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Disclaimer
This report was elaborated by Finasist Consulting Ltd for Moldovan Investment and Export Promotion Organisation (MIEPO) in October-November 2012. The assertions made in this report belong to the authors and are intended for general guidance only. Neither MIEPO nor Finasist Consulting Ltd. can accept any responsibility for loss occasionated to any person or organisation acting or refraining from action as a result of any material in this publication. The conclusions and judgments contained in this report should not be attributed to, and do not necessarily represent the views of, IFC or its Board of Directors or the World Bank or its Executive Directors, or the countries they represent. IFC and the World Bank do not guarantee the accuracy of the data in this publication and accept no responsibility for any consequences of their use. Integral or partial use of this report shell be authorized by MIEPO and must contain references both to MIEPO and Finasist Consulting Ltd. Chiinu 2012
Abbreviations
CIS Commonwealth of Independent States CLD Credit Line Directorate FAO United Nations Food and Agriculture Organisation MAFI Ministry of Agriculture and Food Industry MIEPO Moldovan Investment and Export Promotion Organisation NAIP National Agency for Interventions and Payments NBM National Bank of Moldova NBS National Bureau of Statistics SHS State Hydro-Meteo Service SME Small and medium-sized enterprise WB World Bank BY Belarus EE - Estonia EU European Union FR France GB Great Britain GE Georgia GE - Germany GR Greece IQ Iraq IT - Italy KZ Kazakhstan PL Poland RO - Romania RU Russian Federation SK Slovakia UA Ukraine
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RS Serbia
Contents
Contents ............................................................................................................................. 4 Executive summary ........................................................................................................... 6 Key messages .................................................................................................................... 7 Capitolul 1. Flashback on agriculture in Republic of Moldova ................................. 8 1.1 Production and agriculture land .......................................................................... 8 1.2 Agribusiness and food processing industry ....................................................... 11 1.3 Markets ................................................................................................................... 13 1.4 Resources and competitiveness ......................................................................... 14 1.5 Agriculture and food industry profitability ......................................................... 15 1.6 Access to nutrients ................................................................................................ 16 1.7 Access to finance ................................................................................................. 17 1.8 Agriculture sector SWOT analysis ........................................................................ 21 Capitolul 2. Organic agriculture (farming) in Republic of Moldova ....................... 22 2.1 Legal framework and certification..................................................................... 22 2.2 Organic production, export ................................................................................ 24 2.3 Subsidies ................................................................................................................. 28 2.4 Sector barriers ........................................................................................................ 29 2.5 Organic agriculture positive effects .................................................................. 30 2.6 Existing models of organic farming in Moldova ............................................... 31 Capitolul 3. International experience in organic farming ........................................ 35 3.1 Ongoing status of international organic farming ............................................ 35 3.2 Ongoing status of organic farming in Europe and EU .................................... 36 3.3 Country study: Estonia .......................................................................................... 38 3.4 Country study: Czech Republic .......................................................................... 40 Future lessons ................................................................................................................... 42
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Sources ............................................................................................................................. 44
Exhibits list
Exhibit 1 Evolution of agriculture production value, mio MDL ..................................................................9 Exhibit 2 Structure of land fund in 2011, thousand ha, % .........................................................................10 Exhibit 3 Land fund ownership structure, 2011 ...........................................................................................11 Exhibit 4 Use of agriculture machinery, units per 1000 ha of arable land ............................................11 Exhibit 5 Banking lending to agrifood sector, mio. MDL, % .....................................................................17 Exhibit 6 Agriculture areas under organic crops .......................................................................................24 Exhibit 7 Structure of organic areas .............................................................................................................25 Exhibit 8 Dynamics of organic farmers ........................................................................................................25 Exhibit 9 Exported volumes of organic production, tons .........................................................................26 Exhibit 10 Organic farming in EU member state, % (2007) ......................................................................37 Exhibit 11 Estonian organic farming label...................................................................................................38 Exhibit 12 Czech Republic organic farming label .....................................................................................40
Tables list
Table 1 Agriculture production in 2011, quantities .....................................................................................9 Table 2 Key results in agriculture in 2011 .....................................................................................................12 Table 3 Key results in food processing industry in 2011 ............................................................................12 Table 4 International trade with food products, animals, beverages and tobacco in 2011 ...........13 Table 5 Structure of fruits and vegetables exports in 2011, value and destination............................13 Table 6 Agriculture productivity comparable results in Republic of Moldova and some EUmember states .................................................................................................................................................14 Table 7 Top of most profitable agriculture activities in 2011 (out of top 1000 most earnings performing domestic companies) ...............................................................................................................15 Table 8 Top of most profitable food processing industry activities in 2011 (out of top 1000 most earnings performing domestic companies) ..............................................................................................15 Table 9 Use of nutrients in agriculture, comparative breakdown, 2002-2010 .....................................16 Table 10 Comparative breakdown of use of nutrients per ha, t/ha .....................................................16 Table 11 Maturity of banking credits to agrifood sector, effective 30/09/2011 ..................................18 Table 12 Players on the agrifood bank credits market, 2008-2011 ........................................................18 Table 13 structure of bank credits to agrifood sector according to financing source (own, borrowed) in 2011 ...........................................................................................................................................18 Table 14 International projects and donor fund financing (ongoing programs) ...............................19 Table 15 Bank lending to primary agriculture and food industry in January-September 2012 .......20 Table 16 1.8 Agriculture sector SWOT analysis ...........................................................................................21 Table 17 National legal framework matrix governing organic agriculture ..........................................23 Table 18 Sort and long-term estimations of organic areas and organic production exports .........27 Table 19 Subsidizing organic farming during 2007-2011 ..........................................................................28 Table 20 Evolution of organic farming subsidizing instruments, 2007-2012...........................................28 Table 21 Motives, factors and modes of governance for environment policy instruments (EPI) matrix in Estonia ...............................................................................................................................................39
Chapter: Executive summary Organic agriculture in Moldova: local and regional perspectives
Executive summary
Most features of natural capital endowment (land, agro-climatic) and international specialization recommend Moldova as a country with a high agriculture potential. Although relative indicators have a doubtful relevance, e.g. agriculture goods and services are worth 27% of the GDP but GDP/capita is only 2000 USD, agriculture impact is worth considering. After retail&wholesale and industry, this is the third most important engine of the economy. Regarded through the optics of production forces, agriculture relies heavily on household agriculture, which exposes its granulation and low profitable profile. Because of rural penury, agriculture is still a subsistence activity. This brings about an informal and formal resistance to a genuine consolidation of agriculture land and boosting profitability. The sector is dominated by conventional agriculture (99% in terms of agriculture land), which drives ecological imbalance between anthropic and natural ecosystems and growing insertion of external inputs such as fertilizers, pesticides and fuel. Organic agriculture is a dynamic sector with great potential. It saw organic land increasing to over 22 thousand ha in 2011, under the impact of focused subsidizing policies of public authorities through 2008-2010. Due to budget austerity, 2011-2012 and declared intentions for 2013 have brought a visible dissipation of subsidizing measures. Agribusinesses perception regarding this is negative. Most likely, these should be a deceleration of land conversion and even exits from organic farming. Still, pessimistic scenarios arguing an increase of area under organic agriculture to the range of 3% from the utilized agriculture area would imply exports of over 60 mio Euro, against only 15 mio in 2011. This means exports of only crops production. The local distribution channels are rather inexistent. This disparity is more impressive as retail instruments, e.g. farm markets, boxes, organic food in school canteens, has gone far in European countries. The most frequent alternative for this distressing condition is to sale organic production at conventional production prices, which is discouraging for organic farmers. National organic agriculture sector development has to be linked to export markets, at least for the middle term. These markets are more mature and can digest local organic products and offer farmers fair prices. Still, pioneering a model of developing the organic sector without involving the local market would be a serious mistake. Sustaining the local distribution channels creates huge opportunities for related sectors (trade, rural tourism, unconventional medicine etc.), apart from reestablishing the ecological balance, health and driving social responsible behavior. Governments politics must avoid creating such a misbalance, and the first step would be to reconsider subsidizing policies and re-introduce a special support measure for the sector.
