Emerging Markets / November 28, 2016

Trade and Agricultural Production in Romania

Romania is a mid-size country located in Eastern Europe. With a population of more than 21 million, Romania joined the European Union in 2007, which symbolized the important transition that the country underwent from communism to a free market economy. Today, Romania’s US$400 billion dollar gross domestic product is divided into 5% agriculture, 41% manufacturing industry, and 54% services. However, due to Romania’s vast territory and rural population, more than one-fourth of the national labor force is employed within the agricultural industry. Amongst Romania’s top agricultural products are wheat, corn, barley, sunflower seeds, and potatoes. Even though the country’s main trade partners are fellow EU member states, Romania’s privileged geographic location allows for convenient access routes to other Eastern European nations, such as Russia and the Ukraine, as well as Asian markets.

The possibility of better economic relationships between Russia and the Western nations, due to the good disposition of politicians such as President-elect Trump and French presidential candidate François Fillon, could represent an important trade opportunity for Romania. This article explores the status of agricultural and cattle markets in Romania.

Trade and Agricultural Production in Romania

Since 2011, the amount of head of cattle within the Romanian agricultural industry has been growing steadily, totaling 2.1 million head during 2015. Because Romania lacks the appropriate processing equipment and technology to export meat ready for consumer purchase in large quantities, its industry focuses on the export of live cattle, particularly young bulls and calves. Most of these Romanian exports are destined for Mediterranean nations, such as Croatia, Italy, Spain, Greece, and Lebanon. This trade pattern represents good regional integration as well as use of Romania’s maritime outlet into the Black Sea. Furthermore, because of Romania’s key maritime route towards the Mediterranean, Turkey is becoming an increasingly significant trade partner.

In terms of beef production, for 2016, Romania is expected to produce a total 100.000 metric tons of beef, most of which will be consumed domestically. Meanwhile, during the same time-period, the country should import some 43.000 metric tons of beef and export about 16.000. When it comes to pork meat, Romania’s production is much more significant, totaling some 445.000 metric tons during 2016. At the same time, the domestic consumption of pork meat within Romania is much higher, accounting for more than 670.000 metric tons for 2016. Therefore, pork meat imports during 2016 are estimated at 275.000 metric tons, while exports should only account for 45.000 metric tons.

Finally, Romania’s meat industry benefits from incentives and subsidies under the EU’s Common Agricultural Policy (CAP). Under the CAP, agricultural producers have access to several types of incentives. One of these incentives is known as direct payments, which are attributed to producers that abide by EU standards of sustainability and whose production contribute to long-term plans for their respective sector within the common market. Another subsidy scheme is a quota system, which serves to incentivize specific crops, such as cotton or cereals, as determined by the national as well as EU governments.

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