Required Report - public distribution

**Date:** 5/21/2004

**GAIN Report Number:** RO4008

RO4007

**Romania**

**Grain and Feed**

**Annual Report**

**2004**

**Approved by:**

![](media/image1.wmf)Brian Goggin

U.S. Embassy Bucharest

**Prepared by:**

Cristina Cionga

**Report Highlights:**

A significant recovery from last year's draught-devastated crop is
expected for grain and feed in Romania in MY2004/05, though current
persistent dryness may jeopardize yield potential by harvest. U.S. wheat
exports to the region (Romania, Bulgaria, Serbia) reportedly reached
550,000 MT, of which Romania officially imported over 170,000 MT by
April 2004. FAS Bucharest estimates that about 300,000 MT of milling
wheat will be imported in MY2004/05, but exportable surpluses of feed
barley and corn will be available.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Unscheduled Report

Sofia \[BU1\]

\[RO\]

Table of Contents

[**PRODUCTION 3**](#production)

[Crop Prospects 4](#crop-prospects)

[Wheat: Production, Supply and Demand
5](#wheat-production-supply-and-demand)

[Barley: Production, Supply and Demand
6](#barley-production-supply-and-demand)

[Corn: Production, Supply and Demand
6](#corn-production-supply-and-demand)

[TRADE 7](#trade)

[Table 1. Import Duties in CY2004 on Selected Grain Products
7](#table-1.-import-duties-in-cy2004-on-selected-grain-products)

[Chart 1. Romania's Wheat Suppliers, July 2003-March 2004
8](#chart-1.-romanias-wheat-suppliers-july-2003-march-2004)

[Wheat: Import Trade Matrix 9](#wheat-import-trade-matrix)

[Barley: Import Trade Matrix 9](#barley-import-trade-matrix)

[Corn: Import Trade Matrix 10](#corn-import-trade-matrix)

[Corn: Export Trade Matrix 10](#corn-export-trade-matrix)

[CONSUMPTION 11](#consumption)

[Food Grains 11](#food-grains)

[Feed Grains 11](#feed-grains)

[DOMESTIC SUPPORT POLICY 12](#domestic-support-policy)

[Table 2. "Green Box"-type measures of support, budgetary allocations
for crop production in 2004
12](#table-2.-green-box-type-measures-of-support-budgetary-allocations-for-crop-production-in-2004)

[Table 3. Product-Specific Aggregate Measurement of Support: Market
Price Support
12](#table-3.-product-specific-aggregate-measurement-of-support-market-price-support)

[PRICES 13](#prices)

[Prices Table: Wheat 13](#prices-table-wheat)

[Prices Table: Barley 14](#prices-table-barley)

[Prices Table: Corn 15](#prices-table-corn)

#  PRODUCTION

Wheat and barley (including two-raw barley for malt) production for the
marketing year 2004/05 are forecast at 4.9 MMT, and 1.1 MMT
respectively, which would more than double production figures from last
year's drought-devastated crop.

Cereal production in 2003/04 in Romania reached its lowest level in
almost 40 years, as a result of both poor yields and shrinkage in the
harvested area. Unfavorable weather conditions hit the southeast Balkan
and Danube-basin region, and were particularly extreme in Romania
reducing winter grain production to levels that turned the country into
a net importer throughout the marketing year. Farmers had a very short
planting window, due to a late summer harvest, heavy October rains and
an unusually early winter. Temperatures reached historical lows in the
winter - spring of 2003 that caused considerable winterkill and damaged
the re-emerging plants. Low rainfall and extreme heat in spring and
summer followed, that further contributed to low yields.

Strongly affected by these extreme weather conditions, local wheat was,
however, able to meet local milling standards. The Romanian Ministry of
Agriculture's official average yield estimate stood at 1.7 MT/HA on a
total 1.4 million HA harvested, resulting in an output of 2.4 MMT. The
highest yields and best quality were obtained in western Romania, with
2.5-3 MT/HA in Timis and Arad, while most counties in the Danube Plain
and Moldova were devastated by drought. Winter barley had a similar
pattern, with official estimates of 235,000 MT, derived from an average
yield of about 2 MT/HA on 116,000 HA cropped, with large disparities
ranging from 2.4-3 MT/HA in west (Timis, Arad), to 0. 2-0.5 MT/HA in
south and east (Baragan Plain and Moldova). Also, a modest production of
about 305,000 MT of malting two-raw barley was officially reported.

