTION OF GRAIN BY RO4CEREAL: QUALITY AND PRICES BRASOV BRANCH: BASES AT RUPEA, SERCAIA, FAGARAS, STUPINI PRODUCT HECTOLITRIC MOISTURE FOREIGN PRICE WEIGHT PERCENT MATTER % LEI/TON WHEAT 75 KG 15 3 70,000 BARLEY 58 KG 15 5 50,000 MAIZE -- 17- 3 60,000 NOTES: (1) PAYMENT IS CASH AGAINST DELIVERY (2) TRANSPORTATION FROM THE PRODUCER TO THE BASE OF ROMCEREAL IS PAID BY ROMCEREAL ACCORDING TO A NEGOCIATED TARIFF Table 42 A Program for the Privatization of Romcereal and the Input Distribution System Actions Sequence Outcome LEGAL ACTIONS 1. Investment Promotion Legislation A Incentives for investment In'Agricuitural Regulations to the Law clarifying incentives Creation of a network of wholesalers and dealers in farm Inputs 2. Specitic Seed Law A Definition of role of state and private sector New Seed Law and Regulations redefine the In research, production, processing and distribution of seeds private sector position and specify an important role for private wholesalers and dealers all in the private sector 2A.Specilic Input Production and Distribution La A Definition of Rote of State in Input Production and Distribution 3. Amendments in Commercial Law A Elimination of anti-speculation limitations 4. Privatization Law for Semrom and Agromecs A Elimination of State Input Distribution and Service Organizations POLICY ACTIONS 5. Order of MAF terminating input distribution a Id. through Communal Centers and Inspectorate of Plant Protection 6. Phasing out of input subsidies a input pricing at gradually close to real prices 7. Phasing out of Input Subsidy Credit 8 Cost of credit adjusted and nearerer to real economic and social cost S. Liberalization of Grain Market Prices a Grain markets react to supply/demand forces 9. Market Support Programs a Altow grain price discovery Grain Cash and Futures Markets Grain Price Information System Grain Warranting System SPECIFIC ACTIONS.ON ROMCEREAL 10. Phasing Out of Romcereai Integration Role C Romereal discontinues financing and supporting input distribution Discontinue Credit Oversubsidization Credit in the transition at positive agreed interest rate inputs Supplied by Private Dealers In the transition, orders for inputs to Private Dealers and Mechanization Operators 11. Grain Contracts at Market Prices C Romcereal acts provisionally as a Trading Company 12. Grain Storage Services C Ailows operation of grain market stabilization and Warranting 13. Final Discontinuation of Integrator Status 0 Termination at end of transition of integrator status 14. Romcereal to be Privatized D Silos and storage deposits sold out to private sector Romcereal retains 1S% Silas and Storage Depots 15. Romcereal as Grain Market Regulator E Actions in Developing Grain Reserve for Security and market Regulation Table 43 TOTAL FERTILIZER, ROMANIA Production, Consumption, Export 3.5. 