Romania outlines crop force majeure declarations
Romania is considering enabling local counties to declare a state of calamity, equivalent to force majeure, after drought conditions hit crops this year. These measures could have serious consequences for the country's downstream fertilizer distributors if enacted.
The framework outlined by the government is a direct response to the drought that has affected the country this year, particularly eastern regions. Romania has recorded hardly any significant rainfall since the end of June, according to the European Commission's latest MARS crop report this week, with the report labelling Romania's predicament a "definite concern".
The drought has left Romanian farmers scarred this summer, with a drop in fertilizer demand in August-September ahead of purchases typically picking up for the fourth quarter.
There has been a significant impact on the 2020 maize crop in Romania with yields expected to fall by 13pc on 2019 to 5.69 t/hectare (ha) this year, MARS projects. Spring barley yields will slip by 8.2pc on 2019 to 2.58 t/ha under the latest forecast, down by 5.4pc on the five-year average.
The government has floated the measures as a direct response to the drought in a bid to alleviate the pressure on farmers. County legislative bodies will be able to declare a state calamity if half or more of the agricultural area in the county has been damaged by the drought, once assessed by technical support group findings. Following a declaration of force majeure, farmers will be removed from any contractual liabilities with regards to the affected crops, according to documents seen by Argus.
Concerns for local fertilizer suppliers
The measures could have far-reaching implications for local fertilizer distributors in Romania. Romanian farmers typically line up input purchases — fertilizers and crop protection — on credit in the fourth quarter of the year ahead of sowing and harvests the following year. They forward sell these crops to grain traders in the first quarter of the year, pay the input suppliers following the harvest at the end of the third quarter and deliver their produce to grain traders. Around three-quarters of input purchases are on these credit terms in Romania.
But these measures will limit the amounts that farmers will be required to pay suppliers, if enacted. Romanian farmers spent a total of just over €767mn on fertilizers, soil improvers and plant protection products in 2019, according to the latest estimates from the European Commission's Agriculture and Rural Development country report.
Local fertilizer suppliers have registered their concern over the possible measures, citing downstream distributors' inability to bridge payments beyond a one-year cycle. Should the measures be enacted, there could be a further impact on input purchases in the fourth quarter of this year for 2021 crops, local sources said.
Romania is an increasingly important receiver of nitrogen and phosphates-based fertilizer products in Europe, importing 344,000t and 317,000t of DAP and urea, respectively, in 2019. In terms of complex fertilizers, NPKs, NP and NPS are also widely consumed, particularly 15-15-15 and NP 20-20, with NPK and NP/NPS imports totalling 444,000t last year, up from an average of 285,000t in 2016-18.
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