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Chapter: Key messages Organic agriculture in Moldova: local and regional perspectives
Key messages
Although it represents only a fraction of conventional agriculture, organic agriculture has potential. As of 2011, only 3% of food products are organic (5% of cereals, fruits and vegetables). Nevertheless, areas under organic agriculture have boosted from 80 ha to 22 102 ha through 2003-2011 (x270). The most frequent pleas in favor of this potential would be: superior selling prices (including export), re-balancing of natural and anthropic environments, development of related industries (rural tourism), capitalization of land fund, incomes from lower GHG emissions and fostering better management skills for farmers etc. There are specific and general factors that can boost organic sector in Moldova and convert it into a real driver of agriculture development. General factors are mostly common to overall agriculture development: increase investments, rise complexity of domestic markets infrastructure, enhance farmers business and management skills, develop rural infrastructure, e.g. roads, irrigation systems etc. Specific factors can impact the sector o the short term: stimulate land conversion, enhance subsidizing, stimulate the demand through focused instrument and promote the national organic brand on export markets. These please can be seen in the global evolution of organic agriculture. Exports of organic products in 2026 can reach 86-87 mio according to a realistic scenario of organic land increment and over 130 mio according to an optimistic scenario. Both of these estimations do not take into account price increments over time, the multiplication effect of generating these incomes in the national economy, other pecuniary and relative advantages to the service of the society. Case-studies showcase existing role-models of organic businesses. But there is a problem with advertising and showing support to farmers to assume this type of businesses. As it appears, these businesses evolve from a sound and responsible understanding of how perishable natural agriculture resources are. These farmers even instigate to tax irresponsible behavior of farmers, e.g. fostering erosion, soil salinization and issue regulations that oblige farmers to use cultivation techniques that can restore land and nature biocenosis, e.g. cultivate species of facelia to stimulate pollination, cultivate species of mustard to enrich soils with organic nutrients. These farmers go even further by embracing low- and no-till1 cultivation technologies. Their advantages are demonstrated and are seen as the unique alternatives to two of the most important challenges for the national agriculture in present: increasing temperatures and lack of proper water for irrigation. Public bodies must understand that laisser faire laisser passer-type stimulus for organic sector development, e.g. high cost fertilizers and operating inputs, are irrelevant on the long term in a highly competitive regional agriculture.
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No-till farming (also called zero tillage or direct planting or pasture cropping) is a way of growing crops from year to year without disturbing the soil through tillage. No-till is an agricultural technique which increases the amount of water and organic matter (nutrients) in the soil and decreases erosion. It increases the amount and variety of life in and on the soil but may require herbicide usage
Chapter: Flashback on agriculture in Republic of Moldova Organic agriculture in Moldova: local and regional perspectives
In terms of quantities, agriculture production increased by 4,6% yoy in 2011 (+6,7% yoy for crop production and +0,4% yoy for animal husbandry production). In structure, 32% of agriculture production is generated by agribusinesses, 19% are generated by small peasant farms and 49% are generated by households. The relatively high portion of households is explained by the important share in livestock breading and raising (80% of total).
2 3
National Bureau of Statistics, agriculture production of goods and services was 8646 mio MDL in 2001 State Hydro-meteorological Service, http://www.meteo.md/mold/art_seceta2011.htm
Chapter: Flashback on agriculture in Republic of Moldova Organic agriculture in Moldova: local and regional perspectives
2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 0 2 500 5 000 7 500 10 000 12 500 15 000 17 500
Drought
20 000
22 500
25 000
services
Moldovan agriculture is mostly a producer of cereals and grain legumes. This crop distribution is reflected by the structure of the land fund (73% arable land). It is also a stress factor for the ecological balance in agriculture. Estimations show that at least 40% of the arable land is presently hit by erosion.
Table 1 Agriculture production in 2011, quantities
CAGR 2009-2011 % +7,1 +22,3 +32,3 +10,8 +26,2 +16 +8,3 +10,6 -6,9
Production Th. t Crops production Cereals and pulses Sunflower Sugar beef Tobacco Soya Potatoes Vegetables Fruits, nuts, berries Grapes 2495 425 590 5,4 78 351 361 377 594
Animal husbandry production Cattle and poultry livestock Diary Eggs (mio units) Services Source: NBS, authors estimation
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Chapter: Flashback on agriculture in Republic of Moldova Organic agriculture in Moldova: local and regional perspectives
Total area of agriculture land is thousand ha. In 2011, there was observed a rise in fallow land (+17%) and orchards (+0,6%) areas, and a contraction of vineyards (-2,5%) and arable land (-0,22%) areas.
2498.3
orchards; 133,3; 5%
Only 228.3 thousand ha were irrigation-ready in 2011 (6.7% of land fund). Out of them, 213.3 thousand ha were arable land and 13.3% were multiannual plantations. The Government has voiced plans to expand irrigated areas to 300 000 ha by 2020, an investment worth 11 billion MDL. There are also plans to restore 11 centralized irrigation systems covering 15 000 ha by 2015 trough the funding of Millennium Challenge Corporation. There were 297.4 thousand ha of hydrological improved land (irrigated 228.2 thousand ha, drained 69.2 thousand ha) at the beginning of 20114. Bearing the fact that agriculture is still recovering from severe post-soviet era capital losses, increasing irrigated areas relies heavily on restoring former agriculture collectivities irrigation systems and create water users associations. Losses incurred by agriculture due to lack of irrigation systems go beyond 400 mio. MDL on annual basis5. The ownership structure shows that the bulk of land was in private ownership 73%. The state controls 72% of prairies and 99% of grassland.
State Agency for Land Relations and Cadastre, NOT INFORMATIV la proiectul Hotrrii Guvernului Republicii Moldova Cu privire la aprobarea Cadastrului funciar la data de 1 ianuarie 2011 5 Farmers National Federation from Republic of Moldova, State Agency Apele Moldovei, Informative guide, Irrigation water users association
10
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Chapter: Flashback on agriculture in Republic of Moldova Organic agriculture in Moldova: local and regional perspectives
Fallow land Prairies Grassland Vineyards Orchards Arable land Total land fund 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Public ownership
Source: NBS, authors estimations
Private ownership
Regarding the intensity of agriculture machinery use, the domestic agriculture sector has a common regional profile (as compared to Ukraine, Romania). In 2008, almost 20 tractors on average were used to cultivate 1000 ha of arable land6.
Exhibit 4 Use of agriculture machinery, units per 1000 ha of arable land 140 120 100 80 60 1995 2008
40
20 0
Source: FAO
11
12
Chapter: Flashback on agriculture in Republic of Moldova Organic agriculture in Moldova: local and regional perspectives
in returns, or employed over 9 people). Presently, the total number of peasant farms goes to over 300 000 units. 97% out of the 2438 companies were small and medium sized companies, employing over 46.7 thousand people. These companies cohabited with other nearly 1200 companies from the food processing industry, which made nearly two times more profits than companies in agriculture. Although this sample of companies does not take into account households and all small peasant farms (with legal status of natural persons), it could be considered as the most representative (formal) for the existing national agri-food complex in 20117.
Table 2 Key results in agriculture in 2011
No. of companies
units
SMEs
units
Earnings profitability
%
(+18,3% yoy)
No. of companies
units
Data released by State Agency for Land Relations and Cadastre shows that 2008,7 thousand ha of agriculture use land is utilized a follows: 232 agriculture cooperatives farming 126,3 thousand ha (6.3%), 161 JSCs farming 40.4 thousand ha (2.0%); 4624 LLCs faming 683.2 thousand ha (34.0%); 398.7 small peasant farms farming 555,1 thousand ha (27.6%). Production cooperatives rented 72.5 thousand ha, JSCs rented 30.7 thousand ha, LLCs rented 607.6 thousand ha and small peasant farms rented 68.8 thousand ha.
12
Earnings profitability
13
Chapter: Flashback on agriculture in Republic of Moldova Organic agriculture in Moldova: local and regional perspectives
15297 902
(+4% yoy) (+4% yoy)
Source: NBS, authors calculations and estimations
6%
1.3 Markets
In 2011, Moldovas foreign trade balance with food products, animals, beverages and tobacco was positive, with an excess worth 14.2 mio. USD (totalling over 29% of national exports and 12% of national imports)8. With small exceptions (sugar, beverages), Moldovan exports of food products are made of products incorporating a low to medium level of processing technologies.
Table 4 International trade with food products, animals, beverages and tobacco in 2011
Export mil. USD Live animals Meat and meat products Diary and eggs Fish, crustaceans and molluscs Cereals and cereal derived products Fruits and vegetables Sugar, sugar and honey derived products Coffee, tea, cacao, spices and their substitutes Livestock feed Diverse food products and derivates Beverages Tobacco TOTAL Source: NBS, authors calculations and estimations 8.2 21.6 10.8 86.1 280.7 15.8 3 17.5 2.6 180.9 28.7 655.9 Import mil. USD 5.7 33.5 33.3 46.8 77.3 132 23.1 55.5 19.1 74.6 47.9 92.9 641.7 Balance mil. USD 2.5 -11.9 -22.5 -46.8 8.8 148.7 -7.3 -52.5 -1.6 -72 133 -64.2 +14.2 9 5 8 12 3 1 7 10 6 11 2 4 x 12 8 9 7 3 1 10 5 11 4 6 2 x Top in export Top in import
Fruits and vegetables were the most valuable category of exported food products in 2011, and the destination of these exports, with small exceptions, was rather Commonwealth of Independent States markets (Russian Federation, Ukraine and Belarus) and Romania.
