Required Report - public distribution

**Date:** 10/28/2006

**GAIN Report Number:** RO6022

RO6022

**Romania**

**Dairy and Products**

**Annual**

**2006**

**Approved by:**

![](media/image1.wmf)Susan Reid

U.S. Embassy Bucharest

**Prepared by:**

Cristina Cionga

**Report Highlights:**

Industry representatives assess that Romania has the potential to cover
the quota negotiated with the EU (3,057,000 MT, to which a "reserve"
quota may be added in 2009). This together with rising consumption of
dairy products continues to be a driving force for Romania's dairy
industry. Romania requested a transitional period until December 31,
2009 for modernizing milk processing installations, and for organizing
milk collection and standardization centers in compliance with the EU's
structural requirements.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Unscheduled Report

Sofia \[BU1\]

\[RO\]

Table of Contents

[Executive Summary 3](#executive-summary)

[Production 3](#production)

[Production, Supply and Demand Table
4](#production-supply-and-demand-table)

[Production, Supply and Demand Table
5](#production-supply-and-demand-table-1)

[Production, Supply and Demand Table
6](#production-supply-and-demand-table-2)

[Consumption 7](#consumption)

[Yogurt 7](#yogurt)

[Cheese 8](#cheese)

[Butter 8](#butter)

[Trade 8](#trade)

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

[Export Trade Matrix 9](#export-trade-matrix)

[Import Trade Matrix 10](#import-trade-matrix-1)

[Export Trade Matrix 10](#export-trade-matrix-1)

[Import Trade Matrix 11](#import-trade-matrix-2)

[Table 1. Import Duties on Selected Dairy Products, 2006
11](#table-1.-import-duties-on-selected-dairy-products-2006)

[Special Preferences Granted to EU for Dairy Products in 2006
12](#special-preferences-granted-to-eu-for-dairy-products-in-2006)

[Prices 12](#prices)

[Prices Table 12](#prices-table)

[Policy 13](#policy)

# Executive Summary

Romania's milk production in CY2005, as reported by Eurostat, indicates
a very slight reduction compared to the previous year. For comparability
reasons, as Romania is joining the EU on January 1, 2007 and will be
included in the EU consolidated reporting of the USDA, Post is using for
this report the EUROSTAT figures rather than the statistics provided by
the Ministry of Agriculture. However, in the absence of dairy cattle
numbers in EUROSTAT, we used in the following PSD tables the average
number of cows in milk given in Romania's national statistics. Milk for
factory use was also decreased from the previous estimate.

The total national reference quantity for milk set for Romania during
country's EU accession negotiations is 3,057,000 MT, of which 1,093,000
MT for deliveries and 1,964,000 MT for direct sales. This, together with
the "reserve" quota that might be added in 2009 in order to count for
current on-farm consumption, reflects Romania's projected ability to
improve milk collection, cold storage and processing facilities.
Currently, Romania is negotiating in Brussels some increase in its milk
quota based on the reference fat content (3.59%).

The dairy products market remains one of the most dynamic ones, with
annual growth estimated at 5 percent, and the entry of new players into
the market who are attracted by Romania's substantial milk quota.

Increased dairy product consumption (especially cheese and yoghurts) is
expected to further contribute to the industry's expansion in 2007.

# Production

While statistics provided by the Romanian Ministry of Agriculture
indicate a 2% increase in the cow milk production at the end of 2005
compared to a year earlier (due to the average per head productivity
gains), EUROSTAT data for Romania show, on the contrary, a 1% reduction
in domestic supplies. For comparability reasons, as Romania is joining
the EU on January 1, 2007 and will be included in the EU consolidated
reporting of USDA, Post adopted in the present analysis the EUROSTAT
figures. In the sections dedicated to other dairy products we have also
adopted the methodology indicated for the EU-25.

