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Traders face unpredictable weather - Doing Business | DOINGBUSINESS.RO

  |  12.11.2012

Traders face unpredictable weather

The agricultural trading market in Romania is fairly competitive, operated by almost all the large groups active in this segment

agriculture

Yet, it didn’t reach the maturity, neither as business models nor as stability and predictability. The local agricultural trading states a similar level or even a superior one compared with the other neighboring countries, due to its main logistics features: the Black Sea’s port at Constanta and the riverine positioning of the Southern part of the country on the Danube.

 

Challenged from within

 

The state of Romanian agriculture is rather unpredictable and even if the latest production volumes, especially the corn harvests have been significantly reduced by the dry weather, this industry triggers a lot of attention on a larger economic scale. The agriculture, as a strategic field of Romanian economy should benefit from a more coherent operational strategy and the development of a countrywide irrigation network should be a priority for investments. The country has the advantage of large agriculture areas and high quality of soil but the natural benefits sustained also by a national strategy could convey an enviable position of Romania among the worldwide agricultural industries.

 

The global economy turmoil affected every industry but, agriculture is a segment in economy that addresses the basic feeding needs of a population, hence, it cannot cease from existing. I think that Romanian farmers could face better the harsh conditions delivered by the weather or the lack of subsidies and poor agricultural infrastructure if they found support. However, those who have understood to run a proper business in agriculture are now harvesting the results.

 

The performance obtained by Romanian farmers due to a national irrigation system could weight against the large differences regarding the subsidies granted for the agriculture industry in Romania, compared with other EU countries. Also, a coherent strategy in agriculture might significantly reduce the risks in this segment.

 

The price game

 

The price of grains saw a significant increase in the last years and especially this year due to the dry weather and its effects on the autumn harvest. The prices increased not only locally but worldwide. If 2013 will benefit from normal weather conditions, the prices of grains could see a certain decline but not a significant one. Hence, the profitability in this segment will go on attracting investors as it delivers promising businesses and it will significantly impact the national economy.

 

The fortunate natural setting of Romania within the Black Sea’s coastal region and the Constanta harbor, one of the most dynamic logistic hubs in Europe, offers significant potential for exports. Overall, the goods delivered by sea targets the Middle East markets while the cargos which are being delivered by Danube or leaving from the Western part of Romania are exported on EU large markets as Italy, Austria, or Germany. Of course, the demand comes also from the local market, due to the large processors and consumers but, overall, Romania is a country with a large potential for exports in agriculture.

 

As for the challenges of this year, 2012 has been in deed a challenge for any trader on this market, no matter its size. I think that whoever managed to maintain a profitable business or at least tried to survive this year, will be ready to face future challenges in this segment. However, the unpredictability factor in agricultural trading is the highest challenge of all.

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