Romania's Ministry details support for farmers and agri-food modernization - EXCLUSIVE

CE Report presents an exclusive interview given by a source in the Press Office of the Ministry of Agriculture and Rural Development of Romania, who highlighted that the Strategic Plan of the Common Agricultural Policy 2023-2027 represents a crucial tool for bridging the gap between Romania’s agricultural production potential and the current low value added in the food processing sector. The source emphasized that, through targeted investments in storage, conditioning, and processing facilities, the plan aims not only to enhance the competitiveness of Romanian agri-food products but also to strengthen food security, support small and medium-sized farms, and reduce the country’s trade deficits in processed food products.

The Romanian food industry still faces significant gaps in terms of the value added of food products, as reflected by the imbalance of the trade balance. In order to mitigate these gaps, the Strategic Plan of the Common Agricultural Policy 2023-2027 (SP 2023-2027) finances investments in conditioning/storage and processing units, so that Romanian producers and processors can supply the agri-food market with value-added products, ensure food security, while balancing the trade balance and reducing existing deficits in certain sectors.

For Romania, restructuring, modernization and development of farms in order to increase productivity is essential, especially for small and medium-sized farms. The SP addresses the need to invest at farm level, particularly in sectors that have started to develop following capital infusions from the EAFRD, such as vegetable growing, fruit growing and livestock farming, while increasing investments in precision agriculture, digitalization and innovation - essential tools for ensuring sustainability and competitiveness.

As it comes out from the SWOT analysis, farms in certain agricultural sectors (e.g., horticulture, livestock and mixed farming) record low levels of net value added compared to other categories of farms. At the same time, net value added remains low in case of small-sized farms. For commercial operators open to adopting high-performance and innovative technologies, continued investments in technological upgrading for the processing of agricultural products are required, while for small-sized farms, cooperation/association represents a solution for increasing the added value of their agricultural products and improving access to the market.

Increasing the value of agricultural products and ensuring their optimal marketing requires enhanced attention to both storage/conditioning facilities, especially in segments of deficit products identified in the SWOT analysis. Cooperation/association represents the key to effective marketing of agricultural products originating from farmers, particularly small and medium-sized ones, while at the same time ensuring a continuous and sufficient flow of domestic agri-food products along the supply chain, from farm to fork. At local level, vertical integration of farmers into the value chain is necessary, from storage/conditioning facilities to processing, distribution and marketing.

From the perspective of rural development, agricultural interventions under the Strategic Plan2023-2027, investments aimed at developing storage and processing capacities have been supported through a series of interventions, detailed below:

DR 20 Intervention - Investments in the livestock sector within the Strategic Plan 2023-2027, in addition to investments in the primary production component, investments in the conditioning and/or storage, as well as the processing of products obtained at farm level, were also supported. Investments in units for processing own products represented only a secondary component within the project.
The beneficiaries of this intervention are farmers, except for natural persons, agricultural cooperatives and cooperative societies serving the interests of their farmer members; and producer groups and organizations established under the applicable national legislation and recognized by the Ministry of Agriculture and Rural Development (MARD), serving the interests of their members.

Eligible investments under this intervention also included:

• establishment, expansion, and/or modernization of conditioning and/or storage facilities;

• establishment, expansion, and/or modernization of farm-level processing units, including related equipment, only as a secondary component of the project (from a financial perspective);

• establishment/development of the marketing component at farm level, including farm-gate shops or food trucks, through which exclusively own agricultural products are marketed, only as a secondary component of the project;

In addition, it should be noted that, in order to develop local markets and to better integrate Romanian farmers into the short supply chain of primary production – processing – marketing, projects that demonstrated, at the time of submission of the funding application, that they marketed their own primary agricultural production (at a minimum share of 30%) within a maximum radius of 200 km (geographical distance) or in neighboring counties were awarded points under the selection criteria.

The project submission session was carried out during the period 20.12.2023 – 30.04.2024, with a total allocation of Eur 224.610.728 euros.

The maximum amount of public support was 2.000.000 euros per project and in the case of projects exclusively aimed at the simple acquisition of agricultural machinery and equipment, the maximum amount of public support was 300.000 euros per project.

The intensity of non-repayable public support is up to a maximum of 65% of eligible costs.