3- Cn 2.5 z 00 0J .5 - _ _ _ _ _ _ _ _ _ _ _ 0-- 1985 1986 1987 1988 1989 1990 1991 1992 1993 YEAR -U- Production -+- Consumption -4--- Exports FIG. 7 FERTILIZER PRODUCTION, CONSUMPTION AND EXPORT Table 44 RATIO GRAIN/FERTILIZER PRICES IN TERMS OF,N NUTRIENT . C S4 u- - 3- c. 2- 0 1986 11/1991 4/1992 9/1992 4/1993 4/1993b MONTH AND YEAR WHEAT/AMN -MAZE/AMN G WHEAT/UREA E MAZE/UREA FIG. 8 RATIO GRAIN TO N PRICES Table 45 P205 USE AND P205 SOIL STATUS ALL ROMANIAN JUDETS: AVERAGES 0- 0- 0 172620 25 2513226 282 21 32 1029 022220322221 33 29 20 17 30 17230 232 162035 2883 31 1027'23 SOIL P205 IN PAL UNITS FIG. 9 RELATIONSHIP BETWEEN SOIL P205 STATUS AND P205 USE, ALLJUDETS Table 46 FERTILIZER CONSUMPTION ROMANIA 1800- 1600- c 1400- > 1200-I 1000- 800- 0 600-' × 400-' 200-' 19851986 19871988198919901991 19921993 YEARS N P205 M K20 FIG. 10 TOTAL AND PARTIAL ANNUAL FERTILIZER NUTRIENT CONSUMPTION Table 47 FERTILIZER EXPORTS ROMANIA RATIO OF EXPORTS/PRODUCTION 80- 70- z 0 0 a--50- - 0 40- Lu 0030- 20- 1985 1986 1987 1988, 1989 1990 1991 1992 1993 YEARS FIG. 11 RATIO OF FERTILIZER EXPORTS TO PRODUCTION Table 48 Evolution of Maize Yield in Romania 1991 1990 1989 1988 1987 m 1986 1981-85 1976-80 1971-75 1966-70 1961-65 1956-60 1951-55 1934-38 1 0 500 1000 1500 2000 2500 3000 3500 4000 4500 Grain Yield Kg/Ha FIG. 13 EVOLUTION OF MAIZE YIELD IN ROMANIA, 1934/38 -1991 SERVICIUL CONSTITUIRE FOND SEMINTE, TEHNOLOGIA PRODUCE- RII SI CONDITIONAPIl SENINTELOR C OMERCIALIZARE ri i PROGRAMARE ,MNRRME TING, STATITIC 7. NÅFoRMikmriOPERA C) T VER ELATII INT ERN'E 51 - rri EXfERNIE CONTROL T EHNIC DE C4LITATE LABORATOARE ni SERVICIUL EXPLOATARE DEZVOL- TARE MODERNIZARE TEHNICA z NOUIA APRCVIZIONARE 0 BIROUL ORGANIZARE,NORMAREI cPROGRAME FORT A DE MUNCA rr PERFECTIONA RE PROrE510NeA!A aF'FTARIAT C»i rr SJURIDIC .St LEGISLArT/E 5ERVICIUL FINANCIAR' PRErLURI, ANAl.IZE ECONONICE TITLbJRi DE P ROPRIE TAr E CONTR OL FINANCIAR INT ERN. AcN IN TE ADMINITRATI cn~ CONTRACTARE, PRLAE PRELUCRARE > m r COMERCIAL -- r- 0 zm CONTROL TEHNIC DE CALITATE i CD O 0 EXPLOATARE, DEZVOLTARE, APROVIZIONARE, > PROTECTIA MUNCII z -00 0 z - -n > mm e c no m cE__I' > -- z z >O >-RE U I,TTLR4- æ00 L Q) PRETRI,TTLUR 0 DE'PROPRIETATE n m nO zz Ln m 0ORGAN IZARE, SALARI ZARE, C >n r- 2c--- NORMARE, PER FECTIONAR.E PROFESIONALA, EVIDENTA - PERSONAL n- , _SECRETARIAT, 䯯E~ ADMINISTRATIV- M> z 0 MZZ mm - mu J Table 51 SEMROM S.A. SEED PRODUCTION FLOW REEDER'S SEED 4 AGRICULTURAL RESEARCH STATIONS SUPER ELITE SEED Fundulea, Podu Iloaie, Suceava Lovrin, Turda, etc Plant Breeding/Production Depts BASIC SEED AGRICULTURAL RESEARCH STATIONS ELITE SEED NBRED LINES AND== Production Departments ARENT SINGLE CROSSES