FAS Bucharest's wheat production estimate for MY 2003/04, resulting from
field observations and data from industry, corroborated with satellite
pictures, were 2 MMT, of which about half kept in reserve on-farm. Our
average yield estimate was 1.4 MT/HA,

The MY 2003/04 Romanian corn crop is officially estimated at a record
level of about 8.8 MMT [(derived from a total harvested area of 3.1
million hectares and average yields of over 2.8 MT/HA]{.mark}).

FAS Bucharest's estimate is significantly lower, i.e., about 7 MMT, as
satellite pictures and field observations indicate that the extended
drought period shrank the total 3 million hectares planted to corn in
spring by about 10 percent at harvest time, after plant development had
been timely aided by May rainfalls[.]{.mark} Our average yield estimate
is 2.6 MT/HA, with productions close to 3 MT/HA in northwest and
northeast to just 2.2-2.4 MT/HA across the southern counties, from west
(Oltenia) to east (Dobrogea), due to corn vulnerability to dryness and
high temperatures, and the high cost of production (chiefly fuel for
drying). These figures are consistent with industry's assessment of corn
supply in MY 2003/04.

A number of reasons may explain the discrepancy in numbers between the
official estimates and our figures. In the first place, given the poor
domestic and regional harvest, much production was stored for on-farm
use and stayed out of the market, making estimates more difficult.
Secondly, as already shown, differences were large among the several
growing regions, which were unevenly affected by weather.

##  

## Crop Prospects

Winter crops were planted under adequate conditions, in terms of soil
moisture, in the winter of 2003, especially in the farms that were able
to sow within the optimum period, which lasted until October 15. After
October 16 an extremely rainy period followed, so that sowing could
resume only towards the end of October.

Official statistics show that 66 percent of the area planted to wheat,
96 percent of barley area and 47 percent of two-row barley area were
sown in the optimum period. Temperature and moisture in the fall of 2003
were favorable to crop growth and hardening.

The interval October 1 -- 15 provided the necessary temperature and
light for plant growth. In the period October 16 -- 30, the weather
cooled down, and the cloudiness reduced photosynthesis intensity. In
November, the vegetation rate was normal; the first light frost on soil
appeared only in early December. Temperatures in December and January
were moderately low in most agricultural areas, and hence plants did not
suffer from severe cold. The lowest temperature in the southern plain
(the main cereal growing area) was minus 18.8 Celsius degrees, recorded
on January 11, 2004, but all the fields had a protecting snow cover by
that time. Most crops developed very well and thus in February the
plants were strong, with a good density (more than 350-500 plants/square
meter), bearing 1 --2 tillers and with a well-developed root system.

Especially the soil moisture throughout the soil profile and the good
development of the root system prevented plant damage that extensively
occurred in the previous year, despite the fact that the deep soil
humidity was good. At this stage of the vegetation period, when the
future leaves and roots were about to develop, all needed nutrients
should have been provided in soil. Nonetheless, chemical fertilizer
supply has been very tight during the season. At the end of March 2004,
the official statement was that 60 percent of the cereal crops sown last
fall had been fertilized.

Yields in winter crops are also threatened by early pest attacks. The
evolution of pests and disease-inducing agents need careful
investigation and adequate treatments, given the fact that a large
portion of the seed sown in fall was infested with pathogens. This is
especially true for the small farmers, who do not use certified seeds.
In April plant growth was aided by good weather conditions, so that in
most regions the plant density as well as tallness are currently high,
but at the same time could provide a favorable environment for pest and
disease development. Adding to these, an inadequate crop rotation
pattern (since many farmers grow cereals for many years in a row in the
same fields) helps to maintain an intense pathogen pressure. There are
already reported cases of germ damage.

