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Romania’s grain exports disappointingly modest
After last year’s bumper crops in all grains and oilseeds, perspectives for Romania’s cereal production are again very optimistic in the major growing regions. According to GOR Ministry of Agriculture’s official estimates, area planted to wheat in the fall of 2004 reached 2.4 million HA, while winter barley was sown on almost 234 thousand HA and two-raw barley on 60 thousand HA, most of the works being performed under normal moisture and temperature conditions.

About 3 MMT of wheat are devoted every year to cover the domestic human consumption.

Important amounts of corn (about 800,000 – 1 million MT) are also consumed as food in households.

Food industry absorbs some 150-200 thousand MT of corn, while starch production and the alcohol industry, over 1 MMT of corn.

As of end of March, a large portion (about 4.7 MMT) of last October’s corn production is still stored on-farm, because of bids considered unacceptably low by corn holders, expecting further price rise. In spring, domestic prices continued to further decline, as farmers began selling for financing the on-going planting campaign.

For wheat, reportedly there are still 1.1 MMT stored off-farm (in commercial silos) and about the same amount on-farm. Total (urban) domestic consumption of wheat is estimated at 120,000 MT/month, i.e. 360,000 MT are needed for the following three months of 2005, to which household self-consumption and feed consumption adds.

FAS Bucharest estimates that about 1.7 MMT of wheat, 600,000 MT of barley and about 6.8 MMT of corn will be used as feed by the MY 2004/05, with similar consumption levels in the coming crop year.

End-year inventories are high in wheat and corn, as exportable surpluses did not ultimately find a market. These figures will need, nonetheless, to be quite significantly adjusted with the volume of losses, caused by improper storage conditions. A recent study published in the local press shows that most of Romania’s grain storage facilities (totaling about 10 million MT) do not comply with the EU requirements and, consequently, if investments in the sector not made by the end of the pre-accession period, from 2007 wheat coming from such silos will not be allowed any longer for human consumption, even on the domestic market.

Although anticipated to end up with over 1 million MT of corn and about the same amount of wheat shipped to its traditional destinations by the end of the MY 2004/05, Romania’s grain exports remained disappointingly modest until the end of January 2005. For wheat, high domestic bids compared to the international reference prices made the Romanian product practically non-tradeable internationally. Between July 2004-January 2005 only 25,000 MT were exported, mainly to Lebanon and some to Germany and Italy. The situation was aggravated by the fact that, from February 2005, EU signed export rebates varying between $7.3 and 13.3/MT for 1.3 MMT of wheat, which contributed to an already tense dynamics in the cereal world market. Wheat originating from Argentina remains competitive in the Mediterranean region.

For corn, 334 thousand MT were shipped (to Spain, Egypt, Turkey, Italy, Israel) between October 2004-January 2005 and opportunities for about a similar amount are expected by traders until the new harvest, although quality of local corn may limit exports.

Barley for feed found some market outlets in Saudi Arabia, Morocco, Italy, Spain, Israel, Libya, countries to which roughly 107,000 MT were exported between July 2004-January 2005, with good perspectives for more than doubling this amount until the end of the marketing year.

By calendar year, trade matrixes below illustrate a situation rather atypical for Romania, which became a very large importer of wheat in 2003 and 2004, the latter being the year when the US top agricultural export to Romania was wheat (over 300 thousand MT).
For the MY 2005/06, despite the optimistic auspices under which grain crops are currently developing, some 50-100 thousand MT of wheat (especially with good milling parameters, for blending) will be likely imported to augment the domestic supplies.

Exportable surpluses are anticipated to be significant in the MY 2005/06, in all grain and feed crops. Actual exports may surge at about 1 MMT of corn, over 500-600 thousand MT of wheat and about 450 thousand MT of barley.
Romania’s trade regime with grains is moderately protective, with no licensing system in place, except for the commodities under preferential quotas.

After last year’s extremely tight situation, which led to spectacular appreciation of wheat, barley and corn domestic prices, over the MY 2004/05 domestic bids have crept down bit by bit.

Nonetheless, local wheat (either for milling or for feed) enjoyed no demand by exporters in the context of an abundant regional supply, which made inventories from neighboring countries more affordable.

This situation pushed farmers for price lessening towards the end of CY2004. In-silo prices for milling wheat reached $150-160/ton in November-December 2004, 33 percent down from the corresponding 2003 period. The beginning of the year 2005 brought some price appreciation (to $170/MT), as many market operators revived their activity with the upcoming new crop on the horizon.

Barley prices dropped immediately after harvest to levels around $100/MT (in-silo) and were steady in the following months, making this commodity the best seller in the market, both domestically and for export purposes.

Farmers have been quite displeased with the bids offered for domestic corn, which have constantly depreciated after the October harvest. The tremendous carryover seems to be giving the buyer extra bargaining power, although an additional reason for the current downward scenario seems to be related to product quality, which led farmers to try to sell as soon as possible and avoid paying additional storage for a low grade corn.
MGR Archive 19.4.2005
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