Policies for the Future of Farming and Food in Romania

Executive Summary

Key messages

• Romania’s agricultural policies and objectives have evolved significantly since its accession to the European Union (EU). EU policies, and in particular the Common Agricultural Policy, have led to the adoption of broader agri-environmental and rural development measures and increased financial support to farmers and rural areas.

• Romanian agricultural policies focus on social, environmental, and economic objectives, with an emphasis on developing the viability and competitiveness of farms and strengthening their market orientation.

• The structural transformation of the Romanian agriculture is underway, but it is slow and key challenges need to be addressed to unlock the full sector’s economic potential:

  • The sector is developing on two tracks, with a large number of small (< 5 ha) farms with limited market orientation and very few large farms. Access to credit and to land are key barriers to farm restructuring.

  • Agro-food exports are increasing but remain concentrated in products with low value-added, resulting in limited integration of the agricultural sector into global value chains.

  • Lack of skills, education and training are key barriers for a more productive, resilient, and sustainable sector.

• OECD accession can help Romania improve the effectiveness of its policies for the agriculture sector, encouraging innovation, with a view of improving productivity and competitiveness while promoting environmental sustainability and resilience.

Romania’s agricultural policies are shaped by the European Union’s objectives and programmes

Romania’s policy and legal framework has evolved significantly since its accession to the European Union. Romania was one of the original members of the World Trade Organization when it was created in 1995, yet it was its accession to the European Union in 2007 that prompted many policy reforms in several sectors, including agriculture. EU policies, regulations and, in particular, the Common Agricultural Policy (CAP) have led to not only increasing financial support to farmers and rural areas, but also the adoption of broader agri-environmental and rural development policies. Upon its EU accession, Romania also adopted the common commercial policy of the European Union. Romania has also adhered to the main OECD legal instruments and Declarations. Although it is not yet an Adherent to the Recommendation of the Council on the OECD-FAO Guidance for Responsible Agricultural Supply Chains, Romania has undertaken promotional activity to encourage the use of this instrument and adheres to the Council Recommendation on the OECD Due Diligence Guidelines for Responsible Business Conduct (RBC) and to other RBC-related instruments. It is an Adherent of both the 2016 OECD Declaration on Better Policies to Achieve a Productive, Sustainable and Resilient Global Food System and the 2022 OECD Declaration on Transformative Solutions for Sustainable Agriculture and Food Systems.

Romania’s main agricultural policy objectives are socio-economic in nature. Over the last two decades, Romania’s Ministry of Agriculture and Rural Development (MARD) has released several strategic documents on the future of the country's agricultural policies and on the necessary steps to achieve key objectives dealing with social, environmental and economic issues. The CAP Strategic Plan (CSP) for 2023-27 is currently the main reference and policy tool. It deploys a broad range of policy instruments to increase the viability and competitiveness of farms, to reinforce their market orientation, and to promote the socio-economic development of rural areas. Structural changes could create additional pressures on the environment, and there is room for more ambitious agri-environmental interventions.

The policy and regulatory environments have improved, although significant challenges remain. Despite notable improvements in its regulatory policy since the early 2000s, including a formal requirement to conduct regulatory impact assessment (RIA) when developing primary laws and subordinate regulations, when it comes to negotiating and transposing EU directives and regulations, Romania relies solely on the European Commission’s regulatory impact assessments (RIA). Stakeholder engagement has improved, but representation is primarily through organised associations. The CSP has benefitted from broad consultation with national stakeholders, allowing MARD to identify and prioritise the country’s needs and necessary policy interventions. However, Romania’s allocation of CAP financial resources among the different instruments shows that there is scope for more strategic and bolder use of EU measures to achieve its stated objectives.