The Ministry of Agriculture forecasts to harvest about 2 million HA
planted to winter wheat and rye, resulting in a total of 5.4 MMT. FAS
Bucharest area estimate is lower, i.e., 1.8 million HA, because
excessive dryness has already extensively damaged winter crops in
Eastern Romania (especially Dobrogea). The yield figure is consistent
with the official one, since field observations and satellite pictures
indicate a good plant development in most growing regions, which, under
normal conditions, should lead to average yields of about 2.7 MT/HA.
Nonetheless, according to the weather forecast, the current year will be
dry, which may further reduce yield potential.

For winter barley, current Romanian Ministry of Agriculture official
production estimates are expected to exceed 550,000 MT, derived from a
total area of 180,000 HA and an average yield of 3100 kg/HA. Some 50,000
HA were planted to winter two-raw barley, the production estimate
currently standing at 139,000 MT (corresponding to an average yield of
2.8 MT/HA), while spring two-raw malting barley was planted on 214,000
HA and is forecast to result in 500,000 MT. FAS Bucharest's total
projected barley production for the marketing year 2005/05 is 1.1 MMT on
a total of 410,000 HA harvested.

According to the official Ministry of Agriculture statistics, about 3.2
million HA will be planted to corn this spring which, again assuming
normal conditions, will result in a production figure of almost 10
million MT. FAS Bucharest's corn production estimate will be 8.7 MMT, on
a total of about 3.1 million HA harvested, since the forecasted dry and
hot summer will likely affect both yield and area harvested.

Other production figures estimates in the MY 2004/05 are as follows:
487,000 MT of oats (on 249,000 HA planted), 8.8 MMT of fodder crops (on
490,000 HA planted), and 2000 MT of rice (on 1000 HA planted).

The good yield potential projected for this marketing year is partly
based on the on-going extensive works to revamping the irrigation system
in Romania. Repair works on 2,000 pumping stations were reportedly
completed at the end of March, and are prepared to provide water to some
1.5 million hectares.

### Wheat: Production, Supply and Demand

  --------------------- ----------- ------------- ----------- -------------- ----------- -------------- ---------
  **Romania**                                                                                           

  **Wheat**                                                                                             

                        **2002**    **Revised**   **2003**    **Estimate**   **2004**    **Forecast**   **UOM**

                        **USDA      **Post        **USDA      **Post         **USDA      **Post         ** **
                        Official    Estimate      Official    Estimate       Official    Estimate       
                        \[Old\]**   \[New\]**     \[Old\]**   \[New\]**      \[Old\]**   \[New\]**      

  **Market Year Begin**             07/2002                   07/2003                    07/2004        MM/YYYY

  **Area Harvested**    2190        2190          1500        1500           0           1800           (1000 HA)

  **Beginning Stocks**  1980        1507          1430        951            780         248            (1000 MT)

  **Production**        4300        4300          2000        2000           0           4900           (1000 MT)

  **TOTAL Mkt. Yr.      350         422           2300        1950           0           300            (1000 MT)
  Imports**                                                                                             

  **Jul-Jun Imports**   350         422           2300        1950           0           300            (1000 MT)

  **Jul-Jun Import      0           0             0           200            0           30             (1000 MT)
  U.S.**                                                                                                

  **TOTAL SUPPLY**      6630        6229          5730        4901           780         5448           (1000 MT)

  **TOTAL Mkt. Yr.      135         128           50          3              0           135            (1000 MT)
  Exports**                                                                                             

  **Jul-Jun Exports**   135         128           50          3              0           135            (1000 MT)

  **Feed Dom.           1750        1600          1550        1000           0           1500           (1000 MT)
  Consumption**                                                                                         

  **TOTAL Dom.          5065        5150          4900        4650           0           4900           (1000 MT)
  Consumption**                                                                                         

  **Ending Stocks**     1430        951           780         248            0           413            (1000 MT)

  **TOTAL               6630        6229          5730        4901           0           5448           (1000 MT)
  DISTRIBUTION**                                                                                        
  --------------------- ----------- ------------- ----------- -------------- ----------- -------------- ---------

### 

### 

### 

###  

### 

### Barley: Production, Supply and Demand

  --------------------- ----------- ------------- ----------- -------------- ----------- -------------- ---------
  **Romania**                                                                                           

