Controversial Romanian crop policy plans to be dropped

Romania is likely to scrap planned policy that would enable farmers with drought-hit crops to declare force majeure and break contracts with fertilizer suppliers and grain traders.

The cabinet had been due to vote on the plans this month, but this never took place and some market participants now believe it is unlikely to happen before parliamentary elections on 6 December, if at all. Agricultural ministry officials told one fertilizer supplier that the legislation will now be removed from consideration, but no official announcement has been made.

The controversial plans would have potentially wide-ranging impacts on suppliers to farmers and those who purchase crops. The measure would apply to farmers that have had 30pc or more of their crop acreage damaged by drought, and allow them to waive contractual liabilities on the buy and sell side.

The government floated the plans in mid-September, and agricultural industry representatives met policy makers in late September and last month to in a bid to halt or alter the plans.

The proposals were part of a bid to preserve agricultural production security, but fertilizer distributors dismissed them as pandering to the farming lobby ahead of December's elections. The move followed extremely hot weather that sapped this summer's crop yields, forcing the government to pass legislation in September approving support payments for farmers.

'Commercial relations destroyed'

Even though the plans may not become law, they have already affected Romania's agricultural industry by eroding trust between distributors and farmers.

Farmers have already sought to benefit from the proposals by cancelling payments, one fertilizer supplier said. And suppliers are now wary about selling products on credit, with "commercial relations destroyed", he said.

The policy would have been a blow to the country's fertilizer industry, with 75pc of fertilizers sold on credit. Romanian farmers typically line up input purchases — fertilizers and crop protection — on credit in the fourth quarter ahead of sowing and harvests the following year.

They then forward-sell crops to grain trading firms in the first quarter, pay input suppliers following the harvest at the end of the third quarter and deliver their produce to grain trading companies.

Fertilizer offtake remains slow, with buying yet to get into full swing. Some sowing is continuing in the northeast, but field activities are set to halt shortly, with freezing temperatures and snow forecast in some parts of the country next week.

By Harry Minihan