The amount of ewes' milk increased from 339,000 MT in 2004 to 376,000 MT
in 2005, goat's milk production also grew from 109,000 MT to 169,000 MT,
and buffalo milk reached 311,000 MT at the end of the year (as against
292,000 MT). Partial data for the first 8 months of 2006 (released by
the Ministry of Agriculture) indicate \-- assuming the 1% reduction in
cows in milk inventories \-- a very slight decrease in the milk output.
With assumed increases in the yield per cow, we anticipate that domestic
supplies will be fairly stable this year compared to last year.

Supply is very dispersed (70% of the raw milk coming from households
with at most 3 cows), so that milk sanitation and collection continues
to be an important constraint to the industry. Apart from quality
problems due to the lack of milking and cold storage infrastructure, the
raw material flow is strongly affected by seasonality. Although Romania
is expected to be able to fulfill its milk quota after country's EU
accession, a number of priorities remain to be addressed, e.g.,
improvements in feed and forage practices at farm level, introduction of
specialized dairy breeds, and advanced techniques for animal husbandry.
Industry analysts consider that by 2010 about 65% of domestically
processed milk will be supplied by large farms of over 100 cows.

## Production, Supply and Demand Table

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

  **Dairy, Milk,                                                                                                     
  Fluid**                                                                                                            

                     **2005**    **Revised**         **2006**    **Estimate**        **2007**    **Forecast**        **UOM**

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

  **Market Year                  38353                           38718                           39083               MM/YYYY
  Begin**                                                                                                            

  **Cows In Milk**   1587        1587                1650        1576                0           1580                (1000
                                                                                                                     HEAD)

  **Cows Milk        5500        4977                5700        4900                0           4950                (1000 MT)
  Production**                                                                                                       

  **Other Milk       390         856                 400         900                 0           900                 (1000 MT)
  Production**                                                                                                       

  **TOTAL            5890        5833                6100        5800                0           5850                (1000 MT)
  Production**                                                                                                       

  **Intra EC         0           0                   0                               0           3                   (1000 MT)
  Imports**                                                                                                          

  **Total Imports**  2           2                   2           3                   0           1                   (1000 MT)

  **TOTAL Imports**  2           2                   2           3                   0           4                   (1000 MT)

  **TOTAL SUPPLY**   5892        5835                6102        5803                0           5854                (1000 MT)

  **Intra EC         0           0                   0           0                   0           1                   (1000 MT)
  Exports**                                                                                                          

  **Total Exports**  0           1                   1           1                   0           1                   (1000 MT)

  **TOTAL Exports**  0           1                   1           1                   0           2                   (1000 MT)

  **Fluid Use Dom.   3700        4059                3819        3772                0           3712                (1000 MT)
  Consum.**                                                                                                          

  **Factory Use      1475        1134                1550        1400                0           1500                (1000 MT)
  Consum.**                                                                                                          

  **Feed Use Dom.    717         640                 732         630                 0           640                 (1000 MT)
  Consum.**                                                                                                          

  **TOTAL Dom.       5892        5834                6101        5802                0           5852                (1000 MT)
  Consumption**                                                                                                      

  **TOTAL            5892        5835                6102        5803                0           5854                (1000 MT)
  DISTRIBUTION**                                                                                                     

  **Calendar Yr.     0           0                   0           0                   0           0                   (1000 MT)
  Imp. from U.S.**                                                                                                   

  **Calendar Yr.     0           0                   0           0                   0           0                   (1000 MT)
  Exp. to U.S.**                                                                                                     
  ------------------ ----------- ------------------- ----------- ------------------- ----------- ------------------- ---------

The total national reference quantity for milk set for Romania within
country's EU accession negotiations is 3,057,000 MT of which 1,093,000
MT for deliveries and 1,964,000 MT for direct sales. This, together with
the "Reserve" quota that might add in 2009 in order to count for current
on-farm consumption, reflects Romania's potential to improve milk
collection, cold storage and processing facilities. Currently, Romania
is negotiating in Brussels some increase of its milk quota based on the
reference fat content (3.59%).