  **Barley**                                                                                            

                        **2002**    **Revised**   **2003**    **Estimate**   **2004**    **Forecast**   **UOM**

                        **USDA      **Post        **USDA      **Post         **USDA      **Post         ** **
                        Official    Estimate      Official    Estimate       Official    Estimate       
                        \[Old\]**   \[New\]**     \[Old\]**   \[New\]**      \[Old\]**   \[New\]**      

  **Market Year Begin**             07/2002                   07/2003                    07/2004        MM/YYYY

  **Area Harvested**    296         296           250         317            0           410            (1000 HA)

  **Beginning Stocks**  77          20            95          9              45          49             (1000 MT)

  **Production**        660         660           450         540            0           1100           (1000 MT)

  **TOTAL Mkt. Yr.      200         75            200         150            0           30             (1000 MT)
  Imports**                                                                                             

  **Oct-Sep Imports**   100         78            200         130            0           40             (1000 MT)

  **Oct-Sep Import      0           0             0           0              0           0              (1000 MT)
  U.S.**                                                                                                

  **TOTAL SUPPLY**      937         755           745         699            45          1179           (1000 MT)

  **TOTAL Mkt. Yr.      242         241           0           0              0           300            (1000 MT)
  Exports**                                                                                             

  **Oct-Sep Exports**   99          98            0           40             0           220            (1000 MT)

  **Feed Dom.           400         330           500         230            0           380            (1000 MT)
  Consumption**                                                                                         

  **TOTAL Dom.          600         505           700         650            0           810            (1000 MT)
  Consumption**                                                                                         

  **Ending Stocks**     95          9             45          49             0           69             (1000 MT)

  **TOTAL               937         755           745         699            0           1179           (1000 MT)
  DISTRIBUTION**                                                                                        
  --------------------- ----------- ------------- ----------- -------------- ----------- -------------- ---------

### 

### 

### Corn: Production, Supply and Demand

  --------------------- ----------- ------------- ----------- -------------- ----------- -------------- ---------
  **Romania**                                                                                           

  **Corn**                                                                                              

                        **2002**    **Revised**   **2003**    **Estimate**   **2004**    **Forecast**   **UOM**

                        **USDA      **Post        **USDA      **Post         **USDA      **Post         ** **
                        Official    Estimate      Official    Estimate       Official    Estimate       
                        \[Old\]**   \[New\]**     \[Old\]**   \[New\]**      \[Old\]**   \[New\]**      

  **Market Year Begin**             10/2002                   10/2003                    10/2004        MM/YYYY

  **Area Harvested**    2666        2666          2400        2700           0           3100           (1000 HA)

  **Beginning Stocks**  644         842           800         974            250         304            (1000 MT)

  **Production**        7300        7300          6000        7020           0           8700           (1000 MT)

  **TOTAL Mkt. Yr.      200         252           200         260            0           26             (1000 MT)
  Imports**                                                                                             

  **Oct-Sep Imports**   200         252           200         260            0           26             (1000 MT)

  **Oct-Sep Import      0           0             0           0              0           0              (1000 MT)
  U.S.**                                                                                                

  **TOTAL SUPPLY**      8144        8394          7000        8254           250         9030           (1000 MT)

  **TOTAL Mkt. Yr.      144         170           50          70             0           800            (1000 MT)
  Exports**                                                                                             

  **Oct-Sep Exports**   144         170           50          70             0           800            (1000 MT)

  **Feed Dom.           5800        5800          5300        6700           0           6000           (1000 MT)
  Consumption**                                                                                         

  **TOTAL Dom.          7200        7250          6700        7880           0           7300           (1000 MT)
  Consumption**                                                                                         

  **Ending Stocks**     800         974           250         304            0           930            (1000 MT)

  **TOTAL               8144        8394          7000        8254           0           9030           (1000 MT)
  DISTRIBUTION**                                                                                        
  --------------------- ----------- ------------- ----------- -------------- ----------- -------------- ---------

# 

# TRADE

Romania's trade regime with grains is moderately protective, with no
licensing system in place, except for the commodities under preferential
quotas (Table 1). In July 2003, the GOR suspended customs duties for 1
MMT of wheat. In October 2003, the TRQ and the licensing system were
revoked and milling wheat imports fully liberalized until the new
harvest. At the same time, imports of barley malt as well as corn for
feed and processing were fully liberalized until June 30. 2004.