In Romania, the agricultural products processing sector requires investments, particularly for the modernization of existing units with innovative equipment and technological processes, including equipment that facilitates the application of the circular economy concept and leads to increased productivity, which is currently low compared to the EU-28 average.

From a competitiveness perspective, the Romanian food industry still faces significant gaps in terms of the value added of food products in relation to the production capacity of domestic agricultural products, a situation reflected by the export of raw materials and the import of processed food products.

Therefore, support needs to focus on those agri-food products for which there is diversified raw material production and market demand, in order to develop primary and further processing capacities for obtaining finished products, as well as storage/stocking/conditioning facilities that ensure marketing at competitive prices depending on the season, both in the crop and livestock sectors.

In this context, the need for investments in large-capacity production facilities and modern technologies, the development of new products, and the application of innovative practices and technologies is high in the dairy and milk products industry, in the processing of horticultural products and potatoes, in the meat industry, the bakery and bakery products industry, as well as in high value-added products — organic products, products registered under European quality schemes (Protected Geographical Indication (PGI), Protected Designation of Origin (PDO), Traditional Speciality Guaranteed (TSG), Controlled Designation of Origin (DOC), mountain product, etc.) and national schemes.

Stimulating these sectors will lead to improved productivity, increased competitiveness and sustainability of processing units that comply with EU standards (food safety and traceability), of organically certified operators producing organic products, as well as to an increased market share of domestic high-value-added products.

Romania has set as a strategic objective the increase of the value added of primary agricultural production. One of the interventions contributing to the achievement of this strategic objective is DR 22, by supporting investments aimed at increasing the capacity for collection/intake and processing of raw materials originating from a significant number of agricultural producers, in order to ensure a profit margin both for raw material producers and a competitive final consumer price for the resulting products, compared to imported products.

DR-22 – Investments in the conditioning, storage and processing of agricultural and fruit products under the Strategic Plan 2023–2027 contributes, through the financial support made available to potential beneficiaries in the food sector, to addressing an economic challenge by reducing the trade balance gap, as well as to ensuring food security in the context of the economic crisis generated by the Russian invasion.

The intervention targets investments carried out by SMEs, large enterprises, as well as associative forms, in storage/conditioning and/or processing units for the purpose of commercialization.

In the context of market demand for value-added products, priority has been given to investments aimed at obtaining high-quality products, particularly in sectors that offer the highest value added, including for the production of goods registered under European and national quality schemes.

Support for investments in the agri-food sector to produce diversified and healthy products, with an emphasis on organic products, through the application of innovative practices in the processing of agricultural products, while also promoting sustainable consumption of foods with high nutritional value and affordability for consumers, will respond to the need for the development of this sector by providing safe and nutritious food, produced sustainably with benefits for both the environment and consumers, and aligned with EU standards.

The beneficiaries of this intervention are economic associative forms, namely agricultural cooperatives and cooperative societies, producer groups and organizations, other economic operators falling within the SME category, large enterprises, including farmers who qualify as SMEs or large enterprises.

Eligible investments also targeted:

• Setting up, expanding, and/or upgrading infrastructure for conditioning, storing, and/or processing agricultural and fruit products;

-setting up/developing the marketing component as a secondary part of the project;

Investments in intangible assets for:

• Organizing and implementing quality and food safety management systems, if related to the project's tangible investments;

• Acquiring technologies (know-how), patents, and licenses to prepare for project implementation;

• The purchase of software, identified as necessary in the technical-economic documentation of the project;

• Marketing of the obtained products, etc.

The value of support

The amount of non-reimbursable public support for modernization investment projects was up to a maximum of 3 million euros per project.

The amount of non-reimbursable public support for establishment investment projects that include at least processing investments in the vegetables and fruits sectors, the milling, oil, and compound feed industries, was up to a maximum of 10 million euros per project.

For all other establishment investments, the support was up to a maximum of 7 million euros per project.

The intensity of non-refundable public support - maximum 65%.

The project submission session took place between December 20, 2023, and April 30, 2024 and had a total allocation of 459.361.176 euros.

DR-23 - Investments in the processing and marketing of agricultural products with a view to obtaining foodstuffs and processed products other than those listed in Annex 1 to the Treaty on the Functioning of the European Union - targets investment projects of potential beneficiaries in the agri-food sector who aim to obtain food products not listed in Annex 1 to the Treaty on the Functioning of the European Union.

The beneficiaries of this intervention are SMEs and large enterprises.

