Presentation on theme: "Www.agricover.ro Financing Romanian Agriculture Investment and development options."— Presentation transcript:
Financing Romanian Agriculture Investment and development options
How attractive is Romanian agriculture versus Europe ?
Agriculture in Netherlands vs. Romania RomaniaNetherlands GDPEuro 140 billionEuro 600 billion Arable land9.5 million ha1.8 million ha Professional farmers (working > 5 ha) Agriculture exportsEuro 4 billionEuro 78 billion Arable land pricesEuro – /haEuro /ha
Total loans to the agricultural sector 2013 LoansAverage Debt / farmer Romania Euro 3.5 billion1 300 Euro Netherlands Euro 40 billion Euro
Total agricultural loans in Romania Aug % granted by banks annual growth rate 3% 25% granted by Non-Bank Financial Institutions (NFI) annual growth rate > 20% *Commercials credit (offered by agribusiness players) is estimated at RON 2.5 – 3 billion per year. Million RON
What is being financed? Working Capital Needs (Banks, NFI, Commercial Credit) Investment Loans Equipment (NFI) Projects with European grants (Banks) Others, such as arable land acquisitions (Banks, NFI) 33%
What investment and development options does a Romanian farmer has?
Extension of the agricultur al area Milling bakery Energy (biogas wind) Silos Trade in cereals FNC Agricultu ral service delivery Livestock breeding (pigs, cows) Vegetabl e and fruit growing Development
» Defensive » Low risk » Moderate increase in cost efficiency » Liquid fixed assets and an increasing trend in the market value during the next period » Facilitates the densification of land ▪ Increases the indebtedness ▪ Investment paid off in the long term ▪ The market becomes extremely competitive, decreasing negotiation power Acquisition of agricultural land
» It may generate a significant profitability in the future » Multiplies the profit centers » Limitation of the specific seasonal character » Using renewable resources » A market with a growth potential in the future » Possible access to non-reimbursable funds ▪ High risk ▪ Increase in exposure, significant investments ▪ Low expertise level, it does not depend on the underlying activity ▪ Dependent on tax incentives that are highly uncertain Energy (biogas, wind)
» Defensive » Storage » Immunity » Allows a better capitalization on one’s own production » Possible access to non-reimbursable funds ▪ Average risk ▪ Increase in exposure, significant investments ▪ Money blocked ▪ Risk of extra capacity ▪ The risk of deterioration of the production stored is taken over Silos for one’s own needs
» Integrated model » Average profitability » Legal limitations that are to reduce the access to the market of the small producers, generating growth opportunities » A market with an increase potential » Possible access to non-reimbursable funds » The integration of activities related to large crops increases profitability ▪ Average risk ▪ Expenses on initial investments ▪ Liberalization of the milk market in 2015, pressure of imports Livestock breeding (pigs, cows)
» Integrated model » Low risk » Average profitability » Market with an increase potential » Possible access to non-reimbursable funds ▪ Expenses on initial investments ▪ Pressure on the price by imports Fruits and vegetables growing
Distribution of development options Low risk High risk High profitability/ efficiency Low profitability / efficiency Energy Inputs Livestock breeding Silo Services Vegetable growing Fruit growing Land Shops FNC Trade Milling, bakery
In conclusion, Romanian agriculture Has great potential for improving performance Can contribute significantly more to economic development and export growth Is hugely under-financed both in terms of working capital needs and investment loans Will benefit from a significant increase in European funds/subsidies
NFI’s are ideally placed to satisfy the farmers needs for credit Specialized loan providers, understanding the farmers business Can provide fast, innovative and flexible credit solutions Better collateral valuation Better collection mechanisms
AGRI-FINANCE WHERE AGRICULTURE MEETS FINANCING Thank you !