Is Moldova’s Agriculture in Trouble?

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Last year, agricultural production reached its peak over the entire independence period. Unfortunately, this year is the opposite – agriculture is caught in another “perfect storm”.
Problems on all fronts The year 2022 is sure to be one of the most challenging for the agricultural sector in the country’s modern history. Traditionally, one of the main factors catalysts of problems was a severe drought, which for our region, belonging to the zone of risky agriculture, is not a rare phenomenon at all. It affected the crops severely, as the abnormal heat wave in June and July aggravated the already critical situation after the major deficit of precipitation in winter and spring. In recent weeks, farmers have been reporting a drop in yields on almost all key positions: some by half, others by several times. For example, the sugar beet harvest is the lowest in ten years. The lack of rainfall affected up to 90% of fields planted with corn, the sunflower harvest is predicted to drop by 30%, and wheat – by a third. In addition to the drought, the war in neighboring Ukraine affected the sector adversely. It led to problems with logistics, disruptions in supply chains, including fertilizers, and a spike in fuel prices before the harvest campaign, when Ukrainian oil traders outbid our fuel transporters. But, most importantly, the mass export of Ukrainian grain dramatically collapsed the prices of agricultural products. To add to all these troubles, on August 15, Rosselkhoznadzor announced a temporary ban on the import of fruits and vegetables from 31 regions of Moldova due to the detection of quarantine pests in lots of our products. The authorities hastened to claim the ban to be purely political and that our products should be sent to the places where “the quality is valued”. In fact, the Russian service had notified the National Agency for Food Safety about the pest situation in writing as early as May, so the restriction of supplies was not a surprise. Either way, the ban hit many farmers for whom Russia was still the main market. Orchard growers were hit especially hard – last year, for example, almost the entire apple crop (96%) went to the Russian market, and it is simply impossible to quickly redirect this amount to other countries. The government’s “first aid” The Ministry of Agriculture has been working closely with the Ministry of Finance on the list of assistance measures for the agricultural sector since the beginning of the crisis. And yet, despite all the problems, the government refused to impose a state of emergency in agriculture (as insisted on by farmers’ associations), although initially Minister Vladimir Bolea supported this option. However, the official admitted that the state of emergency was no longer necessary, since the issues that it was supposed to help resolve had supposedly been resolved without it. Moreover, the basis was taken from Ion Chicu government’s insights, referred to by Bolea as “good and very efficient”. Thus, the Ministry held meetings with representatives of commercial banks and the National Bank, where it was agreed to act by analogy with 2020. At that time, in some cases, agricultural producers were extended repayment schedules of loan obligations upon submission of specified documents, in others – additional funds were provided. “We started negotiating with the World Bank to offer a $65 million package so that our farmers can access cheap money to rebuild their irrigation systems, obviously supported by the state. We have preliminary talks with banks for economic entities that submit these documents or a report of force majeure to be exempted from paying the so-called late fees... We are also analyzing the VAT refund,” Minister Vladimir Bolea revealed. Point-by-point legislative changes are also planned in order to facilitate the activities of business owners. In addition, there is progress on the Russian embargo. Yesterday Vladimir Bolea assured that “necessary steps are being taken to unblock the export of Moldovan products to the Russian Federation”. Next week, the official will fly to Moscow to personally discuss the issue with his Russian counterparts. Long-term perspective Despite the crisis, the authorities’ plans for agriculture are quite ambitious: they want to turn the sector into the “economy driver”. Among the priority measures are restoring irrigation systems and providing farmers with access to surface water. But this is only the beginning – ideally, it is planned to carry out “small industrialization” of the country’s agricultural sector. According to Vladimir Bolea, in the past periods we managed to reach a certain level of quality of produced raw materials, and the next stage is making higher-cost products out of it: “We must switch to making our own juice and jam from grapes. They are ща higher cost and are a product that you can keep longer. We are talking about industrializing our agriculture, that’s what will bring more money to the growers. And we have to build a whole system of subsidizing the industry.” To meet its targets, the Ministry of Agriculture and Food Industry will be reorganized again. In particular, to achieve the above industrialization, the ministry will set up a food industry directorate. “There should be separate units for the food industry, for the wine industry – each has its own specifics. This structure should have its own experts, we have to bring them together, and we need a sound internal policy in this area – how we support processors and subsidize them,” the minister explains. Other new divisions within the Ministry of Agriculture will be the irrigation and trade departments. As for the latter, Bolea believes that our sales abroad are “very bad”, and this is something that needs to be quickly changed. What about today? The government’s plans to develop agriculture look nice on paper, but right now they do little to relieve the farmers who have been hit by several crises at once. The measures already taken appear to be quite insufficient. The government believes that the support provided was more than sufficient, but the farmworkers strongly disagree. They claim the government does not really understand the seriousness of the current situation. Agricultural producers complain that today they are forced to sell products below production cost, while they have numerous debts to banks, suppliers of raw materials and other creditors. And on top of that, the tax burden will increase in September. Despite that, the Cabinet of Ministers has flatly refused to meet one of the key demands of farmers – to provide tax incentives – citing the loss of budget revenues. Against this backdrop, the Power of Farmers Association makes grim predictions, “In such extremely unfavorable cumulative circumstances, with no prompt intervention on the part of the state, many rural small and medium-sized farmers risk going bankrupt in a few months, leading to the loss of tens of thousands of jobs and accelerated migration. Alexandru Slusari, director of this association, argues that “even in 2020, it was not that difficult”. He pointed to the inefficiency of official relief policies: for example, based on his information, most of the creditors do not actually agree to defer payments, which the Ministry of Agriculture talked about. With all the problems, the agrarians again demanded not only that the state of emergency in the industry still be imposed, but also that another meeting with Natalia Gavrilita be arranged. This did not happen before September 12, the deadline for the ultimatum put forward by the three farmers’ associations. Therefore, starting September 20, farmers plan to come out and protest in several districts of the country at once. So, alongside the economic difficulties, the authorities now run the risk of gaining political troubles as well.