Writing that Romania is the first country to cut off grain exports during the coronavirus pandemic, Bloomberg warned in an article today that this “dramatic move could fan worries about the global food supply.”
The ban on grain and other cereals exports is set out in a military ordinance adopted by the Government in Bucharest last night.
Romania’s decision could also support higher wheat prices. Futures traded in Chicago, the global benchmark, are up 12% from a low in mid-March, Bloomberg further notes. However, the publication argued that “the move is largely symbolic, as Romania, the second-biggest wheat shipper in the European Union, has already harvested and sold much of its crop at this time of the season” and so, less than 1% of EU exports would be affected.
Holde Agri Invest voices concern that ban will affect the local agricultural sector
Holde Agri Invest SA, a Romanian agricultural company operating 7,000 hectares of farmland that expects to be listed on the Bucharest Stock Exchange later this has expressed its concern related to the measures affecting the agricultural sector as included in Military Ordinance 8, which was issued last night, on April 9th. Among other measures, the ordinance has forbidden the export of wheat, barley, oats, corn, rice, flour, soybeans, sunflower, sugar, bakery products and oil.
“This measure has a potential detrimental effect on the financial situation of the Romanian farmers and can negatively impact the whole Romanian agricultural sector. As an example, each year Romania produces between 9 to 10 million of tonnes of wheat, out of which estimated 3,5 million tonnes is used internally, while remained amount is going for an export. At the current moment, Romania does not have the storage capacity to hold this amount of cereal internally. On top of this, forbidding exports will lead to artificially lowering the price of the crops, below the expected price, thus having a negative impact on the financial situation of Romanian farmers who will lose money not being able to sell their crops locally, or will have to sell them with a lower profit margin,” says Holde Agri Invest in a press release.
Moreover, the group argues that the ordinance does not differentiate between conventionally farmed and organic cereals. “At the current moment, Romania has no processing facilities for organic crops which means that in case the ordinance also covers organic farming, all the crops that were grown in organic manner will have to be sold locally, under significantly lower prices obtained for conventional farming, or will have to be stored until the measures are lifted. This has a significant impact on the business of organic farmers, who are in minority in Romania, and can lead to losses and cashflow issues which will impact them on a medium-term.”
Holde Agri Invest adds that it has at this moment 1,500 tonnes of organic wheat for which contract was expected to be sign with a foreign player with a capacity to process organic crops and the company can no longer execute the contract and that the decree puts into question the contract it already has signed and partially executed for 2,000 tonnes of organic sunflower, having sent 1 truck to Austria with remaining 7 are on stand-by, ready to be dispatched.
“According to Military Ordinance no. 8, the procedures for exporting agri-food products in progress at the date of entry into force of the ordinance, are suspended during the period of emergency. This measure is thus causing chaos and concern of the local farmers who were in the progress of executing orders abroad and, that were, in some cases, even paid and partially delivered.”
The agricultural corporation also complains that the stakeholders from the agricultural sector have not been involved in preparing on these measures, given the significant immediate financial impact they will have on the Romanian agricultural sector. “Therefore, the measures concerning the agricultural sector should be elaborated and explained in order to ensure that the business continuity of the sector of such vital important as agriculture is ensured.”