Table 5 Structure of fruits and vegetables exports in 2011, value and destination
Value mio. USD 280,7 71.54 58.02 23.51 17.55 12.59 10.02 Destination country
RU, UA
National Bureau of Statistics, Social-economical development in Republic of Moldova in 2011: exports with food products, beverages, live livestock and tobacco made up to 29.5% of national exports, while imports of same products totaled 12.3% of national imports
13
TOTAL, including: Other nuts, fresh or dried, whether or not shelled or peeled Apples, pears and quinces, fresh Apricots, cherries, peaches (including nectarines), plums and sloes, fresh. Grapes, fresh or dried Tomatoes, fresh or chilled Other fruit, fresh (Strawberries, Raspberries, blackberries, mulberries and loganberries, Black, white or red currants and gooseberries, Cranberries,
FR, GR, GE, IQ, IT RU, BY, KZ RU, BY RU, BY, RO RU, BY
14
Chapter: Flashback on agriculture in Republic of Moldova Organic agriculture in Moldova: local and regional perspectives
Value mio. USD 280,7 5.18 3.59 2.12 2.02 1.97 1.20 0.67 0.59 0.45 0.39 0.19 0.15 Destination country
TOTAL, including: bilberries and other fruits) Potatoes, fresh or chilled Fruit, dried, mixtures of nuts or dried fruits Citrus fruit, fresh or dried Dried leguminous vegetables, shelled, whether or not skinned or split Other vegetables, fresh or chilled Cucumbers and gherkins, fresh or chilled Onions, shallots, garlic, leeks and other alliaceous vegetables, fresh or chilled. Vegetables (uncooked or cooked by steaming or boiling in water), frozen Cabbages, cauliflowers, kohlrabi, kale and similar edible brassicas, fresh or chilled Fruit and nuts, provisionally preserved but unsuitable in that state for immediate consumption Dates, figs, pineapples, avocados, guavas, mangoes and mangosteens, fresh or dried Carrots, turnips, salad beetroot, salsify, celeriac, radishes and similar edible roots, fresh or chilled Source: NBS, authors calculations and estimations
RU, BY RU, PL, BY, UA RU, KZ IT, GB, RO, RS RU, BG, UA, KZ RU, KZ, RO RU, RO, EE, GE RU, UA, RO RU, BY, BG BG, UA, RO, SK RU RU, BY, RO
http://data.worldbank.org/indicator/EA.PRD.AGRI.KD
14
Moldova Belgia Germania Frana Marea Britanie Olanda Danemarca Polonia Romnia Bulgaria Slovacia Cehia Slovenia Estonia
100kg/ha 83. 3 58 309. 1 276. 2 324. 5 267. 3 230. 5 186. 7 228. 4 121. 2 573. 7 388. 8 249. 4 : 232. 9 110. 1 145. 8 88. 6 159 39. 5 110. 1 94. 9 194. 5 97 196. 1 : 165. 9 6
152.4 : 460 414 444 460 330 205 172 : 224 297 : 175
capete 21.7 640 450.8 23 868 158.9 9 097 51.2 15 279 27.2 10 836 639.1 56 738 462.1 6 157 95.5 12 597 39.5 7 156 21.8 7 690 35.4 6 508 52.4 8 596 80.7 12 584 40.8 2 009
38.5 101.7 11.8 30.0 132.6 83.1 : 2.2 70.2 56.5 22.1 6.2 34.2 7.1
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Chapter: Flashback on agriculture in Republic of Moldova Organic agriculture in Moldova: local and regional perspectives
GAV per employe e, 2000 constan t prices USD Animals per 100 ha of utilized agriculture areas Poultry capete Net profit (loss) MDL 182259006 51008522 27053619 15982839 12013870 9380897 8985710 4322759 3552777 1411361 -19166615 Net profit (loss) MDL 247721032 148474026 108275946 80135689 53719414 51376168 42499235 30611221 29165885 26109989 25577989 Sheep and goats Swine cattle Earnings MDL 1337732233 326008978 37427262 38408801 34974756 33181408 31016084 32544335 43230125 81051789 376306118 Earnings MDL 1743219064 1300739262 692741194 400946333 1029839590 442064115 1672979945 543560184 503648848 517988477 1118366303
Vegetab les
100kg/ha
As for the food processing industry, the most profitable activities seem to be: (i) wine industry, (ii) production of sugar and (iii) and production of beer.
Table 8 Top of most profitable food processing industry activities in 2011 (out of top 1000 most earnings performing domestic companies)
No. of employees Manufacture of wine Manufacture of sugar Manufacture of beer Production of mineral waters and other bottled waters Manufacture of refined vegetable oils and animal fats Manufacture of fruit or vegetable juices Manufacture of liquid milk and diary products Processing and preserving of meat Manufacture of cocoa, chocolate and sugar confectionery Manufacture of distilled, potable, alcoholic beverages Manufacture of fruit or vegetable food products (exclusive persons 4709 1560 393 397 788 1308 3160 328 1268 826 1169
Potatoe s
Cereals
Fruits
15
16
Chapter: Flashback on agriculture in Republic of Moldova Organic agriculture in Moldova: local and regional perspectives
No. of employees persons Net profit (loss) MDL 13652461 4149557 3290038 1934953 1794301 882328 724689 -12125947 -19435677
Earnings MDL 159457825 152988448 138797230 125786173 164023390 101685548 45411911 872080757 610939701
potatoes) Manufacture of rusks, biscuits and other dry bakery products Preparation and preservation of fish Processing and preserving of poultry meat Manufacture of other food products Manufacture of crude vegetable oils and animal fats Manufacture of ice cream Production of flour Manufacture of bread and rolls, fresh pastry, cakes, pies, tarts Production of meat products Source: Authors estimations and calculations 456 248 239 106 109 252 127 3790 1780
Source: FAO
16
Ukraine Russian Federation Romania Republic of Moldova Poland Lithuania Latvia Italy Germany France Estonia Czech Republic Austria
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Chapter: Flashback on agriculture in Republic of Moldova Organic agriculture in Moldova: local and regional perspectives
553 2261 663 8029 3969 3199 3585 10580 7005 3075 6026 965 2 9 1 24 20 9 13 17 10 7 11 3 1 4 1 29 16 9 13 26 15 10 13 4
Russian Federation Romania Republic of Moldova Poland Lithuania Latvia Italy Germany France Estonia Czech Republic Austria Source: FAO
3287 2790,7
3562
Credit balance
Dsiboursed credits
In 2011, the average credit to agrifood sector stood at 779 thousand MDL (+25.3 yoy). As of November 2012, 62% of the credit portfolio (worth 2.54 billion MDL) and 91% of the number of credits were disbursed in national currency. In January-November 2012, the average banking credit stood at 422 thousand MDL for MDL credits and at 3 mio. MDL for foreign currency
17
2008
2009
2010
2011
18
Chapter: Flashback on agriculture in Republic of Moldova Organic agriculture in Moldova: local and regional perspectives
credits (the banking sector average is 129 thousand MDL and 2 mio. MDL respectively). 58% of credit portfolio and 54% of the number of credits had a medium term maturity (1 to 5 years). The average medium term credit stood at 676 thousand MDL. Less than 1 year maturity credits (usually disbursed for working capital) reached 32% of the credit portfolio balance (1.35 billion MDL) and 44% of the number of credits (2881 credits) effective 30/09/2012.
Table 11 Maturity of banking credits to agrifood sector, effective 30/09/2011
Credit balance Pn la 1 an De la 1 la 5 ani Peste 5 ani Total credite acordate agriculturii Total credite pe sistem Th. MDL 1 350 238 2 411 303 395 913 4 157 454 28 990 170 % 32% 58% 10% 100% No of credits units 2 881 3 568 105 6 554 126 507 % 44% 54% 2% 100%
The biggest players on the agrifood bank credits market are BC Moldova Agroindbank SA, BC Moldindconbak SA and BC Victoriabank SA.
Table 12 Players on the agrifood bank credits market, 2008-2011
Market share, 2011 % 41.1% 10.8% 14.1% 7.0% 2.6% 1.3% 3.3% 1.3% 6.4% 6.8% 4.4% 0.0% 0.6% 0.0% 0.4%
100.0%
Bank
2011 th. MDL 1 389 005 365 047 475 366 235 156 86 369 42 206 112 986 42 767 214 415 230 299 147 141 0 20 431 150 14 217
3 375 555
2010 th. MDL 1 321 252 179 309 295 752 209 916 96 952 88 429 239 841 37 638 5 453 186 854 113 000 0 8 284 6 013 15 842
2 804 535
2009 th. MDL 946 517 344 391 156 400 181 735 84 027 50 762 68 035 24 844 38 198 137 847 70 425 27 802 24 729 0 0
2 155 712
2008 th. MDL 1 160 462 432 697 250 707 138 091 123 413 151 521 109 865 22 671 95 606 152 464 23 329 0 125 889 3 950 0
2 790 666
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Moldova Agroindbank Victoriabank Moldindconbank Banca Social FinComBank Eximbank Banca de Economii Unibank Banca Comercial Romn Energbank ProCreditBank Universalbank Mobiasbanc EuroCreditBank Comerbank Total
Market share evolution 11/08 p.p. -0.4 -4.7 5.1 2.0 -1.9 -4.2 -0.6 0.5 2.9 1.4 3.5 0.0 -3.9 -0.1 0.4
x
In 2011, the agrifood sector was credited from the banks own resources. The share of banks own resources raged between 52-100% from the overall portfolio of credits to the sector.
