“Romania, Russia and Ukraine were the growth drivers,” the Monsanto executive, who oversees eleven markets in the region, said during a meeting with European journalists at the Farm Progress fair in Decatur, Illinois, in the USA.
The Black Sea market has opened, investments in infrastructure have been made. There is growth potential and the growth will come. Investments are made in farms and the farming market is consolidating, he added.
Having seen the growth of the agricultural markets of the emerging economies in Eastern Europe coming, Monsanto is now conducting $300 million investments in its plants in Romania, France, Hungary and Turkey.
“This is an area we’ll work on and the demand for seeds in Romania must be met.”
Monsanto owns a processing facility in Romania in Sinesti, Ialomita (south of the country), where it sorts, cleans, dries, treats and packages in bags the seeds multiplied in partnership with Romanian farmers. The facility has already required more than $150 million investment, as previously said.
Monsanto posted EUR86 million revenue in Romania in calendar 2012 and its net profitability rate stood at 10%, according to the Finance Ministry data.
There are 2.7 million hectares of corn crops in Romania, which means a third of the country’s farming land, and the highest exposure to this crop of all European Union countries. Russia has 2.2 million hectares of corn, and Ukraine 4 million hectares.
The corn seed market in Romania is divided between certified seeds made by specialist companies like Monsanto, Pioneer, KWS, Caussade and Limagrain and traditional seeds taken from the previous harvest.
Certified seeds are hybrid seeds, with better yields than traditional seeds but cannot be kept for use in the next sowing campaign because their yield then becomes significantly lower. On the other hand, traditional seeds carried over from the previous year’s harvest are an ancient technology with no productivity spikes.
Certified corn seeds are used on only half of the corn crops in Romania.
Monsanto, world’s largest genetically modified organisms vendor, makes almost all its revenue in Romania from sales of regular hybrid seeds, because of the restrictive GMO legislation in Europe.
The company decided a month ago to withdraw all its applications to have genetically modified seeds approved for use in EU and will focus on regular hybrid seeds and pesticides in Europe.
The Black Sea area is a good place to be close to demand. There is quality land there and this helps farmers’ business, Jagresh Rana said.
The major drawback of this region, however, Rana said, is the poor infrastructure, which makes it difficult to carry the harvest by road or railway to harbors and storage facilities.
The excessive fragmentation of the local agricultural market into 3.8 million small farms continues to keep hybrid seeds away from more than 1 million hectares of land. Monsanto had the same problem in Asia, in India for instance, and its solution was to sell seeds in small bags suitable for use in subsistence farms.
It plans a similar approach for Romania and is now looking for a distribution network, Jagresh Rana said. The shift from traditional seeds to hybrid seeds caused productivity to double in a single year in India, he added.
This year has been one of the best in decades for Romania. Total grain production is estimated at 17.4 million tons, up 40% on 2012. Agriculture should have a significant contribution to the economic growth expected to reach 2.5%.
(English version by Loredana Fratila-Cristescu)