• On 1.04.2022, Mr. Aurel Popescu, the president of ROMPAN, gave an exclusive telephone interview to the Arta Albă editorial office.
As always, Mr. Aurel Popescu, president of the Romanian Employers' Association of the Milling, Bakery and Flour Products Industry, made available to us your time and the latest information for the milling and bakery sector.
Thus Arta Albă readers will be the first to learn the results of the meeting with the Prime Minister on 31.03.2022, in which Mr. Aurel Popescu, president of ROMPAN.
1. The pandemic that has shaped the last period at the global level has also left deep traces in Romania's economy. What were and still are the effects on the milling and baking sector?
The effects have been quite large since the pandemic. We have a decrease in bread sales during this period of the pandemic, because, especially in the state of emergency when people stayed at home, they ate home-made bread, they ate less, they also ate polenta...
In any case, during the pandemic, for the whole country, we had lower sales of 10-15%, but the average is 7-8% for both years. That on the one hand.
Higher expenses reflected in the cost of production
On the other hand, you realize that we spent a lot on the substances we needed, in addition to what we used, in the process of disinfecting utensils, machines, hands, work surfaces. With the masks we had to keep in mind that a mask cannot be worn for a whole day because it is hard to bear and gets wet, so several masks were changed per day.
All these costs have been reflected in the total cost of production, and of course, given that sales have also decreased, we cannot afford to increase the price, otherwise we would have had even lower sales than we did.
2. Now, on top of the shock of the pandemic, there is also the Ukraine-Russia armed conflict, combined with the crisis of energy resources...
Until the armed conflict, two plagues came upon us: the energy plague and the price plague of raw materials, because the milling-bakery sector was the hardest hit in the entire food industry, I think also in the economy, in the idea that, in addition to the increases energy costs that were felt by the whole economy, we also had the increase in raw material costs.
The price of wheat has doubled and of course from here the price of flour has also almost doubled and, you can imagine, the influences in the price of bakery products.
3. How do you think the milling and baking sector will bear these new blows?
Here the problem is that we have not been able to raise the prices to the level of the new increased costs and we are somewhat at a loss now and this cannot continue much longer. That is why we have had several meetings with the governors to find and identify methods to mitigate these losses that we are experiencing.
But, when we thought that energy was also over, because these capped prices were given for the food industry, for which we struggled at the Ministry of Agriculture and the Government to obtain them, this crisis appeared with the war in Ukraine, crisis that affected us terribly, in the idea that in addition to the doubling of the price of the raw material, there was another increase of about 30-35%, and the trends are still increasing.
The increase in the price of the raw material
This increase in the raw material was recorded due to the fact that Ukraine and Russia represent two great pillars in the export of grain in the world. They no longer doing this, and the Black Sea being "bombarded" in various ways, grain trade in this area of Russia and Ukraine did not take place at all and then the pressure shifted to Romanian wheat, to the port of Constanța, and there was a very high demand sea of wheat, compared to the offer we were giving. Although we had stocks to ensure consumption needs, but also export availability, the demand was much higher than thought.
4. I published on the Arta Albă website an article about the analysis of raw material stocks, analysis carried out by the Ministry of Agriculture and Rural Development following the request sent by ROMPAN. Do you think that the Romanian state has taken appropriate and sufficient measures to support this important sector of the country's industry?
Yes, because I took them in consensus. This is what I wanted to tell you that a working group was organized with the leadership of the Ministry of Agriculture. The management and all representatives of grain traders, representatives of agricultural producers, warehouses and processors in milling and baking and the main mills participated in these analyzes which were done with the figures on the table, in such a way that we aim to never we reduce the stock (of wheat no.) below one million tons so that we have secured the wheat until the new harvest.
Three weeks have passed since this analysis and very good things have been recorded, in the sense that they have decreased the export, so they have not reaped from the quantities of wheat in stock for so long, and the miller has been able to access purchases of wheat at prices even lower than 1750 lei, the maximum recorded during this period. And in the last week, the price of wheat has really decreased, today (1.04.2022) it is somewhere around 1530 lei, which is a gratifying thing, that the price of bread is no longer increasing either, the pressure is no longer on us.
We need to analyze market behavior very well
Because, you see, we have to analyze market behavior very well, because if we don't behave properly, we lose. And I'll tell you why. Our production costs are like in the West, but the purchasing power, incomes, salaries, pensions do not even compare with what is in the West. And then, unfortunately, we make baked goods at Western costs and sell at Eastern prices. Here is the big problem of the milling and baking sector. Yesterday we had a meeting with the Prime Minister on the topic of the food industry and a serious analysis should be done because it is still being discussed and especially the press comes and says that we will have a food crisis. We won't have any food crisis and I think the prices have also leveled off a bit, they stay where they are. Unfortunately, raised, but it's good that they don't grow anymore. And we have identified some ways of working and I think they will be put into practice in the next period.