Table 13 structure of bank credits to agrifood sector according to financing source (own, borrowed) in 2011
# 1 MAIB Bank Value of credits Own Borrowed % % 77.9 22.1 Number of credits Own Borrowed % % 79.8 20.2
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Chapter: Flashback on agriculture in Republic of Moldova Organic agriculture in Moldova: local and regional perspectives
Value of credits Own Borrowed % % 51.9 48.1 65.3 34.7 71.7 28.3 76.3 23.7 67.2 32.8 100.0 0.0 100.0 0.0 100.0 0.0 Number of credits Own Borrowed % % 59.1 40.9 37.5 62.5 32.8 67.2 53.1 46.9 59.0 41.0 100.0 0.0 100.0 0.0 100.0 0.0
# 2 3 4 5 6 7 8 9
Just like in the last years, banks borrowed credit finances from two sources: (i) financing projects funded by international financial institutions or international development agencies and (ii) sector support programs, state or international donor-funded. The financing projects funded by international financial institutions or international development agencies are employing three disbursement schemes: (i) direct financing of local financial institutions, which credit local SMEs according to own credit criteria; (ii) apex financing, within which funds are made available to local financial institutions for strictly designed measures, and credits are approved only by the international funding institution or development agency; (iii) leasing, e.g. 2KR project, which uses a quasi-leasing financing scheme. Sector support programs are state and international donor-funded, e.g. Japanese Non-Project Grant Aid to SME sector support and development in Moldova, the Project for the SocialEconomic Enabling of the Youth (PSEEY), the Credit Guarantee Fund (CGF) of the Small and medium-sized enterprises sector development organisation in Moldova, the Interbank Society for Credit Guarantee Garant Invest, Private Sector Investment program, Improvement of social and economic condition in the rural areas of Moldova program and the Pilot program for the remittances attraction into economy (PARE 1+1) etc. Finally, in 2011, credits worth 208.17 mio. MDL, 16.78 mio. USD and 11.64 mio. were financed through international institutions and donors credit lines and revolving funds (repaid credits). 76% of these amounts were revolving funds (11.39 mio. USD, 8.38 mio. and 188.62 mio. MDL). On aggregate, beginning with the start of implementation of small and medium-sized enterprises development programs under the Line Credit Directorate, the agrifood sector received financing worth 1,326.84 mio. MDL, 42.24 mio. USD and 14.99 mio. Euro, which is 64.23% from the total value of credits to the sector. There were 5758 financed projects, out of which 1401 were also grant projects (from RISP1, FIDA 2, PASET 2 and PSEEY programs).
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Table 14 International projects and donor fund financing (ongoing programs) 10
Discounted to local financial institutions in 2011 42 207 176 6 042 650 468 950 Total discounted to local financial institutions 639 479 149.8 9 104 168 468 950 Total repaid by local financial institutions, credit body 197 641 030.4 962 867.1 0 Debt balance of local financial institutions, credit body 441 838 119.4 8 141 300.9 468 950
Program
Currency MDL $
10
20
Chapter: Flashback on agriculture in Republic of Moldova Organic agriculture in Moldova: local and regional perspectives
Lei $ MDL $ 103 999 711 5 527 355 13 621 951 4 758 656 10 866 580 6 635 370 450 000 300 000 41 704 034 208 168 242 16 778 661 11 635 530 775 321 870.2 13 881 149.8 27 486 951 5 906 138.5 12 952 715.5 50 013 394.1 450 000 300 000 121 584 897.1 1 695 972 572.1 73 613 202.4 32 744 112.1 377 802 783.7 3 060 398.3 8 453 804 557 982 1 754 399 17 085 124.8 0 0 42 409 634.1 674 309 927 48 852 993.5 20 767 049 397 519 086.5 10 820 751.5 19 033 147 5 348 156.5 11 198 316.5 32 928 269.3 450 000 300 000 79 175 263 1 021 662 645.1 24 310 208.9 11 208 113.1
The Rural Finance and Small Enterprise Development Project (IFAD) Competitiveness enhancement project (CEP) Kreditanstalt fur Wiederaufbau (KfW) Project for the Social-Economic Enabling of the Youth (PSEEY)
TOTAL
Source: LCD, NBM, raw data from commercial banks, authors calculations
Banking sector does not appear to encourage the agribusiness lending: the share of loans granted to this sector is relatively stable and did not exceed 14% per total portfolio. The commonness of this phenomenon derives from the fact that 12.8% of these loans are problematic compared to the average 8.1% per domestic banking sector. The share of the fund related risk is by 6.7 p.p. above the share in total portfolio. Therefore, the level of indebtedness of the agricultural business (compared to the financial performances) stood at an admissible level: the total gross debt ratio 1.4 (acceptable up to 1.5), ROA - 6% (acceptable from 6%), ROE 14.3% (acceptable from 12%)11. In January-September 2012, local commercial banks have lent credits worth 2.99 billion MDL to both primary agriculture and food industry. 1.78 billion MDL have been lent to food industry processors (61.4%), whereas 1.12 billion MDL have been lent to primary agriculture companies. This originates in different debt capacity in primary agriculture and food industry sectors.
Table 15 Bank lending to primary agriculture and food industry in January-September 201212
Industrie alimentar mii MDL 125 513 0 37 437 24 468 0 89 051 39 124 222 955 862 557 26 443 149 762 Pondere agricultur din total % 26,0 100,0 51,8 32,1 100,0 47,3 42,2 17,8 31,5 24,1 46,2 Pondere industrie alimentar din total % 74,0 0,0 48,2 67,9 0,0 52,7 57,8 82,2 68,5 75,9 53,8
Denumirea bncii
Agricultur mii MDL 44 129 48 797 40 289 11 542 8 098 79 920 28 615 48 436 396 128 8 416 128 672
Total mii MDL 169 642 48 797 77 726 36 010 8 098 168 971 67 739 271 391 1 258 685 34 859 278 434
11
Authors calculation from commercial banks monthly and quarterly statistic reports (data does not include most of small peasant farms) 12 The separated evidence of primary agriculture and food industry bank lending is possible due to changes introduced starting with January 2012 in the methodology banks use to keep the evidence of these credits (aggregated data was only reported before)
20
1 2 3 4 5 6 7 8 9 10 11
Banca Social Banca Comercial Romn Banca de Economii Comerbank EuroCreditBank Energbank Eximbank Fincombank MAIB Mobiasbanca Moldindconbank
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Chapter: Flashback on agriculture in Republic of Moldova Organic agriculture in Moldova: local and regional perspectives
Pondere industrie alimentar din total % 5,7 64,8 44,8 74,0
61,4
Denumirea bncii
Industrie alimentar mii MDL 3 427 38 390 162 357 125 513
1 781 483
12 13 14 15
1 121 131
Strengths
a. Availability of land and agro-climatic resources b. Adjusted and harmonized legal framework regulating organic agriculture
Weaknesses
a. Agriculture land erosion b. Low agriculture land irrigation readiness c. Low embracement of no-till and low-till cultivation technologies d. Low incorporation of post-harvest processing technologies
Opportunities
a. Expected signing of Deep and Comprehensive Free Trade Agreement (DCFTA) with the EU b. Free trade agreements with 9 Commonwealth of Independent States countries c. Entry of Russian Federation in WTO d. Specializing in intensive crop production, greenhousing and organic production e. Development of naval infrastructure of International Free Port Giurgiulesti f. Increase of donor-funded international projects, diversification of projects reach g. Agrifood know hom import by Moldovan expats and new business models implementation h. Unification of fiscal policiesle
Threats
a. Exodus of qualified specialists and people able to work b. Increasing imports of agrifood fresh and processed products c. Stagnation of research&development institutions d. Bad weather conditions frequency and severity exacerbation
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Chapter: Organic agriculture (farming) in Republic of Moldova Organic agriculture in Moldova: local and regional perspectives
As of today, the national legal framework is very well adjusted to European framework. At least nine EC Regulations and quality standards have been transposed into the national legislation and regulatory framework. This timing is very advantageous for national manufacturers and for the sector in general.
Table 17 National legal framework matrix governing organic agriculture
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Chapter: Organic agriculture (farming) in Republic of Moldova Organic agriculture in Moldova: local and regional perspectives
There are 5 accredited companies to perform organig products manufacturers certification which are licensed by the Ministry of Agriculture and Food Industry: CERTIFICAR-ECO SRL, CRPA Inspect, CS ICEA Group SRL, CS ECOGRUPPO ITALIA-M SRL. In December 2011, the Government has registered and adopted the logo of the national brand Organic Agriculture Republic of Moldova. This is applied only on products, labels and packing of organic food products which have been inspected and certified by certification bodies along their production cycle.
