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Agriculture: Drought and VAT reduction for food, contracts in 2015 agriculture
The farming sector was marked in 2015 by two major events: VAT reduction for food and drought. While VAT reduction for food from 24% to 9% offered a new chance to the development of local food industry, which generated more than 6% of GDP, drought present in spring and summer created serious problems in agriculture with direct impact on economic growth.
2015 also represented the debut of the new National Rural Development Program (PNDR) 2014-2020, already materialised in the selection of 1,114 projects of 68 million euros, even though the number of financing requests received by the Agency for Rural Investment Financing (AFIR) was 6 times higher (7,697) and funds requested exceeded 1.55 billion euros.
Although the field of agriculture and that of rural development were in the top in 2015 for European fund absorption (90% absorption rate), there is still a risk of disengaging 800 million euros for the old PNDR 2007-2013 and about 40% of funds allocated for Romania through the Operational Fishing Program 2007-2013.
The irrigation law, a subject treated with much “passion”in 2015, providing funds of one billion euros in the next 5 years for the modernization of the main irrigation infrastructure did not convince Parliament to allocated the money needed for the first investment year in the Ministry of Agriculture budget.
* Crops on the fall in 2015
Romania’s corn crops dropped by 30% in 2015 because of draught, from 11 million tons in 2014 to 7.2 million tons although the domestic necessary amount of corn does not exceed 4.5 million tons. 54,841 tons of corn are added to the overall crop, with an average 3.18 tons/ha obtained from 17,212 ha grown for seed.
Despite the low corn yield, the total quantity exported in the first 9 month grew 2.5 times, up to 3.86 million tons compared to 2014. Exports of corn and cigarettes generated a third of foodstuff export incomes, Romania having excess in the foodstuff trade.
The sunflower seed yield for consumption and seed indicated crops of 1.53 million tons in 2015, an average of 1.5 tons/ha, on the drop compared to the previous year when crops exceeded 2.1 million tons. Although crops were reduced compared to 2014, specialists estimate that Romania will have export availabilities when needed consumption totals only 750,000 tons.
The average per hectare wheat crops was 3.68 tons in 2015 compared to 3.64 tons in 2014, and the overall yield exceeded 7.5 million tons, compared to 7.4 million tons the previous year. The average per hectare crop for barley exceeded 4.03 tons, while in 2014 it was only 3.8 tons and the overall yield reached 1.051 million tons.
Reap crops slightly dropped in 2015, from a per hectare average of 2.57 tons in 2014 to 2.36 tons per hectare in 2015, totalling 956,886 tons.
According to a EC September report, Romania’s cereal production was supposed to drop by 25.8% in 2015, compared to 2014, more than estimated by EC specialists in April, Romania being in the top of biggest losers in 2015 with a cereal yield of only 16.6 million tons.
The 2016 budget of the Ministry of Agriculture is about 13.443 billion lei, to which an amount of 7.39 billion lei is added as EU foreign contribution to finance PNDR 2014-2020, appearing as income in the AFIR budget. The overall budget for 2016 is 20.83 billion lei, representing 2.81% of GDP.