In August 2005, as part of the pre-EU-accession process, the GOR
approved an Ordinance giving individual producers raw milk quotas based
on historical figures from the reference period. The first round for
gathering information on milk deliveries was April 1, 2005 -- March 31,
2006. To determine the amount of milk channeled to industrial
processing, the authorities circulated to the dairies a form asking for
information on milk deliveries from each supplier. As for direct sales,
there was no statistical tracking in the past; estimates were used
instead. The process was intended to produce a comprehensive
registration of all milk sales other than deliveries to processors.

Data collection continues in the second round of the exercise (April
2006 -- March 2007), when farmers who were not recorded in the first
round (new farmers) or farmers who expanded their production can also
apply for a limited milk quota (between 10,000-2 million KG). The
process of registration and individual quota allocation will end in
March 2007. After this, those producers whose production exceeds their
quota will have to pay high levies for the extra milk delivered. Those
farmers who are not granted a quota will be not eligible for commercial
sales after accession. Nonetheless, farmers will be able to go on the
free market to buy or sell quotas.

The Ministry of Agriculture, Forests and Rural Development decided that
all producers, regardless the number of cows they own, are eligible to
participate in the EU milk quotas. It is expected that about 600,000
farmers will be recipients of milk quotas. This will represent a real
administrative burden, as reportedly up to 400 full time employees would
be needed to administer the program properly.

Romania requested a transitional period until December 31, 2009 for
modernizing and re-vamping the milk processing plants and for the
organizing the milk collection and standardization centers in order to
comply with the Community structural requirements. Products from
establishments subject to transitional arrangements will not be sold to
other Member States and will be clearly identified (labeled).

As of October 2006, there are 59 establishments approved to export to EU
(falling under "A" category), while another 188 were expected to be EU
compliant by January 1, 2007 (the "B" category). In the "C" category,
there were 74 dairy plants (i.e., expected to meet the EU requirements
by the end of 2009). In the "D" category (to be shut down by the date of
accession) are 8 operations.

The HACCP system in dairy establishments in Romania was introduced on
October 1, 2006 (per Article 14 of Directive 92/46/EEC transposed into
the national legislation).

As regards the request for a transitional period relating to raw milk,
such milk is channeled only to establishments located in Romania and
controlled by the General Veterinary Inspectorate. Non-compliant raw
milk and raw milk from non-compliant farms can be delivered for
processing only to establishments benefiting from a transitional period.

Industry representatives assess that Romania has the potential to cover
the quota negotiated with EU with an average number of 826,200 cows in
milk. If after accession the country is not able to fulfill the whole
production quota allocated by EU, the unsupplied amount will be lost and
the quota diminished accordingly.

Romania requested for the traditional cheese brands Nasal, Bradet,
Homorod (smoked cheese) application of the provisions of Decision
97/284/EC.

Please note that in the PSD Table below, domestic butter production for
2005 was adjusted (using EUROSTAT data) to reflect the introduction of
converted butter oils into the "butter" category, per the reporting
instructions for EU-25.

## 

## Production, Supply and Demand Table

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

  **Dairy, Butter**                                                                                                  

                     **2005**    **Revised**         **2006**    **Estimate**        **2007**    **Forecast**        **UOM**

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

  **Market Year                  01-2005                         01-2006                         01-2007             MM/YYYY
  Begin**                                                                                                            

  **Beginning        0           0                   0           0                   0           0                   (1000 MT)
  Stocks**                                                                                                           

  **Production**     7           11                  9           12                  0           12                  (1000 MT)

  **Intra EC         0           0                   0           0                   0           0                   (1000 MT)
  Imports**                                                                                                          

  **Total Imports**  3           4                   3           4                   0           4                   (1000 MT)

  **TOTAL Imports**  3           4                   3           4                   0           4                   (1000 MT)

  **TOTAL SUPPLY**   10          15                  12          16                  0           16                  (1000 MT)

  **Intra EC         0           0                   0           0                   0           0                   (1000 MT)
  Exports**                                                                                                          

  **Total Exports**  0           0                   0           0                   0           0                   (1000 MT)

  **TOTAL Exports**  0           0                   0           0                   0           0                   (1000 MT)