15 000
Ha 10 000 5 000
Source: MAFI, Organic agriculture in Moldova: present and perspectives, April 2012
Structurally, organic areas were mostly under cereals, vineyards and protean crops. The relatively narrow areas under grassland illustrates how badly organic animal husbandry is underperforming in Moldova.
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Chapter: Organic agriculture (farming) in Republic of Moldova Organic agriculture in Moldova: local and regional perspectives
Vegetables, 1%
Vineyards, 21%
Source: MAFI, Organic agriculture in Moldova: present and perspectives, April 2012
Over 170 producers were organically cultivating their crops in 2011 (7% of total number of agriculture companies). The number of certified organic farmers has grown with 41% CAGR during 2003-2011. MAFI estimations say their number will expand to 260 close to 201513.
Exhibit 8 Dynamics of organic farmers 200 180 160 140 120 100 80 60 40 20 0 185 155 160 172
units
64 11 17 23 31
Farmers/manufacturers 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: MAFI, Organic agriculture in Moldova: present and perspectives, April 2012
Exports of organic crops have generally grown steady, except 2011, when a contraction of nearly 30% was observed. Nearly 15,400 t of organic products have been exported in 2011, worth 15 mio. Euro, against 22 mio. a year before. Exports consist mostly of cereals, oilseed and protean crops, berries, oil of aromatic plants, sunflower oil. 80% of these exports are unprocessed crops exports. The main export markets are Germany, Austria, Netherlands, Italy, Switzerland,
13
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Chapter: Organic agriculture (farming) in Republic of Moldova Organic agriculture in Moldova: local and regional perspectives
Denmark and France. Until know, MAFI has no concluding and publically available statistics regarding the structure of these exports.
Exhibit 9 Exported volumes of organic production, tons 25 000 20 000 15 000 10 000 14 500 11 600 6 750 1 373 2 486 3 675 4 165
-30% estimated
22 000
15 400
10 780
tone
5 000
0
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Source: MAFI, Organic agriculture in Moldova: present and perspectives, April 2012; authors calculations and estimations
Exports are expected to contract in 2012 as well. An extrapolation of a general contraction of 30% of the agriculture production in 2012 is expected to drive an even rougher contraction of organic production exports. This logic brings the exports of organic crops and products to less than 10-11 thousand tones in 2012, worth 10-12 mio. Euro. A moderate scenario of 10.6% CAGR during 2012-2026 would bring the total organic area in Moldova to 100,000 ha, meaning 4% of the total utilized agriculture area. This is a highly probable scenario due to the revised subsidizing policy in 2013. In these conditions, organic area would be less by 1 percentage point than the present average in European Union (nearly 5% of utilized agriculture land in European Union is organic)14. A pessimistic scenario, meaning a CAGR of 8,4% during the same period, would correspond to a total organic area of 75,000 ha, reaching 3% of the national utilized agriculture area. This scenario brings the exports of organic products to nearly 52,000 - 53,000 t. For an average 1 Euro/kg (as it was the case in 2010-2011), this means the exports value would reach 53 mio. Euro. According to the moderate scenario, the exports are supposed to reach70,000 t, while an highly optimistic scenario would translate into exports worth 104 105 thousand t15.
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These estimates do not take into account some important factors such as: increase of organic products export prices, unstable subsidizing policies, bad weather conditions that may result in decreasing volumes of production, growing potential of animal husbandry organic sector.
14 15
The pace for the organic land increment was calculated from the expected ratio of organic land at the end of 2026 The expected value of the exports was calculated using the organic land CAGR during 2012-2026
Table 18 Sort and long-term estimations of organic areas and organic production exports
Short term Long-term estimates estimates 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2 498 2 498 2 498 2 498 2 498 2 498 2 498 2 498 2 498 2 498 2 498 2 498 2 498 2 498 2 498 2 498 2 498 19,7 22,1 24,3 20,0 19 12 10 -18 0,8 0,9 1,0 0,8 1,0 1,3 1,7 2,1 2,5 2,9 3,3 3,7 4,1 4,5 4,9 5,3 6,0 0,8 0,9 1,0 0,8 0,9 1,2 1,4 1,6 1,8 2,0 2,3 2,5 2,7 2,9 3,1 3,4 4,0 0,8 0,9 1,0 0,8 0,8 1,1 1,2 1,4 1,5 1,7 1,9 2,0 2,2 2,4 2,5 2,7 3,0 optimist, thousand ha year-end 25,0 32,5 43,5 52,7 62,8 72,5 82,4 92,2 102,0 111,9 121,7 131,5 149,9 yoy increase, % 24,9 30,0 33,8 21,3 19,2 15,4 13,7 11,9 10,7 9,6 8,8 8,1 14,0 moderate, thousand ha year-end 22,5 29,5 34,2 40,1 45,4 51,0 56,5 62,0 67,5 73,0 78,5 83,9 99,9 yoy increase, % 12,4 31,1 16,1 17,2 13,2 12,3 10,7 9,8 8,9 8,2 7,5 7,0 19,0 pessimist, thousand ha year-end 21,0 26,7 30,1 34,7 38,6 42,9 47,0 51,2 55,4 59,5 63,7 67,8 74,9 yoy increase, % 4,9 27,4 12,6 15,1 11,4 11,0 9,6 8,9 8,1 7,5 7,0 6,5 10,5 22 000 15 400 10780 14000 52 -30 -30 30 optimist, t 17 488 22 735 30 429 36 900 43 983 50 759 57 689 64 542 71 433 78 306 85 188 92 065 104 929 yoy increase, % 25 30,0 33,8 21,3 19,2 15,4 13,7 11,9 10,7 9,6 8,8 8,1 14,0 moderate, t 15 739 20 641 23 961 28 072 31 788 35 701 39 515 43 379 47 218 51 070 54 915 58 764 69 952 yoy increase, % 12 31,1 16,1 17,2 13,2 12,3 10,7 9,8 8,9 8,2 7,5 7,0 19,0 pessimist, t 14 690 18 717 21 076 24 268 27 044 30 028 32 908 35 840 38 746 41 665 44 578 47 493 52 464 yoy increase, % 5 27,4 12,6 15,1 11,4 11,0 9,6 8,9 8,1 7,5 7,0 6,5 10,5 Effective
Utilized agriculture land, thousand ha Organic areas, thousand ha Yoy evolution, % Optimistic Estimates of organic land area ratio, % Moderate Pessimist
CAGR 20122026
2.3 Subsidies
Subsidies have a great impact on organic farming in Republic of Moldova. They are mostly used to support new areas conversion from conventional to organic agriculture. Nevertheless, it represents only a fraction of the total volume of subsidies granted to agriculture (0.7% in 2010). In 2007, the foundation of subsidizing was set by assigning 2 mio. MDL to organic farming. During 2007-2008, the support was conceded in order to compensate expenses during land conversion, and starting with 2009 support was also conceded for stimulating trade with organic products. In 2012, subsidizing organic farming has changed, the sector being removed from the list of special target measures, i.e. Measure no.6 Supporting and promoting of organic farming development. The support was broke down to three distinct measures and does not tacitly support conversion of new areas. The impact of this policy change of direction (mostly dictated by budget austerity) has the power to potentially temper the pace of new land conversion.
