MARKET SPECULATION IS DRAMATIC Sorin Minea: 2012 could be the year of bankruptcies in the food industry

• "I haven't seen such a drop in a long time", the president of "Romalimenta" said

• In his opinion, the only solution would be the urgent reduction of VAT and the introduction of tax cuts, or else the situation will spin out of control

For the most part, the recent price hikes are speculative, the representatives of the food industry told us.

"Market speculations are dramatic. The price hikes caused by what is happening right now in the country and in the world will take place towards the end of this year and the beginning of the next. At this moment, most of the price hikes are caused by speculation. The price hikes are fake. Especially in the case of vegetables, most of them are tax evaders who are speculating the moment to increase their profit", said Sorin Minea, the president of "Romalimenta".

He said that no one knows how big the price changes will be.

"Some of the food processors did not hike their prices, on the other side there are the tax evaders, and we are left in the middle, who don't know what is going to happen and what we are going to do. Based on the huge price increase in grains, on a global level, we are also expecting a price increase in meat. But the rise in the price of grains is exaggerated", said Sorin Minea.

According to him, the hike of the VAT rate at 24% killed consumption in Romania. The president of "Romalimenta" claims that things have come to a generalized financial deadlock, and he went on to say that everybody is selling but nobody has the money to buy.

"Real producers are in trouble - it is very hot, everybody is on holiday, consumers buy from the side of the road and from shops that don't pay taxes, the rest of the stores are empty. I haven't seen such a drop in sales in a long time. We are in the midst of a financial deadlock across the entire chain. If something doesn't happen soon, then the problems will be pushed further away towards winter, when they will be impossible to solve, because then we will have the utilities expenses, which we won't know how big we are going to be".

The prices of commodities will increase by 10-15%, according to Mr. Minea, who said: "These will be compounded by the other price hikes and the situation will be uncontrollable. The entire European market fell, especially when it comes to food. The only solution will be the urgent reduction of the VAT and tax cuts. Otherwise, we will be swallowed by the black market. 2012 may be the year of bankruptcies".

Consumer confidence in products has been completely destroyed, the president of "Romalimenta" considers, and he emphasized that the food industry hasn't seen such a difficult period in a long time.

"Money from the stores comes very late, there are no more consumers, when it comes to meat we have problems with trade within the EU, we need to pay off our debts to the state budget, there is no change of a hike in wages, and the recklessness of the politicians have pushed us to the edge", Sorin Minea said.

• Potato output - five times smaller than in 2011

This year's potato output will be 20-30% of what it was in 2011, said Ioan Benea, the president of the Federation of Potato Growers in Romania.

He said: "As for the quality of the potatoes, we can't make a statement on that, because they haven't been harvested yet. They are autumn potatoes, and at the moment they are in the ground, no bigger than nuts or eggs. The only potatoes harvested so far are those in the south, which were planted one month earlier than the rest and which got less rain. They couldn't even be sold until now, because the people in Egypt or Turkey came and ruined the price. It took this long that a kg costs 50-60 bani at the farm, and they come into the market at approximately 1.5 lei".

Ioan Benea considers that it is too early to come to a conclusion on the increase of the price of potatoes. He said that the effects of the draught are long lasting, and he stressed that in many areas of the country, there has been no rain at all, and at ground level the temperatures go as high as 50-60 degrees, killing the plants.

The leu/euro will influence the price at which we will be buying the potatoes in the coming months, since we will be forced to import, if there will be no potatoes grown domestically. In other countries, 1kg of potatoes costs between 1 Euro and 1.90 Euros.

"Last year we produced 3 million tons of potatoes and officially, 90,000 tons were imported. However, I think that unofficially about 900,000 tons of potatoes were imported, that is how big the black market is", said Mr. Benea.

He said that potatoes can't be stored, because we do not have cold storage warehouses.

"In grains, the situation is a disaster, on the northern side the output will not even reach 20% of what it was last year. All the grazing lands are dry, we are feeding our livestock out of what we stored, grain costs are rising, milk output has fallen to 25%, some farmers are killing off their livestock... All of these additional costs will cause prices to rise. Everything is converging towards an alignment with the European markets, except wages", Ioan Benea also says.

• Ioan Ladoşi: "We would like to raise prices, but we can't"

Farmers have been harmed by the increase in the price of grain, and as a result, they are faced with increasing production costs. Ioan Ladoşi, the president of the Romanian Professional Association of Pork Meat, has explained that even though they would want to charge higher prices for the meat, the farmers are unable to do so.

"We would like to be able to come out into the market with higher prices, because inputs have increased, but we can't raise them; do the Romanians have money to buy expensive meat? For most of the year, we work at a loss", Ioan Ladoşi said.

He said that the farmers are seriously considering killing off their livestock.

"I think that any farmer is thinking about sacrificing their animals in order to save on grain. However, each farmer will choose the moment they see fit to do so. For now, everyone lies in wait, to see what happens next, they are awaiting for news from the major grain markets", according to Ioan Benea.

In his opinion, the only option that farmers have is to reduce their production costs, to the extent that they will be able to do so. Those who don't succeed will resort to radical solutions, and some may even file for bankruptcy.

"China has withdrawn its bids for 130 million tons of grains, due to the higher prices", said Mr. Benea: "This is a period where speculation is at its highest. The major grain traders are speculating the moment as much as they can to rake in a maximum of profit. Farmers lose money by keeping their prices steady, consumers buy at higher prices, raised by the retailers who always win".

Lately, grain prices have increased by as much as 20-30%.

When it comes to pork meat, prices are still stable and will not instantly follow the trend of production costs, according to Ioan Benea. He claims that between November-December and the beginning of 2013, prices of pork meat will probably be significantly higher. Thus, farmers, who are now barely hanging on, "will try to get their head above water".

Pork meat prices are very close to those of Germany. Romania imports about 50% of what is being consumed.