Drought costs local agriculture EUR 800 million, says BCR

This year’s poor harvest is estimated to generate losses of about EUR 800 million for the Romanian economy, almost half of which could have been avoided if local farmers had proper irrigation systems, according to Banca Comerciala Romana (BCR).

Romania’s agricultural output is particularly vulnerable to weather conditions, mainly due to the poor technologies used by local farmers and the small individual surfaces they cultivate, explained Sorin Mititelu, director of retail segment management at BCR.

“Small farmers have the alternative to consolidate their land into larger farms in order to have better access to financing solutions and other opportunities offered by the market economy,” he said.

The main challenge cited by more than half of the 200 small companies from the agriculture sector that took part in the BCR survey is falling production. Some 61 percent of respondents said their priority over the coming period was to adapt the technologies they use to the climatic conditions. However, 34 percent of participants to the survey said banks’ ranges suited to farmers were inaccessible, mainly because of the paperwork and guarantees demanded by lenders, while another 34 percent said dedicated banking solutions were too expensive. Financing agriculture is starting to represent important business for the banking industry and lenders are working on making their products more accessible, said Mititelu. As part of an autumn campaign, BCR has launched three credit products dedicated to the farming sector to finance current operations as well as investment in technological modernization and the acquisition of land.

Buying farming equipment through leasing is another financing solution for local farmers, said Bogdan Speteanu, president of BCR Leasing, although this alternative is little known and the market for such services is well below potential.

The need for agricultural equipment is huge in Romania, given that for every 100 households there are 3.2 tractors, against 11.9 percent in Hungary, 43.9 in Poland and 70.9 in the Czech Republic, he added. At present buying agricultural equipment through leasing is an advantageous solution as it is cost effective, requires no additional guarantees and has fiscal incentives such as the payment of VAT throughout the entire leasing period, said Speteanu.

The leasing market for agricultural equipment has grown in recent years from EUR 37.3 million in 2007 (less than one percent of the total leasing market) to EUR 73.7 million last year (5.75 percent) according to data from the Financial Companies Association in Romania (ALB Romania). Speteanu said he expects the market to maintain a similar value this year to the one reported in 2011, although in the first semester the figure was below that of the same period of last year. In 2013 it could rise to EUR 130 million and there is still room for growth given that in Romania about 15 percent of the agricultural equipment acquisitions are made through leasing, while in Western Europe the share is about 50 percent.