SEMROM S.A. Production Depts. of Agrosems at Judet Level Contracts ELITE SEED CONTRACT SEED GROWERS BASIC SEED II (FIRST MULTIPLICATION SEED) < COMMERCIAL HYBRID SEED 12 (SECOND MULTIPLICATION SEED) < SINGLE CROSS HYBRIDS THREE WAY HYBRIDS DOUBLE CROSS HYBRIDS SEMROM S.A. Agrosem Production/Sales Depts. STATE FARMS ROCEREAL PRIVATE FARMERS '~~E -->ASCIATIONS 13,14,15 (ADVANCED MULTIPLICATION A SEED, WHEAT, BARLEY, OATS) 14 ?roduction and Delivery Flow Genetic Identity and Generational Flow SEMROM SEED PRODUCTION FLOW Table 52 SEED DISTRIBUTION CHANNELS DISTRIBUTION SYSTEM IN ROMANIA FOR FIELD CROP, TECHNICAL PLANT AND PASTURE,SEEDS. Naional Level SEMROM S.A. Jujet Level . AGROSEM AGROSEM COMPLEX COMPLEX AGROMEC <ROMCEREAL R.A. JUDET BRANCH Local Level AGROSEM OUTLET STATE FARMERS FARMERS . FARMS ASSOCIATIONS SEED DISTRIBUTION CHANNELS FOR CEREAL, TECHNICAL CROP AND PASTURE SEEDS Table 52 (..continued) SEED DISTRIBUTION CHANNELS' DISTRIBUTION SYSTEM IN ROMANIA FOR VEGETABLE SEED,.INDUSTRIAL CROP SEEDS, AND ORCHARD CROPS AND VINEYARD PROPAGATING STOCKS VEGETABLE SEED INDUSTRIAL CROP SEED ORCHARD PLANT AND AND POTATO SEED (SUGAR BEETS, TOBACCO, VINEYARD GRAFTED TEXTILE FIBERS, ETC) PROPAGATING MATERIALS UNISEM S.A SPECIALIZED LOCAL ORCHARD PLANT OR ENTERPRISE PLANT VINEYARD RESEARCH STATIONS UNISEM PLANT IN JUDET UNISEM STORES GREENHOUSE- >OPERATORS VEGETABLE SEED - INDIVIDUAL FARMERS IMPORTERS FARMERS ASSOCIATIONS . STATE FARMS ,<- POTATO SEED ONLY POTATO RESEARCH STATION, BRASOV SOLANUM S.A. AND OTHER PRIVATE COMPANIES DISTRIBUTION CHANNELS FOR VEGETABLE, POTATO, INDUSTRIAL CROP SEEDS, ORCHARD CROP AND VINEYARD PROPAGATING STOCKS Table 53 FERTILIZER DISTRIBUTION CHANNELS FERTIUIZER FACTORY DIRECT OUTLET FARMERS FARMERS 1 20% ASSOCIATIONS 10 -20% AGROMEC 10-15% ROMCEREAL AGRICULTURAL CENTERS <7% FERTILIZER DISTRIBUTION CHANNELS Table 54 PESTICIDE DISTRIBUTION CHANNELS DISTRIBUTION SYSTEM IN ROMANIA PESTICIDE IMPORT FACTORY Agent + Importer INSPECTORATE FOR PLANT PRIVATE PROTECTION AT JUDETS DISTRIBUTORS STATE FARMER FARMERS FARMS - ASSOCIATIONS A .A COMMUNAL, 7 AGRICULTURAL CENTER FOR --*CENTER PLANT PROTECTION A BASE DE APROVISIONARA BATMA PESTICIDE DISTRIBUTION CHANNELS ROMCEREAL R.A. Table 55 CREDIT, INPUTS AND GRAIN FLOWS BANCA AGRICOLA ROMCEREAL R.A. Credit a Credit b Credit operations Input Supply Procurement Operations Credit b Subsidized Production Credt- G r Credit a a i DIRECT INDIRECT n Farmers Production Farmers Associations _ _Contracts Commercial Farming Companies State Farms A A A A AGROMEC - SEMROM FERTILIZER FACTORIES - Grain Storage INSPECTORATE FOR CENTERS FOR PLANT PRIVATE Credit b PLANT PROTECTION PROTECTION DISTRIBUTORS NOTES: Credit a: Production advance credit, 15% An.Rate Credit B: Grain Storage Credit to ROMCEREAL, 55% An. Rate : Credit and Input flows : Grain flows ROMCEREAL. CREDIT, INPUTS AND GRAIN FLOWS Table 56 universal tractors manufacturing diagram 1989-1990 farmini Iractors 2lhp 34hp 45hp 53hp 55hp 64hp 85hp löhp 15hp 85hp l2hp 0300 0 340 U445 U530 U550M 0640 U65OM 9650E 0750 0850 U1010 300UTC 340DTC V445 c 530 V550M V1640 651» 0770 85001 101001 0 302 U342. 