Eligible investments include storage capacities through:

-the establishment/development of agricultural product processing capacities (expansion of production capacity, diversification of activity, diversification of production, fundamental change);

-establishing/developing conditioning and storage capacities for processed raw materials/finished products resulting from processing, as a secondary component of the project;

-establishing/developing the marketing component, as a secondary component of the project.

Value of support

The value of support will be a maximum of 10.000.000 euros/project for start-up investments in the bakery sector.

The value of support will be a maximum of 3.000.000 euros/project for other types of investments.

The intervention has a budget of 164.929.100 euros and the project submission session will be launched in the coming period.

Also, under the CAP Strategic Plan 2023-2027 (PS PAC 2023-2027), through Pillar II with funding from the European Agricultural Fund for Rural Development (EAFRD), investments in irrigation systems as well as investments in the establishment, expansion, and/or modernization of conditioning and/or storage units in the fruit-growing sector have been supported through intervention DR 15 – Investments in fruit-growing farms.

The beneficiaries of the intervention are farmers (except natural persons), agricultural cooperatives and cooperative societies serving the interests of farmer members, producer groups and organizations established under the national legislation in force and recognized by the Ministry of Agriculture and Rural Development (MARD) serving the interests of their members.

Through DR 15, non-reimbursable funds were granted in proportion to a maximum of 65% of eligible costs, without exceeding 1.5 million euros per project, except for projects proposing the purchase of agricultural machinery and equipment with a maximum value of 300.000 euros.

The project submission session was held within the framework of the 2023-2027 Commune Agricultural Policy Strategic Plan between January 8, 2024, and April 30, 2024, and enjoyed increased interest.

As a result, 338 projects with a total public value of approximately 221 million euros were submitted under this intervention, of which 212 projects with a total public value of approximately 151 million euros were selected for funding.

The total financial allocation for the project submission session was 151.383.527 euros, of which 142.383.527 euros was for the establishment and modernization of fruit farms and 9.000.000 euros was for the establishment and modernization of fruit nurseries.

With regard to the vegetable sector, through DR-16, investments in the vegetable and/or potato sector will finance, among other things, the establishment, expansion, and/or modernization of conditioning and/or storage facilities, as well as investments in irrigation equipment at the farm level, only as a secondary component.

The beneficiaries of this intervention are: producer groups (PG)/producer organizations (PO)/agricultural cooperatives established under Law 566/2004/cooperative societies established under Law 1/2005 representing the interests of farmer members or members of such associations.

The value of the support will be a maximum of 2.000.000 euros per project, except for projects proposing the simple purchase of agricultural machinery and equipment, whose value is a maximum of 300.000 euros per project for crops other than potatoes or a maximum of 800.000 euros per project in the case of potato machinery purchased by individual farms and 800.000 euros per project in the case of agricultural machinery purchased by associations, regardless of the crop, with an intensity of 65%.

The allocation for the intervention is 151.383.529 euros.

Details on how to develop projects, as well as aspects related to their implementation, can be found in the applicant's guide for DR 16, posted for information on the website www.afir.ro.

With regard to the levers for supporting young farmers in rural areas, we would like to point out that one of the strategic objectives of the 2023-2027 Rural Development Program is to „Attract and support young farmers and other new farmers and facilitate the sustainable development of businesses in rural areas.”

This objective aims to renew generations of farmers and develop rural businesses, both agricultural and non-agricultural, responding to the need to attract young people to the agricultural sector. Thus, through the new CAP financial year, Romania is ensuring the continuity of the efforts made in the last two financial years (since Romania's accession to the EU) to renew the farming generations, actively contributing to the establishment of young farmers, the modernization and consolidation of agricultural holdings managed by them as farm managers, and thus facilitating young farmers' access to competitive and market-oriented agriculture.

Support for young farmers is provided both through the scheme dedicated to young farmers in Pillar I of the CAP and through rural development interventions in Pillar II of the CAP. The intervention for the installation of young farmers in the Strategic Plan 2023-2027, called DR-30 "Support for the installation of young farmers" supports the continuity of agricultural activity on already operational farms through a selection system that encourages both the takeover of farms from farmers over 60 years of age and the acquisition of ownership of the land associated with the farms that are the subject of young farmers' projects. This approach mitigates the legislative limitations on establishing degrees of kinship between the young farmer and the transferor of the farm, facilitating the takeover of the farm from other relatives, not just from the father (uncles, grandparents, etc.). The flexibility of this approach allows for the easy takeover of agricultural businesses by members of the immediate or extended family.