Table 19 Subsidizing organic farming during 2007-201116
# Subsidies dedicated to organic farming, th. MDL Subsidies utilized in organic farming, th. MDL No. of organic farmers who benefited from subsidies Total subsidies to agriculture, th. MDL Areas in conversion process, ha Source: AIPA, MAFI 2007 2,000 1,747.998 24 365,047 2,857 2008 4,000 3,999.440 32 179,309 3,587 2009 5,000 1,999.841 38 344,391 7,997 2010 2,600 2,200.000 41 400,000 : 2011 :
17
2012 : : : 400,000 :
785,782 13 400,000 :
700 MDL/ha for first year of conversion, 400 MDL/ha for second year of conversion 700 MDL/ha for first year of conversion, 400 MDL/ha for second year of conversion, 40% price addition for exported organic products, 20% price addition for locally marketed organic products Measure No.6 700 MDL/ha for first year of conversion (not more than 100 ha per farmer), Supporting and 400 MDL/ha for second year of conversion (not more than 100 ha); 20% price promoting of organic addition for locally marketed organic products; state support limited to 150,000 farming development MDL per farmer Measure No.6 800 MDL/ha for first year of conversion (not more than 200 ha per farmer); Supporting and 400 MDL/ha for second year of conversion (not more than 200 ha per farmer); promoting of organic 400 MDL/ha for third year of conversion (not more than 200 ha per farmer), farming development for multiannual plantations; state support limited to 200,000 MDL per farmer Measure No.1 Stimulate crediting of Maximum 400,000 MDL for reimbursement of credits contracted during 2010farmers by financial 2011 institutions Measure No. 3 Addition of 5,000 MDL/ha to the initial subvention for establishing organic tree
2010
2011
2012
16
Agency for Intervention and Payments in Agriculture, List of beneficiaries for Measure no.6, 2007-2011, http://aipa.md//images//docs/benef_m6_2011.pdf, http://aipa.md/index.php/lista-beneficiarilor/31-listabeneficiarilor-2006-2009/173-lista-beneficiarilor-de-subventii-ce-au-contribuit-la-dezvoltarea-agriculturiiecologice-2007-2009 17 Data not accessible
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Chapter: Organic agriculture (farming) in Republic of Moldova Organic agriculture in Moldova: local and regional perspectives
plantation, nuts plantation, berries and strawberries Addition of 2,000 MDL/ha to initial subvention for establishing organic plantations of aromatic crops
Stimulate investments in establishing multiannual plantations and promoting vineyard production Measure No. 4 Stimulate production of greenhouse vegetables
18 19
Viorel Gherciu, Green Economy Sector Study: The Potential of Organic Agriculture in the Republic of Moldova idem
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Chapter: Organic agriculture (farming) in Republic of Moldova Organic agriculture in Moldova: local and regional perspectives
beginning of summer, the record for highest temperature being already twice surpassed (40.1 in June, then 42.4C on 7 August)20. The State Hydro-Meteo Service (SHS) reports that since June the average annual temperatures have been 3.7-5.1 degrees above the norm1 and on 95% of territory the precipitations constituted 15-60% of the norm, with temperature on the soil reaching historically highest level of 63-71 degrees. As a result, 95% of countys territory has reportedly been affected by catastrophic drought. Total preliminary estimated agriculture damage varies widely from 800-900 mio. lei to 2.2 billion, while does not take into account the negative aftermath for the livestock. Major damage was done to the Crops of group II (maize, sunflower, sugar-beet) and account for 73% from the total damage. For the Crops of the Group I (autumn wheat, barley, rape) the South of Moldova was the most affected accounting for 49% out of total 575 mio. lei damage to this group of crops. Due to reduction of level of fodder availability in the country (by 60% as per preliminary unofficial data), it is expected that a share of 45% of livestock is going to be slaughtered (poultry and swine mostly) in rural areas.
If soils are improved by organic management, they will increase their value at an average of at least 20 per cent. The added capitalization of 3% of the utilized agriculture land would reach 9 mio. USD. In a more complex approach, additional capitalization streams could come from the establishment of organic fertilizers sub-sector and new job creation. Estimations show that the sector could employ over 100 thousand people and replace a fraction of imports of fertilizers, a market worth 13-14 mio. USD in 2010. Similar opportunities exist for seeds and seeding material sectors.
20
United Nations, Office of the resident Coordinator in Moldova, Moldova Situation report -2012 #1, Drought in Moldova
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Chapter: Organic agriculture (farming) in Republic of Moldova Organic agriculture in Moldova: local and regional perspectives
Organic agriculture enhances biodiversity and ecosystem services, and preserves valuable traditional landscapes that can eventually be assets in developing eco-tourism. Biodiversity conservation will improve lands converted to organic agriculture and the expansion of natural protected areas will contribute to the stabilization of the natural balance between human beings and nature.
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Chapter: Organic agriculture (farming) in Republic of Moldova Organic agriculture in Moldova: local and regional perspectives
The local market of organic products is rather infant and almost inexistent. This is exacerbated by its narrowness, low awareness of organic farming, defying approach of retail chains which se no opportunity in organic farming (are not impressed by the organic labeling). As of today, Mr. Zaharia trades organic products as being conventional. The human factor is the most fluctuating element of agriculture equation. Irresponsibility, avidity and insobriety are common features among field workers. Stunning facts are disclosed regarding organic raspberry exports. The largest part of them is smuggled by intermediaries to Ukraine, Belarus and Romania. On foreign markets they are traded as conventional fruits, also because export of conventional fruits does not require additional papers to prepare and the generally issued sanitary certificate is sufficient for customs service authorities. There is basically no local market of raspberry and currant seeding material. Farmers divest from currant plantation also because imported varieties of seeding material is not homologated ant, therefore, they cannot claim subsidies for these plantations. As an organic farmer of fruits, Mr. Zaharia resents the need of the post-harvesting technical infrastructure (e.g. sorting, grading equipment) which can be established, in his case, on the base of his already existing cooling facility under the form of a sub-regional post-harvest processing center. Financing of farmers is also expensive. Building the cooling facility required a credit of 2 mio. MDL, with an interest of 9%.
Veche,
Anenii
Noi
Mr. Cotorobai is the acting president of Aroma farming cooperative. 1575 ha of land are farmed by the cooperative, out of which 401 ha have successfully underwent the conversion process. 110 ha are planted with lavender, which is the organisation must earning crop. The additional organic areas may be cultivated with crops at buyers wish. Mr. Cotorobai plans to begin conversion for additional 24 ha. Other aromatic crops are the rose, the dill, the hyssop etc. The cooperative has all necessary technical means to grow the plants and extract essential oils. This organisation has been traditionally involved in this industry since the 70 of the last century. After the collapse of the collective farming, the cooperative has managed to maintain the technical base and even buy new equipment. Nearly 2-2.5 t of lavender oil is extracted during a year, given good climate conditions. In 2012, both severe frost in early spring and drought in summer have reduced the yield to less than 200 kg. The market for the oil is made of foreign buyers, mainly from EU countries (Germany, France). In 2012, losses amounted up to 8 mio. MDL. Against a maximum of 150 of persons
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Chapter: Organic agriculture (farming) in Republic of Moldova Organic agriculture in Moldova: local and regional perspectives
employed during harvesting in a well performing year, the cooperative plans to employ not more than 50 persons in 2013. Key messages, lessons for the future: Production of lavender oil and other aromatic plants oils was widely stimulated by subventions in 2008-2010, namely by granting a 40% price addition for exported organic products and 20% price addition for locally marketed organic products. If foreign buyers would lose interest in his production, Mr. Cotorobai would definitely give up on this business. Working only for the domestic market appears to be unprofitable, as buyers such as Viorica Cosmetics were ready to pay not more than 50% f the export price of the oils. Authorities (MAFI, National Agency for Interventions and Payments) are rather inefficient, corrupt and rigid in processing subsidy files and finally subsidy allocation. In the best case, out of his, experience, subsidies help Mr. Cotorobai to cover subsidy obtaining costs and related costs (e.g. taxes). Taxes are regularly cutting from the cooperatives diversification resources and profitability. Going organic is not a matter of choice. Lack of finance to buy nutrients, pesticides, fuels makes organic farming a natural option of farming. EU importers are not keen to give importance to locally issued organic production certificates. In 2010, Mr. Cotorobai had to certify its production with Ecocert (France), in order to make the export. After the transaction, local authorities have rejected Mr. Cotorobais plea for subvention worth 600,000 MDL by rejecting the Ecocert certificate and claiming it was not issued by a local certified organisation. The cooperative goes through difficult times. Salaries have not been paid for the last 4-5 months. Fairness of cooperatives administration and good records in the past are the only incentives to keep people working. Recent changes in taxation policies will allow the organisation to make profits in the upcoming 4-5 years the earliest, in Mr. Cotorobais estimations, should climate conditions be predictable. Changes in subsidizing policies will stimulate the exit of areas from the organic production cycle.
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Cioara,
Hnceti,
(plantations
of
Mr. Simaco is the leader of the agriculture cooperative in Cioara, Hnceti. The cooperative cultivates 1300 ha of land, which is the property of 930 entitled land parcels owners. The cooperative switched to aromatic plants business in 1988-1990. Presently, organically certified areas include 80 ha of lavender, 200 ha of wheat, 2 ha of calendula. The cooperative also cultivates the dill, the hyssop, the salvia etc. Recently, 26 ha of peach trees have been planted (not organic).
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Chapter: Organic agriculture (farming) in Republic of Moldova Organic agriculture in Moldova: local and regional perspectives
The organisation has sufficient technical means to cultivate the lavender. It also has fruits and vegetables canning equipment. Presently, this equipment has been put out of service because of high operating cost. The cooperative has tough records of exporting canned production to USA, former soviet countries markets. The cooperative production of lavender oil stands up to 1 t of flowers per ha, should climate condition be appropriate. Because yields have been less than 50% in 2012, production of lavender oil dropped to 1 t of oil this year. Harsh weather conditions are to blame for this collapse in production. Harvesting of lavender is generally insured by 120-150 seasonal workers and 60 full-time workers. Working force is originated form Cioara, as well as neighbor villages, e.g. Dancu. Two-way transport and one meal per day are provided to seasonal workers. Remuneration is calculated from the individual effort: 0.35 MDL/kg of harvester lavender flower and 200 g of wheat/kg of harvested lavender flower. Key messages, lessons for the future: Organic production of lavender oil is totally exported to Bulgarian intermediaries. The organisation has insufficient amount of resources and know-how to promote its production on its own. Relatively reasonable prices are compensated by annual credits of 100,000 USD for financing harvesting and oil production. Because of low capitalization, the cooperative has the possibility of contracting credits worth less than 300,000 MDL. Subventions mostly cover costs with taxes. There is a need for subventions to cover some specific operating costs, e.g. fuel costs, which would increase operational and financial mobility of the organisation during rush hours. Lavender organic oil business is profitable should organic areas exceed at least 20-25 ha. This is mandatory upon the relatively old equipment extracting the oil. The cooperative performs testing and certification of its organic production with German laboratories on a yearly basis. National certification is necessary but insufficient to make a plea for a veritable organic production to importers.