  **Domestic         10          15                  12          16                  0           16                  (1000 MT)
  Consumption**                                                                                                      

  **TOTAL Use**      10          15                  12          16                  0           16                  (1000 MT)

  **Ending Stocks**  0           0                   0           0                   0           0                   (1000 MT)

  **TOTAL            10          15                  12          16                  0           16                  (1000 MT)
  DISTRIBUTION**                                                                                                     

  **Calendar Yr.     0           0                   0           0                   0           0                   (1000 MT)
  Imp. from U.S.**                                                                                                   

  **Calendar Yr.     0           0                   0           0                   0           0                   (1000 MT)
  Exp. to U.S.**                                                                                                     
  ------------------ ----------- ------------------- ----------- ------------------- ----------- ------------------- ---------

Similarly, please note that consistent with the reporting methodology
for the EU Member States, cheese production reported in the PSD table
below excludes fresh cheese and curd, while the significant jump in
production is due to the fact that Post uses EUROSTAT data in this table
rather than national statistics (employed in the previous years).

## Production, Supply and Demand Table

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

  **Dairy, Cheese**                                                                                                  

                     **2005**    **Revised**         **2006**    **Estimate**        **2007**    **Forecast**        **UOM**

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

  **Market Year                  01-2005                         01-2006                         01-2007             MM/YYYY
  Begin**                                                                                                            

  **Beginning        5           0                   5           0                   5           0                   (1000 MT)
  Stocks**                                                                                                           

  **Production**     28          58                  29          60                  0           62                  (1000 MT)

  **Intra EC         0           0                   0           0                   0           0                   (1000 MT)
  Imports**                                                                                                          

  **Total Imports**  2           2                   3           3                   0           3                   (1000 MT)

  **TOTAL Imports**  2           2                   3           3                   0           3                   (1000 MT)

  **TOTAL SUPPLY**   35          60                  37          63                  5           65                  (1000 MT)

  **Intra EC         0           0                   0           0                   0           0                   (1000 MT)
  Exports**                                                                                                          

  **Total Exports**  4           2                   4           2                   0           4                   (1000 MT)

  **TOTAL Exports**  4           2                   4           2                   0           4                   (1000 MT)

  **Human Dom.       26          58                  28          61                  0           61                  (1000 MT)
  Consumption**                                                                                                      

  **Other Use,       0           0                   0           0                   0           0                   (1000 MT)
  Losses**                                                                                                           

  **Total Dom.       26          58                  28          61                  0           61                  (1000 MT)
  Consumption**                                                                                                      

  **TOTAL Use**      30          60                  32          63                  0           65                  (1000 MT)

  **Ending Stocks**  5           0                   5           0                   0           0                   (1000 MT)

  **TOTAL            35          60                  37          63                  0           65                  (1000 MT)
  DISTRIBUTION**                                                                                                     

  **Calendar Yr.     0           0                   0           0                   0           0                   (1000 MT)
  Imp. from U.S.**                                                                                                   

  **Calendar Yr.     0           0                   0           0                   0           0                   (1000 MT)
  Exp. to U.S.**                                                                                                     
  ------------------ ----------- ------------------- ----------- ------------------- ----------- ------------------- ---------

# 

# Consumption

Milk collection for industrial use is very low, roughly one-forth of the
total.

Direct sales of raw, non-pasteurized milk remain very significant, i.e.
almost 40% of the total domestic supplies. Another 11 percent of
production is used as feed, while the balance accounts for households'
own consumption.

The dairy product market remains one of the fastest-growing in the
agricultural sector, with a turnover estimated by industry
representatives at EURO 800 billion[^1]. Large (mostly international)
companies have a major presence: Friesland (Dutch, who invested mostly
in Transylvania: Satu Mare, Cluj Napoca, Carei, Targu Mures), Danone
(French), LaDorna (Swiss), Campina (Dutch, in partnership with
Covalact), Albalact Alba Iulia (with its brand Fulga), Hochland (Dutch,
with investments in cheese factories in Sovata and Sighisoara) etc, but
there are still numerous small companies who sell locally or regionally.
In terms of industry concentration, the largest three players have
together one-forth of the market turnover.