### Table 1. Import Duties in CY2004 on Selected Grain Products

  --------------- ----------------------- --------------- -----------------
  HS              Product                 MFN Tariff      Special EU
                                                          Preference

  1001            Wheat                                   

  1001.1000       Durum what              Ex              Ex

  1001.9091       For sowing              25              0 for TRQ (2)

  1001.9099       Common wheat, other     25 (1)          0 for TRQ (2)

                                                          

  1003            Barley                                  

  1003.0010       For sowing              25 (3)          18.8 for 1,118 MT

  1003.0090       Other                   25 (1)          18.8 for 55,882
                                                          MT

                                                          

  1005.10         Corn seeds for sowing   3               0 for 1,000 MT

  1005.9000       Other                   30 (1)          0 for 49,000 MT

                                                          

  1006.10         Rice, paddy rice                        

  1006.10.21, 23, Other                   10              0 for TRQ (4)
  25, 27, 92, 94,                                         
  96,98                                                   

  1006.20         Cargo or brown rice     10              0 for TRQ (4)

  1006.24         White rice              25              0 for TRQ (4)

                                                          

  1101.00         Wheat flour             40              0 for 3,000 MT
  --------------- ----------------------- --------------- -----------------

\(1\) Customs duties suspended between Jan 1-June 30.

\(2\) TRQ FOR WHEAT IS 125,000 MT.

\(3\) Customs duties suspended between Jan 1-April 30.

\(4\) TRQ for rice is 10,000 MT.

Wheat and barley have been significantly traded by Romania since July
2003, as drought tightened domestic supplies and elevated domestic and
regional prices. The domestic market prices were driven lower by import
pressure in February and March, and the pace of Romania's wheat imports
remains strong until the new harvest.

According to the Romanian Customs, up to the end of March 2004, Romania
imported over 1.8 MMT of wheat, the main sources being France, the
Russian Federation, Hungary and Canada (Chart 1). The US supplied 9
percent (about 170,000 MT) of this amount, despite the fact that on
April 8 the accumulated exports to Romania reportedly stood at 556,000
MT (see US Export Sales Report of April 15, 2004). This is consistent
with the figures provided by local traders on transshipments on the
Danube towards Serbia, Bulgaria and western destinations, which make the
balance. Import prices have appreciated very much since December, after
regional supplies dried up and Romania had to resort to farther sources.

As the new harvest is approaching and the perspectives for the new crop
year are relatively good, currently farmers have started selling their
inventories stored on-farm. With a total monthly urban consumption
averaging 120,000 MT, almost 500,000 MT of wheat are still necessary
until July, of which likely 150,000 will be likely sourced outside the
domestic market.

For the MY 2004/05, we anticipate that about 300,000 MT of wheat
(especially with good milling parameters, for blending) will be needed
to augment the domestic supplies.

About 130,000 MT of barley (almost all for malt) were imported to
Romania before the end of March, the major suppliers being France, the
Russian Federation, the Czech Republic, Hungary, and Ukraine. With the
area planted to spring two-raw barley significantly increased and good
crop prospects, barley imports are expected to dramatically diminish
during the MY 2004/05, to some 30,000 MT in total. Feed barley export
prospects, on the other hand, will likely be in the range of 300,000 MT,
assuming normal conditions until harvest.

About 180,000 MT corn benefited from customs duty exemptions during the
October 2003-March 2004 period, mainly originated from Hungary, the
Republic of Moldova, the Czech Republic, the Slovak Republic, and
Brazil. The temporary duty suspension will last until June 30, after
which corn imports will be taxed at 30 percent, except for the
EU-originated imports, which enjoy duty-free regime for a 49,000 MT TRQ.
FAS Bucharest anticipates that, given the large inventories still
existing on-farm, corn imports will slow down and just about 70,000 MT
more will be brought to Romania until the end of the current marketing
year. Again assuming normal weather conditions, Romania's exportable
surplus of corn will reach 800,000 MT during the MY 2004/05.