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Chapter: International experience in organic farming Organic agriculture in Moldova: local and regional perspectives
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Chapter: International experience in organic farming Organic agriculture in Moldova: local and regional perspectives
Almost two-thirds of the organic agricultural land of 37.2 mio. hectares in 2009 was grassland/grazing areas (23 mio. hectares). With a total of at least 5.5 mio. hectares, arable land constitutes 15 percent of the organic agricultural land. An increase of 13.2 percent compared with 2008 was reported. Most of this category of land is used for cereals including rice (2.5 mio. hectares), followed by green fodder from arable land (1.8 mio. hectares), and vegetables (0.22 mio. hectares). Permanent crops account for approximately six percent of the organic agricultural land, amounting to 2.4 mio. hectares. The most important crops are coffee (with 0.54 mio. hectares reported, constituting one-fifth of the organic permanent cropland), followed by olives (0.49 mio. hectares), cocoa (0.26 mio. hectares), nuts (0.2 mio. hectares), and grapes (0.19 mio. hectares). There were 1.8 mio. producers in 2009, an increase of 31 percent since 2008, mainly due to a large increase in India. Forty percent of the worlds organic producers are in Asia, followed by Africa (28 percent), and Latin America (16 percent). The countries with the most producers are India (677257), Uganda (187893), and Mexico (128862). The global market for organic food and drink is recovering from the repercussions of the economic crisis. Single-digit market growth was observed for the first time in 2009 because of the economic slowdown reducing industry investment and consumer spending power. Organic food and drink sales expanded by roughly five percent to 54.9 billion US dollars in 2009. Global revenues have increased over three-fold from 18 billion US dollars in 2000 and double-digit growth rates were observed each year, except in 2009. Healthy growth rates are envisaged to restart as consumer spending power rises and as more countries come out of economic recession. The countries with the largest markets are the US, Germany, and France; the highest per capita consumption is Denmark, Switzerland, and Austria.
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Chapter: International experience in organic farming Organic agriculture in Moldova: local and regional perspectives
Source: An analysis of the EU organic sector, European Commission, Agriculture and Rural Development
There are five countries now in Europe with more than ten percent organic agricultural land: Liechtenstein (26.9 percent), Austria (18.5 percent), Sweden (12.6), Switzerland (10.8 percent), and Estonia (10.5 percent). The average size of organic farms is larger than of the average of all farms (13 ha for the average farm in the EU-27 and 38 ha for organic farms, according to the Farm Structure Survey)21. Permanent grassland represents 47.1% of the whole organic area and arable crops (excluding green fodder) only 23.2% in 2006. Among arable crops, cereals represent the most important category with 1.2 mio ha in 2007, i.e. 18.3% of all EU organic land. For animal production the organic sector tends to develop faster for the species which can be fed on the basis of grassland and roughage (cattle, sheep and goats) whereas for pigs and poultry feeding is a more complicated operation since grain and protein rich feedstuffs are necessary. Hence, in 2007 2.7% of the cattle herd is organic in the EU. For sheep and goats, the corresponding shares are 3.5 and 5.0% respectively.
21
European Commission, Directorate-General for Agriculture and Rural Development, An analysis of the EU organic sector, June 2010, pag. 2
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Chapter: International experience in organic farming Organic agriculture in Moldova: local and regional perspectives
It is estimated that in 2008 there were about 197 000 holdings involved in the organic sector in the EU-27, i.e. 1.4% of the total number of farms in EU, and about 33 800 certified processors of organic products. Organic food expenses in EU countries are less than 2% from food consumption costs. Sales of organic products were approximately 18400 mio. in 2009. The largest market for organic products in 2009 was Germany with a turnover of 5,800 mio. , followed by France (3,041 mio. ) and the UK (2,065 mio. ). As a portion of the total market share, the highest levels have been reached in Denmark, Austria and Switzerland, with five percent or more for organic products. The highest per capita spending is also in these countries. An updated overview of European action plans shows that currently 26 action plans (including regional action plans) targeting organic farming are in place. The EU European Action Plan for Organic Food and Farming sets out 21 initiatives to achieve the objectives of developing the market for organic food and improving standards by increasing efficacy, transparency and consumer confidence. The plan aims to achieve measures such as improving information about organic farming, streamlining public support via rural development, improving production standards or strengthening research. It follows the rapid increase in the number of farmers producing organically and strong demand from consumers during the past few years.
Organic production support payments have been made all over Estonia since 2000. The amount of support was EUR 19 per ha of grasslands; 22 /ha of grasslands where organically reared farm animals account for at least 50% of the total LU reared in the enterprise at the time of application; 45/ha under grains, legumes, industrial crops,
38
As part of regulatory framework and EU pre-accession support to Estonian Agriculture, the SAPARD scheme was established at the turn of century. This included the agrienvironment scheme, which has specific incentives for organic farming. Agri-environmental programs, introduced by the EU regulations in 1992 (Reg. 2078/92) and 1999 (Reg. 1257/99) on rural development, include compensation payments to farmers for all costs incurred in carrying out environmental improvements on their land. The development of the agri-environmental support scheme started in Estonia at the end of 1997.
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Chapter: International experience in organic farming Organic agriculture in Moldova: local and regional perspectives
potatoes, feed vegetables, and short-term grasslands; and 128 /ha per ha under open field vegetables, medicinal and aromatic herbs, and fruit and berry gardens in 2003. The main problem in applying for agri-environmental support was the insufficiency of the advisory system there were too few accredited advisers at the beginning of the process. Introduction of the required crop rotation and the preparation of documents were the most difficult steps for the producers. Sector studies have outlined that formal and informal institutions can impact conversion to organic farming. Key institutional factors have been found: legislation, governmental and nongovernmental organizations, Financial reasons for adopting organic farming include an organic produce premium, Producer participation in organized producer groups, Access to information and training and advisory services, Organic standards, certification and labelling of organic products, informal institutions (sanctions, taboos, customs, traditions, and codes of conduct). Several country studies contain an analysis of contextual factors which have influenced environment policy instruments in Estonia: actors (such as the Estonian Green Party which was established only at the end of 2006 and got 6 seats in 101 seated Estonian Parliament in the elections in March 2007); decision-making rules (constitutional rules, other fundamental decision-making practices, traditions and administrative rules and practices); instruments (subsidies, greening of strategic programs of different sectors; national sustainable development strategies and constitutional provisions); integration of legislation and policy instruments (integration of policy development between different governmental agencies, integration of planning processes).
Table 21 Motives, factors and modes of governance for environment policy instruments (EPI) matrix in Estonia22 Key (institutional) factors affecting adoption and remaining in organic farming as an example of successful EPI Legislation Governmental and nongovernmental organizations Financial reasons for adopting organic farming include an organic produce Premium Producer participation in organized producer groups Access to information and training and advisory services Organic standards, certification and Key modes of governance elements supporting EPI via adoption of organic farming Actors Decision-making rules Instruments (subsidies, greening of strategic programs of different sectors, national sustainable 23 development strategies and constitutional provisions )
Key motives in transition from conventional to organic agriculture Ideological reasons for adoption Beliefs and values Attitudes of farmers towards organic farming and environment in general Knowledge and skills of farmers on organic farming Access to markets Access to information, its networks
22
EPIGOV Papers No. 27, ENVIRONMENTAL POLICY INTEGRATION AND MULTI-LEVEL GOVERNANCE, Co-ordinating and synthesising research on environmental policy integration and multi-level governance, 2006-2008; A Co-ordinated Action under the European Union's 6th Research Framework Programme CITIZENS-2004-4.2.2 - Governance for Sustainable Development, DG Research 23 The Estonian National Strategy on Sustainable Development (SE21) takes into consideration interaction between environmental and development factors: Viability of the Estonian cultural space, Growth of welfare, Coherent society, Ecological balance (EPIGOV Papers No. 27)
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Chapter: International experience in organic farming Organic agriculture in Moldova: local and regional perspectives
labelling of organic products The informal institutions (sanctions, taboos, customs, traditions, and codes of conduct)
Estonian organic production has grown rapidly, one of the reasons being the financial support given per organic hectare since the year 200024. By 2011 organic land (134 057 ha) was about 14% of all agricultural land in use, with 1431 organic producers. In addition 1040 ha natural areas were certified. The size of organic farmland has expanded from year to year, to an average area of 94 hectares. Six of Estonias largest organic farms had over 1000 hectares of land. By contrast, development of organic processing and marketing has been modest. In 2011 the organic farming register had a total of 127 organic food processors and traders. Organic products reach consumers mostly via specialist organic shops and direct sales.