1 445 L 530 1550M 1640 U65001C 750 302 UTCE 3420TCE V445DTC V530DTC VJ55OMOTC V 640 UTC ,V1300UTC V3400TC 445 UTC 5300TC 550MOTC 640 UTC 445 NC -530NC 55OMNC 640ifC 0453 U533 U553 0 643 U 703 453 UT 5330T 553 T 643 T 7030T S445 S530 S640 S11V445 S11V530 SM 640 SM445 SM530 1 Irociors wilh rliplemoits FIG. 22 UTB, BRASOV. PRODUCTION MODELS OF FARM AND indusirial tractors INDUSTRIAL TRACTORS - 3Dhp 45hp 55hp 85hp 85hp 159hp l80hp 302DTCEIF TIH4450H TIH552DTCS S 651LS S85OLS S1501LS |VIlC20 S 1802 LS Table 56 (...cont'd) wheeled farming tractors,3rd series -7 45-70 hp FIG. 23 UTB, BRASOV. NEW (3RD) SERIES OF FARM TRACTORS. U 453 U 533 453 DT 533 DT U 553 U 643 553 DT 643 DT U 703 703 DT Table 56 (...continued) SEMANATORI DE PRECIZIE PENTRU PILANTE PRAy>TOAR PRA ITOARE PRECISION SOWING MACHINES FOR WEEDING PI.A NTS DESTINA-[E UTILIZATION SemAnAtordle pneumatice de precizie tip SPC stryt destinate The SPC pneumatic precision sowing machines we manufactured semAnatulul in culbud a plantelor pr&7koare (porumb, sfeclIA, for hole sowing at weeding plants (maize, beet, bean, soya bean, fasole, sole, bumbac, bob mrunt, c1nep, corandru, floarea horse bean, cotton, hemp, coriander, sun flowers, cucumbers, soarelul, castravell, ricn, sorg, etc.) cu sau frl fertilizers con- castor-oil plants etc.) with or without parallel fertilization of the soil comitentA a solulul §1 Tncorporare tngr*gAminto chinice. and Incorporation of chemical fertilizers. ELEMENTE CARACTERISTICE CHARACTERISTIC FEATURES * distribuire pneumalicA * pneumatic distribution * precizle de semAnal 97 % * sowing precision 97% * ridicaie concomitenti a ambilor marcatoril la tipurtle 6-8 r1ndurl * the simultaneous pick up of both markers at thb 6-a rows types * antronare centralizati a fertilizatoruful * centralizedinvolvement of fertilizer * rol do tasare de preslune zero * 0 pressure sinking wheels * 1a cerere: * at request: - dispoxitlv do control electronic al WisAmInlril - sowing electronic control device - dispozltIv de cuplai rapidA la tractor - fast tractor coupling device UNIC PRODUCATOFI IN TARA THE SOLE PRODUCER IN THE COUNTRY FIG. 25 MECANICA CEAHLAU S.A., PRECISION SEED PLANTERS Table 57 DESTINATION OF WHEAT AND RYE JUDET BRASOV 100, 80 z 50- 40- 20 10- 1987 1988 1989 1990 1987-90 1991 1992 YEARS KEPT BY FARMERS SEMROM M ROMCEREAL FIG. 26 DESTINATION OF WHEAT AND RYE, JUDET BRASOV