Romanian milk and dairy product consumption lags Western Europe and is
low even in the regional context[^2]. Nonetheless, the 5% growth rate of
the market in 2005 is one of the highest in Europe. It is certain that
country's imminent EU accession will bring important structural changes
related to a rapid expansion of the share of processed milk products for
consumption at the expense of the non-pasteurized, home-made products,
still available in smaller rural markets.

Industry analysts believe that after the first year of Romania's
European membership, the amount of milk processed domestically will
double, reaching 2 million MT, in parallel with a reduction in so-called
"direct sales". If purchasing power growth may normally trigger a 2-3%
annual increase in the processed milk product market, the shrinking of
the grey and black markets is estimated to result in a 10-15% growth in
demand for processed products.

### Yogurt 

According to a study published by *Ziarul Financiar* in April 2006[^3],
in volume terms, the domestic market of fresh dairy products is
structured as follows: 37% yoghurts, 22% soft cheese and spreads, 16%
milk, 14% sour cream, 7% kefir and other sour products, 3% cream cheese,
1% sweet cottage cheese.

Urban demand is increasingly sophisticated, and product diversification
which targets certain population segments (e.g., women: low fat, high
vitamin and fiber content) is the core of the efforts made by companies
to better position themselves on the market. The market for yogurt and
other cultured milk products continues to be one of the most dynamic.
The market evolved a great deal in the last couple of years; new
products are launched continuously, and the presence of multinationals
that promote their products through strong brands are real forces for
innovation. Probiotic yogurts have an important market share, encouraged
by both the main producers and by consumer access to information. The
number of consumers who eat yogurt for health benefits is increasing
rapidly.

A relatively recent trend is the preference for yogurts with longer
shelf life, a tendency that developed with the hypermarket, supermarket
and cash & carry networks. Another noticeable tendency is the decline in
market share of plain yogurt, although it still holds the number one
spot. Sales of flavored yogurt are rising rapidly.

The yogurt market in Romania is intensely competitive, with 5 important
players: Danone, Friesland, Napolact, Campina and Prodlacta. These
companies together hold over 80% of the sales in volume and about 87-90%
of the value sales.

Yogurt consumption is fairly stable throughout the year, with the
notable exceptions of the fasting periods in the Orthodox calendar and
during the very hot summer weeks, when consumption drops.

### Cheese

Preferred cheeses in Romania are traditional products -- cottage cheese,
kaskawal (pressed cheese), cream cheese.

A peculiarity of the Romanian market is the preference for "no name"
products, sold in bulk, including homemade cheese, especially cottage
cheese that can be found in the peasant markets. Unlike for other dairy
products for which sales are strongly influenced by advertising, cottage
cheese and pressed cheese consumption is not particularly influenced by
price or advertising, say industry representatives. For kaskawal and
cream cheese, the season starts in autumn and ends in spring, while for
feta-type cheese, sales increase once seasonal vegetables are in the
markets.

The number of local brands for cheese (categories cottage cheese, cream
cheese and soft cheese) was 130 in the year 2005, with sales totaling
233.98 million RON, according to ACNielesen. The greatest number of
brands of dairy products is recorded for cottage cheese (101 brands,
with a total value of 119,731 mil. RON), followed by cream cheese (16
brands registered 20.146 million RON) and soft cheese (13 brands, with
sales of 94.104 million RON)[^4].

Dairy companies are forecasting that consumption of white cheese
(Feta-like) and pressed (sheep) cheese will steadily grow.

### Butter

Butter consumption has increased steadily from 2003, narrowing
margarine's market share. Butter, as a dairy product, is perceived as
"natural" and consequently healthier than margarine.

# Trade

Currently Romania is a net importer of most dairy processed products.
The future import dynamic depends both on the exchange rate and on the
pace at which the local dairy industry will be able to move toward
meeting the EU quality and safety requirements.