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Chapter: International experience in organic farming Organic agriculture in Moldova: local and regional perspectives
hectares applying for support. From 2001 Government Decree No. 505/2000 Coll. came into effect, introducing a fixed sum per hectare. This decree was replaced by Government Decree No. 500/2001 Coll. for years 2002 and 2003, but the amount of support for OF remained unchanged. From 2004 to 2006 state support conditions were set out by a program document entitled Horizontal Rural Development Plan (HRDP) which was drawn up in accordance with EU rules (i.e. Council Regulation (EC) No. 1257/1999 on support for rural development from the European Agricultural Guidance and Guarantee Fund) and ensured financial support for organic farmers even after Czech entry to the EU. Since 2007 support for OF has been financed on the basis of a document entitled Rural Development Programme 2007-2013 (RDP) drawn up according to Council Regulation (EC) No. 1698/2005 on support for rural development, and from the European Agricultural Fund for Rural Development (EAFRD) which has replaced HRDP and OP. Newly, since 2007, companies registered in organic farming can also utilize their bonus points for further measures within Axes I and III of the RDP. The level of payment is fixed (in EUR) for the whole 20072013 period as follows: arable land (155 EUR/ha), grassland (71 EUR/ha), permanent crops (849 EUR/ha), vegetables and special herbs on arable land (564 EUR/ha)25. Compared to conventional food supermarket chains, organic food in the monitored sales outlets was, over a long term, at a price level about 100-120 % higher on average. Organic food was cheaper in supermarkets, where the average price of all compared items was 14 21 % lower than in specialized shops. In 2009 a trend of direct distribution of organic food appeared in relation to the new alternative culture of buying food and catering in a renaissance of farm markets and farm sale. Markets are usually organised via civic associations or town halls which can provide a site and a facilities for a market place and possibly promotion among the public. In 2009 great media attention was paid to the distribution of organic food in so-called box delivery, which has been increasingly successful in the last two years. At present the term box delivery covers the distribution of a wide range of farm produce directly to the customers in towns. School canteens are another successfully developing point for organic food sale which has opened up to organic farmers in recent years. As of 31/12/2009, there were 398 407 ha of organically farmed land (9,38% of all utilized agriculture areas). The average size of organic farms decreased from 333 ha to 148 ha during 2001-2009. 82% of organic land was permanent grassland, 11% was arable land. Permanent crops had a share of 1%. In 2009 the volume of organic produce (i.e. produce from purely organic land) reached 643,500 t, of which production of fodder (recalculated as hay) represented 91 % (i.e. 562,300 t from permanent grassland areas and another 25,300 t of fodder grown on arable land). The total production on arable land was 78,450 t of which ca 56 % was cereals and 32 % fodder on arable land (volume in hay). In 2009, there were 2739 organic f arms (8% out of all agriculture companies). 395 companies were involved in organic product processing.
FinAsist Consulting Ltd.
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Ministry of agriculture of Czech Republic, Yearbook on organic farming in the Czech Republic2009
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Chapter: Future lessons Organic agriculture in Moldova: local and regional perspectives
Future lessons
A. EU countries experience shows that the evolution of the organic sector can be linked to three major drivers. First of all, the support provided to the sector (support for agricultural production methods "designed to protect the environment and to maintain the countryside": whether it is specific support to the sector as such with the agri-environment payments for instance or other supports as part of the Common Agricultural Policy (CAP), e.g. direct payments). Within rural development programmes, specific support to the organic sector is provided with the agri-environmental measures. In 2005, public support commitment for agrienvironment measures amounted to 3.83 billion in the EU-25, of which 0.66 billion were devoted to organic agriculture (17.2%). A sizeable part of the area under organic production in the EU benefits from the organic-specific support provided with agrienvironment measures. In the period 2004-2006 this was the case of 46% of the organic area in the EU-25. However, this varies significantly between Member States with more than 90% in Finland and less than 10% in the United Kingdom. If one considers all subsidies received (subsidies on investment excluded), FADN data indicate that organic farms would receive on average higher subsidies in absolute terms and per hectare than conventional farms: 324 against 225 per hectare in the EU-10 and 438 against 355 in the EU-15 in 2007 (FADN data). This is due partly to higher agri-environment payments (127 per hectare in the organic sector in the EU-15 against 24 in the conventional one in 2007). FADN data also indicate that organic farms would benefit from higher less favoured area (LFA) payments (more than twice higher than the conventional sector in the EU-10 in 2007). This is not surprising as organic farms are more likely to be located in disadvantaged rural areas where extensive production systems are more predominant, at least in some Member States. Secondly, market developments do play an important role. Finally, the existence of a "facilitating" environment (extension services, vocational training, agronomic research, etc.) has also an important bearing. In particular, the development of the sector in Northern European Member States, Germany and Austria pertains to a large extent not only to the support provided to the sector but to the establishment of such a comprehensive facilitating environment. In the EU-12, the remarkable development of the sector owes probably also to a favourable context of deep restructuring and reform of the agricultural sector (and the whole economy) since the beginning of the 1990s with the renewal of farming structures, institutions and agricultural policy. These systemic changes provided more space for organic farming to develop.
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Chapter: Future lessons Organic agriculture in Moldova: local and regional perspectives
Market infrastructure
B. Data from the EU Farm Structure Survey shows that the average size of organic farms is larger than of the average of all farms. Fr the animal husbandry sector data, this is not surprising because these business use more intensive grazing and have less storage capacities. For other specializations, e.g. organic crops production and organic vegetables, this situation is more surprising. Additionally, contrary to general beliefs, ecologic farming is less labor-intensive than the conventional framing. Larger average sizes of the farms can also explain this. Age distributions of the managers of farms with organic area and farms without organic area in EU are also strikingly different: farmers younger than 55 represent 64.3% of the organic sector whereas they represent only 44.3% of the conventional sector. C. The government and stakeholders must adopt multidimensional strategies which successfully combine: supply development policies, comprehensive legal framework and demand enhancement strategies, e.g. organic food advertising. These elements are necessary to build a balanced development of the sector. Estonia is a model of integrating environment awareness into the national development strategy, which is worth implementing. Environment balance (including through organic agriculture) coexists with Estonian cultural space viability, growth of welfare (defined as the satisfaction of the material, social and cultural needs of individuals, accompanied by opportunities for individual self-realisation and for realising ones aspirations and goals) and coherent society principles (the benefits from these goals can be enjoyed by the majority of the population and the price for achieving the goals is not destructive for the society as an integral organism).
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Sources
Ahto Oja, Greening the EU agricultural policy: motivation for becoming and being an organic farmer in Estonia, Stockholm Environment Institute Tallinn Centre, January 2008, EPIGOV Papers No. 27 EPIGOV Papers No. 27, ENVIRONMENTAL POLICY INTEGRATION AND MULTILEVEL GOVERNANCE, Co-ordinating and synthesising research on environmental policy integration and multi-level governance, 2006-2008; A Co-ordinated Action under the European Union's 6th Research Framework Programme CITIZENS-2004-4.2.2 - Governance for Sustainable Development, DG Research European Commission, Directorate-General for Agriculture and Rural Development, An analysis of the EU organic sector, June 2010 Farmers National Federation from Republic of Moldova, State Agency Apele Moldovei, Informative guide, Irrigation water users association FiBL and IFOAM, The World of Organic Agriculture, Statistics & Emerging Trends 2011, 2010 Institutul pentru Dezvoltare i Iniiative Sociale (IDIS) Viitorul, Politici Publice, NR. 4, 2011, Sistemul de subvenionare n agricultur administrat de Agenia de Intervenie i Pli n Agricultur, Ion Perju Lukas Zagata, How organic farmers view their own practice: results from the Czech Republic Msuri agro-ecologice n Moldova: realizri i probleme, reguli i sfaturi, Proiectul Msuri agro-ecologice pentru conservarea mediului n Europa, cu susinerea financiar a Guvernului Norvegiei Msuri agro-ecologice n Moldova: realizri i probleme, reguli i sfaturi, Chiinu 2011, Biotica Ecological Society Ministerul Agriculturii i Industriei Alimentare, Agricultura Ecologic n Republica Moldova: prezent i perspective, 25 aprilie 2012 Organic Farming In Estonia 2011, Ministry of Agriculture, Republic of Estonia State Agency for Land Relations and Cadastre, NOT INFORMATIV la proiectul Hotrrii Guvernului Republicii Moldova Cu privire la aprobarea Cadastrului funciar la data de 1 ianuarie 2011 Viorel Gherciu, Green Economy Sectoral Study: The Potential of Organic Agriculture in Republic of Moldova Yearbook, Organic farming in the Czech Republic, Ministry of Agriculture of the Czech Republic United Nations, Office of the resident Coordinator in Moldova, Moldova Situation report 2012 #1, Drought in Moldova Bazele de date ale Bncii Mondiale (http://data.worldbank.org), Biroul naional de statistic, (http://statistica.md), FAOSTAT (http://www.faostat.fao.org), TAT http://ec.europa.eu/tat).
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