Romanian farmers face unprecedented challenges due to input prices, extreme drought, and lack of irrigation systems

A sector study conducted by an agricultural financing company, revealed the challenges that Romanian farmers and agricultural inputs that distributors have faced recently in the context of the military conflict in Eastern Europe, the increase in the price of agricultural inputs, the extreme drought, and the lack of irrigation systems. According to Romanian entrepreneurs active in this field, 2022 was a year with modest increases, below the inflation rate, or decreases in activity.

The increased nitrogen-based fertilizer prices influenced agriculture, rising  from 900 lei/ton in 2020 to more than 4.000 lei/ton in 2021. In addition, the price of natural gas has increased by 40%, along with an increase of 19 % of the cost of electricity and diesel by 21%, according to data presented by the president of the Association of Romanian Farmers, Daniel Bănoiu, at the end of 2022.

The increased price of diesel fuel is one of the critical factors that contributed to the decrease in agricultural harvest and hampering the activities of farmers. According to data in the oil market, the prices at the pump should increase by approximately 3% in the next period.

“We know that agriculture in Romania is going through a difficult and underfinanced period. We were close to distributors and farmers in all areas of the country, trying to understand their problems and provide them with quick solutions that helped them through this turbulent period”, stated Adina China Birta, General Manager of agricultural financing company.

There are fears in the sector that farmers could reach a questioning stage regarding farm profitability unless fuel prices fall or mitigate by a series of government subsidies.

“Diesel prices were and remain very high, and this directly reflects in the establishing crops costs and their profitability”, says Marius Darjan, a farmer from Brăila County who cultivates more than 50 hectares of agricultural land.

There is also a need for more bargaining power among small farmers, which could help them obtain the quantities of fuel needed to establish and cultivate land at affordable prices.

“Diesel has reached an inflated price. To continue farming, we, the small farmers, need a drop in the diesel price or some help from the authorities. At a small level, it is difficult to resist, compared to farmers who work many hectares and have the power to negotiate prices to their advantage”, points out Ane Mari Surugiu, a farmer from the southern part of the country who grows around 10 hectares of vegetables.

Distributors experienced stagnant or declining numbers

Similarly, the distributors were also affected by the market turbulence and the lack of farmers’ confidence against the negative news background on agriculture’s evolution, being forced to sell part of the goods at a loss.

“Agricultural input prices have fallen, and we have had to sell at a loss. We sell only chemical, nitrogen, and complex fertilizers. We have no seeds, pesticides, or other inputs. In the past, we had operational problems, forcing us to turn to imports. For example, we bought about 8.000 tons of agricultural inputs for 4.500 lei + VAT per ton, which we sold for 3.000 + VAT. In 2022, compared to the previous year, the company suffered losses of about 10-15%”, explains Alina Deacu, Sales Director of  a distribution company.

Even in cases where they did not incur losses, distributors failed to make profits that matched the runaway inflation of 2022.

“We tried to automate some of the repetitive processes in our distribution business. At this point, we’ve automated almost everything related to the degeneration of documents or orders. We rely heavily on technology and the opportunities the online environment offers in our customer relationships. We have integrated an efficient and modern order-taking system, expanding the range of products offered, and this has happened at an accelerated pace in the last year. However, in 2022 we had a modest increase compared to the previous year, up to 10%. 2022 was a year when we struggled with rising fertilizer prices. And the war influenced me quite a lot. We work a lot with farmers who grow vegetables, and people were more reluctant to use agricultural inputs, so the average value per order dropped considerably”, says Bogdan Silviu Alexandru, director of a distribution company that operates in the western part of the country.

The prospects of the agricultural sector in 2023

There are fears among farmers and distributors that if prices continue to fluctuate and subsidies received from the authorities do not increase. If the drought continues, they may end up in a situation where they can no longer keep their businesses functioning.

At the same time, the grain flow from Ukraine has destabilized Romanian farms, and farmers are saying that if this trend continues, the situation could worsen even more.

“Last year, we handled the cereals sell as best as we could.  We don’t know what will happen this year, considering the large amount of grain that enters Romania from Ukraine. Last year some people were left with grain in stock and had to sell it at half price because of this amount of grain coming from Ukraine”, says Marian Ionuț Ștefănică, a farmer.

Moreover, if the development of irrigation systems will not occur, farmers who do not purchase such facilities will suffer a significant decrease in production per hectare, making farms unprofitable. In this unfavorable context, a solution would be developing sustainable agriculture models that can face current and future challenges, considering the rapid evolution of climate change and economic uncertainty.

“We don’t even know what plans to make because it’s complicated. We have no money, and everything is costly. An irrigation drum costs a lot, and we are fighting the drought alone. We cannot afford such a drum because the banks no longer grant us credits, having already made loans. We don’t use fertilizers like we used to. We even halved the amount of inputs we used for corn. We are also trying to reduce the treatment done on wheat to limit ourselves to a single procedure if, in the past years, we did two or three”, explains Lucica Eremia, a farmer who cultivates approximately 50 hectares in the south of the country.