September 4, 2012
Romania's 2012 grain production may drop 36% on year
Romania, one of EU's eight largest grain producers, is likely to record the largest dip in production of 35.8% on-year in 2012.
According to an EU Commission report, much of Europe has been affected by a severe drought, which has led to decreased yields of many crops. Romania has been particularly badly affected. In response, the Romanian government announced EUR43 million (US$54 million) worth of support for troubled farmers. Applications for the funds are to be made by mid-October, with dispersal to come from monies allocated both from the 2012 and 2013 budgets.
Despite severe shortfalls in grain production in Spain, Romania, and Hungary, total production for the year is forecast to be only 2% below the average for the last five years. The EU is set to remain a net exporter of cereals for the year.
This should help soften global price increases on the level that occurred in 2008, prompting social unrest in some developing countries. EU agriculture commissioner Dacian Ciolos stated that the recent developments in world food markets highlighted the need for an effective and sustainable common agricultural policy (CAP). A significant reform of the CAP, a system of subsidies and development funds for farmers in EU member states, is currently under negotiation.
Agriculture is hugely important for the Romanian economy. The sector comprised 7.2% of nominal GDP in 2011, and accounts for up to 40% of employment. Given this, the fall in output will damage the economy and put further strain on government finances already amid a struggling European economic climate. The government must be careful to abide by the fiscal conditions imposed by the IMF as part of the Stand-By Arrangement agreed in 2011 that reassures markets of Romania's creditworthiness.