5. During the NATO Summit in Brussels, French President Emmanuel Macron recalls the food security initiative proposed on Wednesday 23.03.2022 by the European Union. This approach would contain a series of short- and medium-term actions to strengthen global food security and support EU farmers and consumers. Can you tell us what these actions would be proposed by the European Union?
I understood that, urgently, the European Union is going to take a decision to establish some stocks of food products, which have a long shelf life, such as wheat, flour, canned goods and so on, at the European level, so that when they appear problems in a country to be able to call on these reserve stocks. In any case, I believe that neither Europe nor Romania will have such events this year. We have certain emotions with the new harvest of wheat and rape which are sown since autumn, but also with those of corn and sunflowers, if it does not rain and if there is a very strong drought, then we must be very careful that the stocks do not diminish. Yesterday (31.03.2022) I made a proposal to the Prime Minister that Romania's state reserve should buy a few hundred thousand tons of wheat, which are on the market now, put them in the state reserve and if necessary, take out there.
6. Following the same meeting with European leaders, President Klaus Iohannis emphasized that the tense international situation, although it will not bring a food crisis to our country, will probably cause syncope in terms of supplies.
On the other hand, at the beginning of March, the Minister of Agriculture and Rural Development states that Romanians do not have to worry because there are enough stocks to ensure domestic needs until the next harvest...
It is! The analysis that the Minister did together with us, with that working group that I told you about, and things are fine. There is no problem, not only in the cereal and bakery sector, but yesterday it was also the meat and milk sector, and there are no problems in ensuring the consumption needs. No discussion! And the problem you saw with oil was a matter, I don't know, that lasted 24 hours, like with diesel and gasoline, when they also bought it for 11-12 lei per liter, only to return to 8 lei . So these things in the Press appear sometimes and scare the population. Naturally, the population is scared.
The population of Romania has low incomes
The population has low incomes, the population sees the very high price increase, which is recorded for food, for fuel, for energy, for heat, for all of these, and they also see the war close to us, and it is normal to be scared. But at the same time, they have to take into account what the specialists say, because we know how to do this and we know how to keep the stocks in hand so that we don't have problems.
7. The Minister of Agriculture stated that he has no intention of intervening on the grain market and will not restrict Romania's trade flows. Farmers support the position of the Minister of Agriculture. The Association of Maize Producers from Romania conveyed through a press release that it supports the official position expressed by the Minister of Agriculture. The Romanian farmers are right to support their position MARD? Do you think we should limit wheat exports, focus more resources on the domestic market?
When the minister made this decision, we were also present and we agreed with this idea, but with one condition: to follow very carefully the quantities of wheat leaving the country, so that the million tons does not decrease. And for now, everything is under control. If any slippage happens, the Minister of Agriculture said that he will immediately take restrictive measures.
8. No industry can develop without investment. But due to the current conflict situation, there is, of course, a stagnation of investment desire. Can superior processing of raw materials, especially wheat, given that Romania is an important exporter, represent a solution for the revival and development of this sector?
Yes, I want to tell you that we have three directions of development in this sector, discussed just yesterday, 31.03.2022, with the Prime Minister of Romania, contained in the National Strategic Program coordinated by the Ministry of Agriculture where milling has Measure 4.1, together with all the others segments of the food industry, the opportunity to make new investments or upgrades in the milling units and that's it, and for the bakery units, at our request, an aid scheme for bakery producers of 200.000 million euros has been finalized, which can be accessed by those who want to make new units, or modernizations in the bakery and flour products sector. This on the one hand.
Refurbishment aid scheme
On the other hand, yesterday, 31.03.2022, Mr. The Prime Minister communicated to us that he agreed with the proposal that we put forward a few months ago, to make an Emergency Ordinance through which another scheme of aid for retrofitting, on electricity issues, would be made, i.e. to replace the cars we have with new, high-performance cars with lower energy consumption.
And there is European money that can be accessed and investments can be made in this area. And the third direction that we will follow carefully, is this one with the installation of solar panels and accumulators for electricity, which is for the whole economy, but with a special aid line for agriculture and the food industry, in such a way that we can, all of us who want and who can install solar panels, access these funds.
Audio version of the interview:
Interview conducted by Gabriela Dan, Editor of Arta Albă
Read on White Art and: ROMPAN – analysis of stocks of cereal raw materials