###  Chart 1. Romania's Wheat Suppliers, July 2003-March 2004

![](media/image2.wmf)

# 

### Wheat: Import Trade Matrix

  ---------------------------------- ------------------ ------------ ------
  **Country**                        Romania                         

  **Commodity**                      Wheat                           

  Time Period                        CY                 Units:       MT

  Imports for:                       2003                            

  U.S.                               21                              

  Others                                                             

  Hungary                            516000                          

  Russia                             390000                          

  France                             390000                          

  Canada                             170000                          

  Bulgaria                           123000                          

                                                                     

                                                                     

                                                                     

                                                                     

                                                                     

  Total for Others                   1589000                         

  Others not Listed                  135000                          

  Grand Total                        1724000                         
  ---------------------------------- ------------------ ------------ ------

# 

# 

# 

### Barley: Import Trade Matrix

  ------------------------------------ ---------------- ----------- ------
  **Country**                          Romania                      

  **Commodity**                        Barley                       

  Time Period                          CY               Units:      MT

  Imports for:                         2003                         

  U.S.                                 0                            

  Others                                                            

  France                               48000                        

  Russian Federation                   22000                        

  Hungary                              18000                        

  Czech Rep.                           10000                        

                                                                    

                                                                    

                                                                    

                                                                    

                                                                    

                                                                    

  Total for Others                     98000                        

  Others not Listed                    7000                         

  Grand Total                          105000                       
  ------------------------------------ ---------------- ----------- ------

# 

# 

### Corn: Import Trade Matrix

  ------------------------ ------------- ------------------- -------------
  **Country**              Romania                           

  **Commodity**            Corn                              

  Time Period              CY            Units:              MT

  Imports for:             2003                              

  U.S.                     0                                 

  Others                                                     

  Hungary                  176000                            

  Rep. of Moldova          50000                             

  Slovakia                 16500                             

  Czech Rep.               13000                             

  Brazil                   11000                             

  Austria                  2600                              

  Argentina                1700                              

                                                             

                                                             

                                                             

  Total for Others         270800                            

  Others not Listed        4000                              

  Grand Total              274800                            
  ------------------------ ------------- ------------------- -------------

### Corn: Export Trade Matrix

  ----------------------- --------------- ------------------ -------------
  **Country**             Romania                            

  **Commodity**           Corn                               

  Time Period             CY              Units:             MT

  Exports for:            2003                               

  U.S.                    0                                  

  Others                                                     

  Turkey                  25000                              

  Morocco                 20750                              

  Italy                   15900                              

  Spain                   11600                              

  Greece                  11200                              

  Bulgaria                10300                              

                                                             

                                                             

                                                             

                                                             

  Total for Others        94750                              

  Others not Listed       5950                               

  Grand Total             100700                             
  ----------------------- --------------- ------------------ -------------

# 

# 

# 

# 

# CONSUMPTION

## Food Grains

Unlike in other recent years, domestic wheat quality was assessed to be
generally good in the MY 2003/04, with inherent inter-regional
differences from excellent in the Western Plain, medium quality in
Moldova Plain and Baragan, to very poor (due to pest attacks) in
Dobrogea and Oltenia. Nonetheless, demand overgrew supply by far, since
farmers were reluctant to sell and kept some one third of the total
estimated production for self-consumption. This, together with the
scarce regional inventories, pushed prices to unprecedented levels.

The authorities took a number of measures in an attempt to cope with the
wheat shortage in Romania. A first offering of 150,000 MT of wheat was
released from the State Reserve in the first part of the marketing year,
and is supposed to be replenished by September 2004. After January 15,
State Reserves opened a tender for a second offering of 150,000 tons of
wheat to be delivered by March 31. Recent developments, such as the
approaching harvest, plus a sharp drop in the South American values,
exerted pressure on the Black Sea prices, which made the industry quite
reluctant to buy.

Domestic mill demand continues to stand close to 3 MMT of wheat, as
cereal-based products are the main source of calorie intake of the
average consumer in Romania.

Although diminishing, corn still holds an important share in the rural
household diet. About 800,000 MT of corn are annually consumed as food
in Romania.