Thus, intervention DR-30 „Support for the installation of young farmers” is among the first CAP 2023-2027 interventions launched, with a financial allocation of 251 billion euros. The project submission session ran from November 2, 2023, to January 31, 2024, with funds currently exhausted.

The Strategic Plan 2023-2027 also introduces a new type of investment intervention dedicated exclusively to young farmers and farmers who have recently entered the agricultural sector: DR-12 „Investments in the consolidation of established young farmers and newly established farmers” with a financial allocation of 169.59 million euros. This intervention ensures the continuity of interventions for the establishment of young farmers, including medium-sized farms.

The DR-12 intervention aims to consolidate the farms of young farmers established through the 2014-2020 NRDP, including transition, and those recently established (in the last 5 years prior to the submission of the funding application) aged up to 45, with the support leading to more efficient management and increased farm viability.

Thus, projects submitted by young farmers who already own farms with an economic size of at least 12,000 SO will receive funding of up to EUR 200.000/project with an aid intensity of:

• 80% of the eligible costs for investments made by young farmers under paragraph (4) of Article 73 of R (EU) 2115/2021;

• 65% of the eligible costs for other categories of beneficiaries.

This new intervention targeting investments for young farmers promotes strategic investments to consolidate farms owned by young farmers and increase their viability, aligning them with the highest standards of agricultural performance.

The support facilitates the positioning of young farmers in the supply chain and has a significant impact on the revitalization of rural areas, reducing the exodus of young people to urban areas or abroad.

Intervention DR 12 targets the possibility of making distinct allocations, in addition to the mountainous area, for certain agricultural sectors such as livestock and vegetable farming — key agricultural sectors — in order to strengthen the holdings of established young farmers and to implement modern and innovative management practices.

Livestock and vegetable farming require a high level of specialization and a complex approach, based on the convergence of multiple elements: specific technologies, investments adapted to animal rearing and vegetable cultivation standards, a high degree of automation, and dedicated resources.

Project selection will be carried out by prioritizing holdings managed by young farmers with an appropriate level of qualification, promoting modern technologies with a low environmental impact and the efficient use of natural resources, while providing support to young farmers who are already established.

This approach encourages the retention of young farmers established in the agricultural sector by providing investment support that brings the farmer closer to the consumer and, consequently, better oriented toward the market.

A complementary support to the previously mentioned interventions is provided under Pillar I of the CAP Strategic Plan, dedicated to young farmers through intervention PD-03 – Complementary Income Support for Young Farmers, granted based on the annual submission of a payment request to APIA.

Thus, for the 2023–2027 period, to support young farmers engaged in agricultural activities, this intervention is implemented through the CAP Strategic Plan 2023–2027, providing a decoupled production payment per eligible hectare declared by the young farmer.

The complementary income support for young farmers contributes to increasing their income, both during the initial period of establishment as farm managers and subsequently.

This intervention benefits from a total financial allocation of 67,200,000 euros, with planned unit amounts ranging between 46–50 euros per hectare.

The support takes the form of an annual payment for young farmers who are entitled to BISS and falls into within the category of eligible beneficiaries, namely:

The young farmer must be no older than 40 years of age. In the case of Authorized Natural Persons/Individual Enterprises/Family Enterprises/Legal Entities, the young person must have control over decision-making regarding the management of the agricultural holding, and in the case of legal entities, effective control is proven by:

- the young farmer acting as sole partner or

- the young farmer acting cumulatively as shareholder or majority partner (holding 50%+1 of the shares/stocks) and administrator/manager

- the young farmer is installed for the first time as head of the farm no more than 24 months before applying for support;

- the young farmer is eligible for BISS payment;

- support is granted for the first 50 eligible hectares and may be granted for a maximum period of 5 years.

The way Romania directs CAP support to young farmers demonstrates its ongoing commitment to supporting generational renewal in agriculture, facilitating the transition toward a modern and sustainable agricultural sector. In this way, Romania continues to provide young Romanians with the necessary tools to become successful farmers and contribute to the development of a competitive, sustainable agriculture aligned with European standards.

Photo: Ministry of Agriculture and Rural Development of Romania

This interview was prepared by Julian Müller