Agricultural support in Romania would benefit from a more coherent policy mix to incentivise innovation and accelerate structural change. Further improvements to the system of granting financial support would ensure an effective response to emerging socio-economic, geopolitical and climate challenges. Romania’s agricultural policies could also benefit from stronger synergies and co-ordination between EU and national instruments. In view of the importance of these synergies, the impact of changes to CAP rules for income support on structural change will need to be assessed. There is also scope to increase the share of funding to promote knowledge transfer and innovation and for further efforts to improve the competitiveness and entrepreneurship of farmers. Romania needs to adopt a comprehensive strategy to strengthen its agricultural knowledge and innovation system (AKIS) for a more productive, resilient, and sustainable sector.

Although structural change is slow, it has led to increased productivity while keeping environmental pressures relatively low

Structural change is underway, but the sector is developing on two tracks, with a large number of small farms and few very large farms. Romania has around 2.9 million of the EU’s 9.1 million farms, and the largest share of the in Gross Domestic Product from agriculture in the European Union. The number of farms has declined by a quarter over the last 20 years, accompanied by a significant increase of average output and farm income per farm. An increasing number of young farmers are entering the sector. At the same time, farmland distribution is highly uneven, with around 90% of farms smaller than 5 ha and less than 1% of the farms owning more than half of agricultural land. Most small farms are not market oriented, have low technology and limited access to credit. While access to land for small and medium market-oriented farms is a key barrier to farm restructuring, permissive legislation on land markets has favoured land acquisition by large foreign investors.

Agricultural productivity is moderate but growing, accompanied by a good sustainability performance. The structural transformation of the Romanian farming sector has resulted in increased agricultural output, largely driven by agricultural productivity growth. Although this positive trend is mainly the result of labour productivity growth, Romania still has the lowest agricultural labour productivity levels in the European Union and the largest agricultural labour force, with almost one-third of the EU’s farms, 8.1% of its Utilised Agricultural Area and 3.3% of the EU’s standard output. The environmental performance of the Romanian farming sector is good, but over the last decade GHG emissions from agriculture have increased and challenges remain, particularly concerning the conservation of biodiversity for High Nature Value (HNV) and water management. The volume of water used for agriculture for irrigation purposes is increasing, and obsolete irrigation infrastructure contributes to water losses.

Bolder policies are needed to achieve the country’s socio-economic objectives. More than 60% of the total budget of the CSP goes to direct payments, whose main beneficiaries are a small group of large holdings (in 2022, more than half of total EAGF payments accrued to under 2% of beneficiaries). This reflects not only the polarised structure of Romanian agriculture, but the implementation choices made by the government. Efforts should be made to further target support to market-oriented small- and medium-sized farms. Positive trade developments in agro-food exports are not always accompanied by the integration of the Romanian agricultural sector into global value chains, which is relatively low compared to peer countries. The number of farmer associations is low, with less than 1% of farmers engaged. Further efforts are necessary to stimulate entrepreneurship, competitiveness, and co-operation.

Policy efforts do not adequately meet resilience and sustainability challenges. Droughts and floods resulting from extreme weather conditions are among the most serious problems in Romanian agriculture today. Nevertheless, only fewer than 1% of Romanian farmers, mostly from large farms, have adopted EU CAP risk management tools, which are not fully implemented in the CSP. Advisory services are weak and fragmented, particularly with respect to cross-compliance and agri-environmental measures. Further efforts are needed to develop training and advice that is targeted to sustainability and resilience objectives. Romania’s capacity to treat food waste is significantly lower than the EU average and is declining compared to the trend in most EU27 countries.

A comprehensive strategy is needed to strengthen the agricultural knowledge and innovation system (AKIS). Romania’s AKIS is at an early stage of development. Although there has been steady improvement in recent years, the low level of farmers’ education and skills requires the development of an ambitious skills and education agenda, as well as additional training. Advisory services are currently insufficient and do not fully respond to the diverse needs of farmers, and should make better use of CAP funding. In general, the AKIS requires greater investment to foster innovation and the adoption of new technologies, by also making better use of national and EU policies.