As weather wreaked havoc during the entire season before harvest,
domestic barley for malting was extremely scarce in the MY 2003/04,
despite the fact that most of the large breweries had pre-financed
production and offered high prices. Deficient indigenous raw material
(both in terms of quantity and malting parameters) affected the industry
in the CY 2003. The beer industry continued to consolidate and the
regional players almost disappeared. Market growth, nonetheless,
exceeded the most optimistic projections, nearly reaching 12 percent.
Annual domestic consumption per capita was estimated at 58 liters, in
comparison with over 100 liters in Central Europe. The top five largest
players in the market: the Austrian Brau Union group, SABMiller,
Interbrew, Carlsberg (via Tuborg), and Bere Mures, which combined hold
76 percent of the total Romanian beer market.

## Feed Grains

Livestock numbers continued to grow in CY2003. The sector relayed
primarily on domestic corn production, since feed wheat and barley
inventories were very scarce. A large portion (about 4 MMT) of last
October's corn production was stored on-farm for household consumption,
despite unusually high bids in the following months. Corn holders,
expecting further price rise, sold only small lots. In spring, domestic
prices have started to decline, as farmers began selling for financing
the on-going planting campaign.

Production growth in the livestock sector surpassed growth in the crop
sector and will continue to go up in the coming years, based on
substantial subsidies from the Ministry of Agriculture. FAS Bucharest
estimates that about 1.5 MMT of wheat, 380,000 MT of barley and about 6
MMT of corn will be used as feed during the MY 2004/05.

# DOMESTIC SUPPORT POLICY

Commercial crop production continues in the FY2004 (January-December) to
be supported via a wide range of policy schemes. Some of these qualify
as "Green Box"-type measures of support, some others can be defined as
market price support and count in the Aggregated Measurement of Support
(see Tables 2 and 3). The total budgetary outlays sum up to \$430
million (14,581.3 billion lei), as follows:

### Table 2. "Green Box"-type measures of support, budgetary allocations for crop production in 2004 

  ------------------ --------------------------------------- -------------
  Measure type       Description of measure                  Monetary
                                                             value
                                                             (billion lei)

  Subsidies for      Price reductions granted to producers   921.6
  agricultural       in order to stimulate the use of        
  inputs             certified seeds.                        

  Structural and     Expenditures for land reclamation;      2,241
  infra-structural   maintenance of irrigation and drainage  
  services           system; expenditures to provide         
                     electric power.                         

  Research and       Acid and alkaline soils improvement.    60
  development of                                             
  infrastructure                                             
  services                                                   

  Crop pest and      Pest and disease prevention and control 200
  disease prevention in the crop sector.                     
  and control                                                

  Agricultural       Budgetary allocations in order to       53.7
  insurance matching stimulate the use of crop insurance     
  funds              schemes                                 

  Payments in case   Budgetary payments in case of natural   670
  of natural         disasters                               
  disasters                                                  

  Support to small   Payments decoupled from production      8,600
  farmers            granted to farms holding up to 5 ha of  
                     cultivated land                         

  Total                                                      12,746.3
  ------------------ --------------------------------------- -------------

Average exchange rate in 2003: 1 \$ = 34000 lei.

Source: Ministry of Agriculture and Rural development

### Table 3. Product-Specific Aggregate Measurement of Support: Market Price Support

+-----------------------------------+-------------------+-------------+
| Product                           | Eligible          | Total       |
|                                   | production        | market      |
|                                   |                   | price       |
|                                   | ('000 MT)         | support     |
|                                   |                   | (billion    |
|                                   |                   | lei)        |
+-----------------------------------+-------------------+-------------+
| Wheat and rye                     | 1800              | 900         |
+-----------------------------------+-------------------+-------------+
| Sunflowerseed                     | 650               | 195         |
+-----------------------------------+-------------------+-------------+
| Sugarbeet                         | 1000              | 270         |
+-----------------------------------+-------------------+-------------+
| Barley for malt                   | 300               | 90          |
+-----------------------------------+-------------------+-------------+
| Rice                              | 1.4               | 7           |
+-----------------------------------+-------------------+-------------+
| Soybeans                          | 300               | 75          |
+-----------------------------------+-------------------+-------------+
| Flax and hamp                     | 10                | 10          |
+-----------------------------------+-------------------+-------------+
| Greenhouse vegetables             | 78                | 234         |
+-----------------------------------+-------------------+-------------+
| Fruits for processing             | 15                | 4.5         |
+-----------------------------------+-------------------+-------------+
| Other                             |                   | 49.5        |
+-----------------------------------+-------------------+-------------+
| Total                             |                   | 1,835       |
+-----------------------------------+-------------------+-------------+

Average exchange rate in 2003: 1 \$ = 34000 lei.