In 2006 Romania continues to import small quantities of raw milk for
processing from neighboring countries, but also processed, packed milk.
Hungary is by far the largest supplier, followed by Germany, the Czech
Republic, Slovakia, and France. Fluid milk imports are expected to
exceed 3,000 MT in 2006 (30% higher than in the previous year).

## 

## Import Trade Matrix

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

  **Commodity**       Dairy, Milk, Fluid                

  Time Period         CY                 Units:         MT

  Exports for:        2005                              **Jan-July 2006**

  U.S.                0                  U.S.           0

  Others                                 Others         

  Hungary             1256               Hungary        1486

  Czech Rep.          608                Germany        186

  Germany             154                Slovakia       80

  France              43                 Czech Rep.     44

  Bulgaria            34                 France         14

  Slovakia            20                 Bulgaria       12

                                                         

  Total for Others    2115                              1822

  Others not Listed                                      

  Grand Total         2115                              1822
  ------------------- ------------------ -------------- -----------------

Fluid milk exports are oriented mainly to Greece (especially targeted by
La Dorna), but remain low (about 1,000 MT).

## Export Trade Matrix

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

  **Commodity**       Dairy, Milk,                         
                      Fluid                                

  Time Period         CY               Units:              MT

  Imports for:        2005                                 **Jan-July
                                                           2006**

  U.S.                0                U.S.                0

  Others                               Others              

  Greece              892              Greece              479

  Malta               7                Russia              4

  Bahamas             3                Cyprus              2

  Cayman Islands      2                Hong Kong           1

  Panama              1                Malta               1

  Switzerland         1                Jordan              1

  Canada              1                Germany             1

  Antigua & Barbuda   1                Antigua & Barbuda   1

  Thailand            1                Turkey              1

  Cyprus              1                                     

  Total for Others    910                                  491

  Others not Listed                                         

  Grand Total         910                                  491
  ------------------- ---------------- ------------------- ---------------

Trade figures for cheese include from the year 2005, consistent with the
EU reporting instructions, just a reduced number of products (0406200000
Cheese, all kinds grated or powdered; 0406300000 Cheese, processed;
0406400000 Cheese, blue-veined; 0406900000 Other Cheese). This change in
the methodology impacts significantly on the export figures, which
appear to have declined by 50% in 2005 compared to the previous years.
This is due to the fact that many of the traditional exports \-- curd,
fresh cheese (mainly shipped to Greece) \-- fall under Harmonized System
codes that are not included in the consolidated reporting. Destination
for the Romanian cheese products included in this analysis are Germany,
US, Lebanon, Italy, Russia, but data for the first 7 months of 2006
indicate a drop in these exports.

Romania's cheese imports in 2005 imports exceeded 2,100 MT and will
likely reach 3000 MT by the end of 2006, consisting mainly of special
cheeses (different varieties of pressed cheese, Swiss cheese, blue
cheese) from the EU, which benefits from a duty-free quota (see Table
1).

## Import Trade Matrix

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

  **Commodity**        Dairy, Cheese                    

  Time Period          CY               Units:          MT

  Imports for:         2005                             **Jan-July 2006**

  U.S.                                  U.S.            0

  Others                                Others          

  Germany              890              Germany         537

  Hungary              298              Poland          299

  France               290              Hungary         209

  Poland               190              France          161

  Czech Rep.           138              Italy           71

  Denmark              130              Denamark        65

  Italy                107              Netherlands     51

  Netherlands          34               Bulgaria        44

  Bulgaria             20               Slovakia        43

  Austria              4                Czech Rep.      36

  Total for Others     2101                             1516

  Others not Listed    15                               39

  Grand Total          2116                             1555
  -------------------- ---------------- --------------- ------------------

## Export Trade Matrix

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

  **Commodity**       Dairy, Cheese                      

  Time Period         CY              Units:             MT

  Exports for:        2005                               **Jan-July 2006**

  U.S.                508             U.S.               182

  Others                              Others             

  Germany             582             Italy              170

  Lebanon             399             Russia             129

  Italy               344             Lebanon            79

  Russia              305             Greece             42

  Australia           54              Czech rep.         14

  Greece              46              Australia          13

  Netherlands         40              United Kingdom     3

  Malta               1               Bulgaria           1

  Georgia             1               France             1

                                                          

  Total for Others    1772                               452

  Others not Listed   1                                  1

  Grand Total         2281                               635
  ------------------- --------------- ------------------ -----------------

Butter imports have stabilized at roughly 3,000 MT for the past four
years, mainly originating from EU countries, under preferential
arrangements (Table 1).

