ROMANIAN DAIRY SECTOR - 2025

Heading for a prosperous future

or

On a dead-end street

Strengthening Milk Sector /Netherlands-Romanian bilateral project

INTERLACTA - Brasov 4 June 2010

Facts -1

• Romanian dairy sector is a part of a larger European market

• The international dairy market is price competitive

• Cost price of raw milk is leading for milk processing plants

• Romanian dairy sector is characterised by subsistence farming (93% having < 3 cows)

Facts -2

• Milk producers are not organised

• Milk processors are organised

•Dairy actors are struggling to survive

• A long term strategy and development plan for the whole dairy sector are lacking

Facts – Current status milk deliveries

Year Producers Quota Average

2006 243,000 1,007.6 4.15

2008/2009 179,000 1,063.1 5.94

•Reduction of 26.3 % in suppliers

•5.5 % increase in total quota

•43.1% increase in individual milk quota  

Facts – Current status direct sales

Year Producers Quota Average

2006 615,000 2,154.6 3.50

2008/2009 324,000 1,273.5 3.93

•Reduction of 47.3 % in suppliers

•40.9.5 % decrease in total quota

•12.2% increase in individual milk quota  

Subsistence farming

Most likely the lowest cost price of raw milk

Problems:• Milk collection

• Milk quality

• Milk payment administration

Leading to high cost for milk processor

Subsistence farming

Lack of :

• Physical capacity and power (land & age)

• Knowledge

• Finance

No future for development =

social problem not to be solved by agricultural policy and subsidies

Poland - deliveries

Year no producers milk quota av/farm

2004 311,110 8.4 billion 27,016 kg

2009 117,870 9.5 billion 53,284 kg

• 42% of the farms stopped in a 5 year period

• Average milk quota/farm increased by 97% !!!

Poland – direct sales

Year no producers milk quota av/farm

2004 76,017 450.3 million 5,924 kg

2009 16,811 105.9 million 6,281 kg

• 77,9% of the farms stopped in a 5 year period

• Total milk quota decreased by 76.5% !!!

Poland – farm size

Milk quotaX 1’000 kg

2004No. farms

2004%

2010No. farms

2010%

% change In farms no.

0-5 81,695 26.3 27,102 15.2 - 66.8

5-10 70,870 22.8 21,335 12.0 - 69.1

10-20 60,383 19.4 28,132 15.8 - 53.4

20-50 58,284 18.7 47,110 26.5 - 19.1

50-100 26,951 8.7 32,384 18.2 + 20.6

100-250 10,925 3.5 18,070 10.2 + 65.4

250 - 500 1,283 0.4 2,724 1.5 + 112.3

500-1,000 389 0.1 627 0.4 + 61.2

< 1,000 330 0.1 386 0.2 + 17,0

TOTAL 311,110 100 % 177,870 100 % - 42.8

The Dutch dairy farming sector 1998 – 2008

Item 1998 2008 %

change No. farms 27,500 18,500 - 33 No. Cows 1.47 mil 1.38 mil - 6 No. Land 875,500 ha 831.000 ha - 5

Milk quota10,2 bil kg 10,4 bil kg + 2

No people52,493 35,686 - 32

The Romanian dairy sector

Projection for 2025

• 3.2 billion kg milk quota

• 7,000 kg milk/cow

• 412,000 milking cows

• 8,500 milk producers

The Romanian dairy sector

Projection for 2025 – farm sizes

5% king size farms having >1.000 milking cows = 20.600 cows at 21 farms

10% large size farms having 500 milking cows = 41.200 cows at 83 farms

15% medium size farms with 150 milking cows = 61.800 cows at 412 farms

20 % family based farms with75 milk cows = 82.400 cows at 1,099 farms

50% family based farms with 30 milking cows = 206.000 cows at 6.867 farms

The Romanian dairy sector

Projection for 2025 – farm sizes

There is a future for approx. 8,500 dairy farms

with good and sustainable income from dairy farming

NOTE: Currently 515.000 entities/farms have around 1.6 million cows

Conclusion

A reduced number of farms/cattle should lead to a spectacular reduction in cost at the private sector as well as at

National/Government level.

This reduction of costs should be used for stimulating the increase in farm size and production by subsidizing cost for

milk control, interest on farm loans & creating a efficient extension organization.

ConclusionThe sector should focus on:

• Competitive milk production (cost price)

• Identify the minimum economic farm size to be competitive

• What kind of support is required to the 5% survivors

• What happens if the milk quota ends in 2015

• What to do if the CNDP ends by 2013 and is replaced by SAP

• What happens by when the EU milk quality regulation is enforced (1st January 2012)

• How to support the Government in preparing effective laws and regulations (OIPA)

• How to reduce controls by the Veterinarians into a less costly auto control

Great idea

But………………………..

Where to start?

Who takes the initiative?

Who pays?

Key decisions in new reality

1. Speak out that Romania will be self supporting in milk production

2. Realise that subsistence farming will lead to insufficient quality & quantity

3. Realise that farming should be commercial viable and not driven by subsidies

4. Realise that scale of economy is the drive in development of farms

Key decisions in new reality

5. Use agricultural state support only for improved performance and not for social support

6. Assess the demographics of current subsistence farmers and the natural decline in numbers

7. Assess the current agricultural state support and re-allocate these funds for development of commercial farms (direct & indirect)

8. Enforce tight implementation on legislation

Key decisions in new reality

9. Assess the capacity of APIA, ANCA, ANSVA, ANARZ, agricultural education required to support the 8,500 dairy farms

10.Realise that a sound and solid long term dairy policy is required – NOT be hampered & jeopardised by political influences and adjustment of Governments

I have a dream…

My dream

Let’s start!

Thank you for your attention!