Source: Ministry of Agriculture and Rural Development

Under the price reduction scheme for the use of certified seeds, the
corn crop was not any longer eligible. Disbursements were made for
planting approximately 1 million HA of wheat (the unit subsidy being of
about \$1.2/kilo of certified seed), and 20,000 HA of two-raw barley
(the corresponding unit subsidy being of \$0.9/kilo).

# PRICES

With productions reaching historical lows for wheat and barley and a
very tight regional situation, domestic prices appreciated gradually
over the MY 2003/04.

The typical situation is that processors buy just as much as they need
and they usually lead the price formulation. Nonetheless, transactions
with domestic grain and feed crops were very limited in number.

In-silo prices for wheat exceeded \$200-210/ton in November 2003
(compared to \$100-105/ton in November 2002) in Romania. The scarce
domestic wheat could be procured in January and February 2004 at prices
of about \$240/MT, that is, a 100 percent increase from the same period
of the previous year. After a slight decrease in March and April, wheat
prices are expected to peak at \$250/MT right before the new harvest.

Prices for bread have been gradually increasing in tandem, albeit the
measures taken by the GOR (trade liberalization and releases from the
State Reserves) encouraged a degree of volatility.

Barley prices followed a similar pattern, reaching \$200/MT in February
2004 (more than double from one year earlier) and, respectively, April
2004, but likely to appreciate at \$210 during the last month of the
marketing year.

Bids for domestic corn reached a peak in January 2004 (at \$217/MT),
after which crept down close to \$200/MT, with a tendency to stagnate.
Despite the authorities' efforts to promote higher value crops, corn
continues to be planted every year on about 3 million HA in Romania.

### Prices Table: Wheat 

  ------------------ --------------- ------------------------ ------------
  **Country**        Romania                                  

  **Commodity**      Wheat                                    

  Prices in          US\$            per uom                  MT

                                                              

  Year               2003            2004                     \% Change

  Jan                114.7           236.4                    106%

  Feb                120.7           240.1                    99%

  Mar                129.6           229.7                    77%

  Apr                135.5           215.3                    59%

  May                150.8                                    

  Jun                160.5                                    

  Jul                167.7                                    

  Aug                164                                      

  Sep                171.6                                    

  Oct                190                                      

  Nov                199.4                                    

  Dec                227.2                                    

                                                              

  Exchange Rate      monthly ave     Local Currency/US \$     
  ------------------ --------------- ------------------------ ------------

### Prices Table: Barley

  -------------------- -------------- ------------------------ ------------
  **Country**          Romania                                 

  **Commodity**        Barley                                  

  Prices in            US\$           per uom                  MT

                                                               

  Year                 2003           2004                     \% Change

  Jan                  84.52          192.64                   128%

  Feb                  87.48          201.96                   131%

  Mar                  93.40          189.54                   103%

  Apr                  108.43         201.96                   86%

  May                  139.82                                  

  Jun                  170.89                                  

  Jul                  139.82                                  

  Aug                  161.57                                  

  Sep                  177.11                                  

  Oct                  186.43                                  

  Nov                  189.54                                  

  Dec                  189.54                                  

                                                               

  Exchange Rate        monthly ave    Local Currency/US \$     
  -------------------- -------------- ------------------------ ------------

### 

### Prices Table: Corn

  ------------------ --------------- ------------------------ ------------
  **Country**        Romania                                  

  **Commodity**      Corn                                     

  Prices in          US\$            per uom                  MT

                                                              

  Year               2003            2004                     \% Change

  Jan                105.60          217.5                    106%

  Feb                114.63          211.3                    84%

  Mar                135.59          195                      44%

  Apr                141.57          201                      42%

  May                164.68                                   

  Jun                167.79                                   

  Jul                177.11                                   

  Aug                180.21                                   

  Sep                155.36                                   

  Oct                139.82                                   

  Nov                170.89                                   

  Dec                201.96                                   

                                                              

  Exchange Rate       monthly ave    Local Currency/US \$     
  ------------------ --------------- ------------------------ ------------