## Import Trade Matrix

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

  **Commodity**        Dairy, Butter                   

  Time Period          CY              Units:          MT

  Imports for:         2005                            **Jan-July 2006**

  U.S.                                 U.S.             

  Others                               Others          

  Czech Rep.           1144            Czech Rep.      1036

  Germany              888             Germany         397

  France               691             France          354

  Netherlands          457             Poland          261

  Poland               422             Netherlands     182

  Hungary              38              Slovakia        118

  Belgium              31              Belgium         60

  Slovakia             20              Denmark         13

                                       Hungary         3

                                                        

  Total for Others     3691                            2424

  Others not Listed                                     

  Grand Total          3691                            2424
  -------------------- --------------- --------------- ------------------

## 

### Table 1. Import Duties on Selected Dairy Products, 2006

+------------+----------------------------------+-----------+----------+
| HS Code    |                                  | WTO bound | MFN      |
|            |                                  | tariff    |          |
|            |                                  |           | duty     |
+------------+----------------------------------+-----------+----------+
| 0401       | Milk and dairy cream,            | 248       | 45       |
|            | concentrated                     |           |          |
+------------+----------------------------------+-----------+----------+
| 0405       | Butter                           | 200       | 45       |
+------------+----------------------------------+-----------+----------+
| 0406       | Cheese                           | 270       | 45       |
+------------+----------------------------------+-----------+----------+

Special preferences granted to EU in the pre-accession year are given in
Table 2 below:

### Special Preferences Granted to EU for Dairy Products in 2006

+---+--------+----------------+----------+----------+-------+--------+
| 1 | 0402   | Milk and sour  | 1,500    | 03       | exe   | 20     |
| \ | 10 19  | cream, in      |          | .01.2006 | mpted |        |
| . |        | powder or      |          |          |       |        |
|   | 0402   | other solid    |          |          |       |        |
|   | 21 11  | forms          |          |          |       |        |
|   |        |                |          |          |       |        |
|   | 0402   |                |          |          |       |        |
|   | 21 19  |                |          |          |       |        |
|   |        |                |          |          |       |        |
|   | 0402   |                |          |          |       |        |
|   | 21 91  |                |          |          |       |        |
+---+--------+----------------+----------+----------+-------+--------+
| 2 | 0403   | Yogurt, plain, | 1,000    | 03       | exe   | 20     |
| \ | 10 11  | no sugar or    |          | .01.2006 | mpted |        |
| . | to     | cocoa added    |          |          |       |        |
|   |        |                |          |          |       |        |
|   | 0403   | Other, plain,  |          |          |       |        |
|   | 10 39  | no fruit or    |          |          |       |        |
|   |        | cocoa added    |          |          |       |        |
|   | 0403   |                |          |          |       |        |
|   | 90 11  |                |          |          |       |        |
|   | to     |                |          |          |       |        |
|   |        |                |          |          |       |        |
|   | 0403   |                |          |          |       |        |
|   | 90 69  |                |          |          |       |        |
+---+--------+----------------+----------+----------+-------+--------+
| 3 | 0405   | Butter and     | 1,900    |          | exe   |        |
| \ | 10     | other fats     | o/w:     |          | mpted |        |
| . |        | derived from   |          | 03       |       | 20     |
|   | 0405   | milk           | 950      | .01.2006 |       |        |
|   | 90     |                | Sem,I    |          |       | 20     |
|   |        |                |          | 03       |       |        |
|   |        |                | 950      | .07.2006 |       |        |
|   |        |                | Sem,II   |          |       |        |
|   |        |                |          |          |       |        |
|   |        |                |          |          |       |        |
+---+--------+----------------+----------+----------+-------+--------+
| 4 | 0406   | Cheese and     | 3,000    |          | exe   |        |
| \ |        | curd           | o/w:     |          | mpted |        |
| . |        |                |          | 03       |       | 20     |
|   |        |                | 1,400    | .01.2006 |       |        |
|   |        |                | Sem,I    |          |       | 20     |
|   |        |                |          | 03       |       |        |
|   |        |                | 1,600    | .07.2006 |       |        |
|   |        |                | Sem,II   |          |       |        |
+---+--------+----------------+----------+----------+-------+--------+

