Slaughtering the sacred cows of Romanian agriculture

Newsroom 01/08/2011 | 11:53

What do Romanian agriculture, tourism and football have in common? Firstly, every Romanian male of voting age is an expert in these areas. Secondly, the country does rather badly at all of them. Thirdly, there are few other fields, if any, where people are so fascinated by the word “potential”. If we could only achieve Romania’s agricultural/touristic/football potential… lots of good things would happen.

Catalin Dimofte

As a worthy representative of the above-mentioned category (Romanian; male; well past voting age), this author is no exception to the rule and is a firm believer in the potential of Romanian agriculture. Therefore, the headline of the position paper recently released by a BCR-Erste team – Agriculture: Romania’s huge potential is still waiting to be unlocked – sounded like a familiar old tune. Likewise, the main issues, from the bankers’ perspective, are the same old ones: land fragmentation, small size of the farms, lack of capital, poor, obsolete or no equipment at all, insufficient irrigation, elderly farmers with little specific formal education, and a focus on subsistence and own consumption, rather than on market demand.

Overall the team did a fine job of assembling and attractively presenting a sizable corpus of data that enable the reader to draw her own conclusions based on facts, rather than fiction; just what’s required from a reference document. Data from the EU’s official statistics bureau, Eurostat, which form the bulk of BCR-Erste’s document, overwhelmingly support the above-mentioned truths about Romanian agriculture.
Or do they?
At a closer look, some of the “sacred cow” truths appear less convincing, whilst others are actually rather questionable and counterintuitive. To an astonishing degree the numbers stubbornly refuse to confirm the theory.
There’s no question about the productivity of the typical Romanian peasant/farmer being low – but why is that, and how do things look in context?
Firstly, low as it clearly is, local farmers’ productivity is roughly on a par with those of their Bulgarian and Polish peers.
And things just keep getting worse. A lot worse.

Secondly “it’s the machinery (and irrigation), stupid,” one could say.
Hmmm, not really. By comparison, the typical Polish farm seems remarkably well-equipped with machinery; Bulgaria, on the other hand, is not that far behind the French in terms of irrigation equipment and irrigated land. Yet neither machinery nor irrigation equipment seem to be of much help, as both these countries have per employee productivities broadly comparable to Romania’s and relatively similar agricultural yields per hectare for most crops.

Thirdly, if neither machinery, nor irrigation can satisfactorily explain the differences, then surely land fragmentation must be the answer? Well… no, not quite. Amazingly as it may seem, considerably more Bulgarian arable land is consolidated in bigger farms than in France. And even Romania is superior to Poland in this respect.

Then perhaps market orientation is the ultimate, indisputable argument? Yes, it is… sort of. The difference between France and the other four nations analyzed is indeed overwhelming in this respect. Yet these four are quite similar amongst themselves. Some 99 percent of Romania’s farms are subsistence and semi-subsistence farms. That’s certainly not good, but then more than 90 percent of Hungarian farms and nearly as many Polish ones are in the same ignoble categories…

Adding insult to injury, although 90 percent of the country’s arable land is in large, market-size farms, pretty close to the ideal situation, Bulgaria’s agriculture is miles behind France’s…
What is one to make of all these statistical conundrums and apparently incongruent sets of data?
It is this author’s belief that there is at least one other indicator that could be a much better proxy for agricultural performance in EU countries.

That indicator, decisive for either consigning the Romanian agricultural model to the trash bin of history, or, on the contrary, suggesting that certain essential lessons still lie in the dust behind the poor Romanian peasant’s horse-driven cart, is, of course, the level of subsidization.
According to Eurostat’s data, the overall subsidies paid in 2009 to farmers in the five agricultural economies studied are shown in the chart below. The argument is indeed methodologically inexact to some extent, because not all subsidies are paid directly to farmers; yet the chart is a fair indication of the cash flows funneled through the agricultural industries of these countries.

Over-simplifying, perhaps, it can be said that the European taxpayer in 2009 invested EUR 80 in the Romanian hectare of arable land – and nearly seven times as much in le hectare français (even though things may well have changed significantly in 2010 and 2011). That probably explains more than a few things.

Catalin Dimofte

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