Seeds of organic farming begin to sprout leaves

Driven by demand on external markets and more consistent financial support, Romanian organic agriculture is beginning to show signs of germinating. To find out more about investing in organic farming, BR talked to Wil van Eijsden, a Dutch entrepreneur who chose the Romanian region of Transylvania to set up an organic herb farm.

Simona Bazavan

“I must admit that being an experienced conventional farmer myself, up until recently I didn’t believe that organic farming was worth the attention,” said Adrian Radulescu, state secretary with the ministry of agriculture and rural development, during a recent press conference on organic farming.

The politician revealed that he reconsidered his position after accompanying a Romanian delegation to the BioFach organic trade fair in Germany – the largest in the world – where Romanian farmers managed to sign contracts worth EUR 150 million in a single day, according to Radulescu.

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Low incomes, little in-depth public information on nutrition and lack of tradition mean that the domestic market for organic products is a far cry from mature ones in Western Europe. On the other hand, it is exactly the increasing demand on these markets that has given a helping hand to local organic farmers. Export prices for organic products can be up to three times higher than the price of conventional agricultural equivalents. Further growth could come from exports alone but the problem is that Romania doesn’t have the physical capacity to match internal production with the increasing external demand, the state secretary said.

The area of ecologically farmed land has grown in Romania around 15 fold in the last ten years, to 260,000 hectares – making up almost 2 percent of total farm production, according to the Agriculture Ministry’s data. Citing the same source, the local organic farming sector has registered average annual growth of 23 percent. In 2010 there were about 3,100 Romanian organic farms and organic food producers.

The Romanian organic food market reached approximately EUR 40-50 million last year and could see a 20 percent increase in 2011, said Marian Cioceanu, president of Bio Romania, the association of Romanian organic farmers. The predicted growth rate is similar to the figures registered in the past couple of years, he added.

Compared to previous years, local organic farmers have managed to get more attention from the authorities. Their stated target is to increase the number of organic farmers and exports of products with a higher added value. In 2011 Romanian certified organic farmers received subsidies for the first time after Romania renegotiated the structure of the National Rural Development Program (PNDR) with the European authorities. Subsidies vary from EUR 163/ha for cereal crops to EUR 393/ha for orchards and vineyards. Should the sums be doubled during the conversion period from conventional agriculture to obtaining organic certification, only then would Romanian farmers be able to compete on equal terms with their European counterparts and local organic farming would grow to a share of about 12 percent of total agriculture, thinks Cioceanu.

By the end of this year, the authorities plan to have formulated a clear strategy for Romanian agriculture, including organic, for the short and medium run, and organic farming is already a chapter in the country’s export strategy for 2011-2015. The potential is there and everyone agrees on this. The key to success is to create strong producers associations, clusters that would give small farmers access to know how, financing and the benefit of collective marketing, authorities say. Such business models could also mean upgrading exports from mainly raw materials to better priced processed organic products under individual brands.

One product that could benefit from the creation of such brands is local organic honey. Presently, organic beekeepers export their honey in bulk to countries like Germany only for it to be later resold, at a higher price, under German brand names.

Last year Romania imported organic food products worth EUR 35 million while exports reached EUR 150 million. Cioceanu says imports are so high because for now Romania is mainly a producer of raw materials for the European organic food industry. Internal consumption has been rising in the past few years but Cioceanu says that exports were the biggest income generators, especially for local farmers who don’t get subsidies. “Without exports, we would not be talking about ecological farming in Romania,” he went on. The major produce from ecological farming in Romania are cereals, honey and wine.

Organic is the long game

“Organic farming is a choice one makes, confident that it is the right thing to do. When you approach it only from the aspect of discounted cash-flow and IRR, then you’d better make another choice. Start making PET bottles or shoes but don’t go into (organic) farming,” Wil J. van Eijsden, director and owner of Agri+Cultura Transilvania, told Business Review.

He runs an organic herb farm in Avramesti, Harghita county in central Romania, but the Dutch investor has over 30 years of international professional experience in farm systems and organic agriculture, food processing and trade. He has been involved in various projects in a large number of countries – from the Netherlands and China to Mozambique and Paraguay.

van Eijsden argues that given the international context and the pressure to feed a mushrooming world population, investing nowadays in organic agriculture means investing in something that is becoming mainstream and unavoidable. And also something that can score well on the economic side by operating in a niche industry with the benefit of a price premium.

He is confident that organic farming has a great future in Romania and the potential is huge for those with a long-term perspective. “Until now organic development was mainly concentrated on the larger arable farms, often with foreign owners, in the south. However I see enormous potential in Transylvania with its traditional agriculture, sufficient precipitation and very good soils,” he adds.

In the Dutch farmer’s opinion there are plenty of incentives to start an organic business locally, albeit not necessarily coming from the authorities. But this is not entirely bad news, he argues, adding that long-term dependence on grants and government support has always failed in the long run. ”Do not invest too much in direct payments but limit them to get good things started and not as a long-term idea. Reducing taxes on clean technologies and increasing them on polluting activities is a much better way than subsidies,” he argues, adding that authorities should direct investments towards the triptych of research, education and extension.

As for setbacks, bureaucracy ranks top, according to van Eijsden, along with the fact that many local workers are leaving the country to work abroad. “Organic farming and thinking requires long-term planning and not only short-term profits. That is not a very easy concept to sell when wages are low and survival is very often the first thing to think about,” he says. Another issue remains scattered land ownership in very small plots.

van Eijsden came to Romania in 2001 and his first impression was a shocking one. “I came to work and live here in 2006 when things were already much better. I was working for English investors to create an organic buffalo farm,” says the Dutch investor.

He was responsible for building and running the organic buffalo farm in Transylvania but at the same time he also set up his own company, Agri+Cultura Transilvania, with what he calls an eye on the future. “I  started with the farm, getting a rental contract on 350 hectares of  neglected pasture land and a collapsed farmyard with useless buildings, and made it into a functioning organic farm with 300 dairy buffaloes and its own feed base of high quality hay,” recalls van Eijsden.  The farm required an investment of over EUR 1.5 million.

He later left the company to set up his own business, growing organic herbs. “Herb production had always been something I was very eager to do professionally and at the same time the concept of social enterprises had always been an important aspect of organic farming for me,” he says. The project started on a small scale. “As a foreigner in a very traditional area you just cannot jump in with all your ideas,” he says. Soon after he started production under the Szt Abraham label, the name of the village where the farm is located.

The company now produces special herbal teas and herb mixtures for gourmet cooking, various types of herb salt using salt from a nearby mine and relaxing salt pads. It uses natural packaging and the small scale production allows a very strict control of the final products’ quality. “We are selling the products in Romania and Hungary for the moment and export is still small but our products have also been introduced in the Cora supermarket chain in Hungary. Talks are ongoing with a large chain of gasoline filling station in Romania,” says van Eijsden. The medium-term target is to start contracting herb production with local farmers and integrating the Roma population into herb collecting. ”The ultimate goal is to make the watershed basin of the small river on the bank of which we live totally organic and to produce together with the locals and to maintain the traditions and the nature here based on a sustainable way of living,” says the entrepreneur.

Photo: Courtesy of Agri+Cultura Transilvania

simona.bazavan@business-review.ro