# Prices

Prices for milk in 2005 have followed the multi-annual pattern, strongly
rising in winter and falling in summer (see Prices Table). However,
during the summer months of 2006 milk price quotes continued to go up,
as processors were making efforts to identify new sources of raw
material. The additional costs (related to difficult collection and poor
transport infrastructure) borne by the processing industry are high, so
that the gap between farm-gate raw milk prices and retail prices has
diminished lately.

## Prices Table

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

  **Commodity**        Dairy, Milk, Fluid                  

  Prices in            US\$                   per uom      HL

                                                           

  Year                 2005                   2006         \% Change

  Jan                  29.2                   28.7         -2%

  Feb                  31.9                   30.8         -3%

  Mar                  21.8                   31.6         45%

  Apr                  23.2                   21.9         -6%

  May                  17.5                   25.0         42%

  Jun                  15.2                   28.4         87%

  Jul                  13.5                   29.1         115%

  Aug                  14.0                   25.3         80%

  Sep                  15.7                                -100%

  Oct                  16.7                                -100%

  Nov                  19.4                                -100%

  Dec                  25.9                                -100%
  -------------------- ---------------------- ------------ --------------

Prices above are at farm gate, no VAT added.

Official monthly exchange rate used in all cases.

# 

# Policy

Various support measures for dairy cattle farmers are provided by the
GOR via subsidies exempted from the reduction commitment ("Green
Box"-type). According to GOR Decision 1853/December 2005, these include
measures to help recovery of the livestock sector.

Dairy cows are subject to a payment per head, as follows:

-   200 RON/head at birth, if calf resulted through artificial
    insemination;

-   100 RON/head at birth if the cow had been conventionally inseminated
    by a certified bull;

-   200 RON/head after 6 month age of a calf resulted through artificial
    insemination;

-   100 RON/head for a calf resulted through conventional insemination
    with a certified bull.

Supplementary payments are to be disbursed for dairy cows in the
situations described below:

-   300 RON/head for all cows which are registered with the Official
    Performance Control Office;

-   100 RON/head for cows registered with the genealogic register;

-   200 RON/head for cows ecologically certified.

Price support for milk is provided in 2006 (as per GOR Decision
1266/2006) in the form of procurement payments to farmers who deliver
their production to processors. The amount budgeted is below the *de
minimis* level Romania is entitled to according to its WTO commitments.

The unit subsidy for standard cow milk 3.5% fat, sold to processors and
which complies with the EU quality standards \-- number of germs at
maximum 100,000/ml and somatic cells at maximum 400,000/ml \-- is 0.3
RON/liter.

The unit subsidy for standard cow milk 3.5% fat, sold to processors and
which complies with the standards required by the National Program for
Raw Milk Quality Improvement \-- number of germs at maximum 1,000,000/ml
and somatic cells at maximum 600,000/ml \-- is 0.15 RON/liter.

[^1]: According to Euromonitor, the Romania dairy market had, between
    1998-2004, the highest annual growth rate worldwide (25%).

[^2]: Consumption of processed dairy products averages 4KG/capita, as
    against 15-20 KG/capita in Central and Eastern Europe region.

[^3]: Signed by Dana Ciriperu, 17 April 2006

[^4]: Source: Revista Piata no. 17 / March 2006.