Summary of recommendations

Area	Assessment	Recommendations
Adopt a coherent policy mix to accelerate the structural change in agriculture	The structural change of the farming sector is slow, but the number of farms above 5 hectares is increasing, with an emerging sector of medium-sized professional family farms. Around 90% of farms are smaller than 5 hectares and the average farm size (4.4 ha) is amongst the lowest in the European Union. The majority of small farms have low technology endowments, limited access to credit, and no market orientation. Generational renewal remains a major problem, but recent data show positive developments. Legislation on land markets has favoured land acquisition by foreign investors while medium-sized farms face barriers.	Target support to small and medium-sized farms that are commercially viable. Facilitate an equitable phasing-out of non-competitive small famers and surplus labour. Strengthen the use of national and EU support to promote entrepreneurship. Continue to promote young farmers to agriculture by facilitating access to land and making full use of all CAP interventions and national instruments. Undertake an in-depth assessment of trends in land ownership to monitor farm restructuring as well as to evaluate the effects of large-scale land acquisitions.
Create an enabling policy environment for a more competitive and resilient agro-food sector	Positive developments in agro-food exports, but limited integration of the agricultural sector into global value chains . Co-operation among farmers is very limited but slowly expanding, driven by supportive national policies. Fewer than 1% of Romanian farmers, mostly from large farms, have adopted EU CAP risk management tools. Romania is not taking full advantage of the implementation options provided by EU policies. Stakeholder engagement in policy design has improved, but mostly covers organised stakeholders and participation is low at the sub-national level.	Adopt a comprehensive sectoral strategy to better integrate farmers in the value chain. Further encourage associations and co-operation within the agricultural and food sector. Accelerate the adoption of risk management tools through advice and improved policy design. Invest in administrative capacity to improve policy management and implementation. Explore alternative deliberative processes to encourage stakeholder engagement. Consider ways to make better use of the room for manoeuvre in the CAP and take account of relevant recommendations in the OECD review of the European Union
More effective policies are needed to ensure the long-term environmental sustainability of the agro-food sector	The environmental performance of Romanian agriculture is good overall, but structural changes could create additional pressures on the environment. It is necessary to encourage farmers to maintain carbon in the soil to maintain a low level of GHG emissions from agriculture. High Nature Value (HNV) farming is very important in preserving nature by maintaining biodiversity, especially as concerns the species-rich semi-natural grasslands. One-fourth of all deaths in Romania can be attributed to dietary risks; fruit and vegetable consumption is the lowest in the European Union and has decreased in recent years. Romania’s capacity to treat food waste is significantly lower than the EU average and is decreasing against the trend in most EU27 countries.	Maintain the farming activities that safeguard traditional biodiversity through targeted interventions. Promote agricultural practices and investments to maintain low GHG emission intensity. Gradually raise the level of ambition of agri-environmental interventions. Strengthen the existing policy mix to encourage healthier food choices and explore synergies with environmental sustainability goals. Promote an integrated policy package for food waste management.
Adopt a comprehensive strategy to strengthen the agricultural knowledge and innovation system	Most farmers and those working in agriculture have no agricultural education or only a primary level of education. The offer of professional training in agriculture is limited and existing life-long learning programmes in rural areas have low uptake. Investment in R&D&I is low and the participation in international projects is limited. The agricultural advisory system leans heavily on public services that are too often not able to meet the diverse needs of farmers. The financial resources devoted to innovation through national policies and the CAP remain limited compared to the total support provided to the sector.	Develop an ambitious skills and education agenda specifically for agriculture. Improve the capacity of the sector to absorb innovation funding with a view to reorienting government support for agriculture to increase the proportion spent on knowledge and innovation systems. Improve the skill-level of farmers via training and a lifelong learning approach. Adopt a strategy to improve the performance of agricultural research. Use all policy opportunities to strengthen advisory services. Investigate the low uptake of knowledge and innovation-related measures and improve agricultural policy design accordingly.