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Financing Romanian AgricultureInvestment and development options

How attractive is Romanian agriculture versus Europe ?

Agriculture in Netherlands vs. Romania

Romania Netherlands

GDP Euro 140 billion Euro 600 billion

Arable land 9.5 million ha 1.8 million ha

Professional farmers(working > 5 ha)

265 000 67 000

Agriculture exports Euro 4 billion Euro 78 billion

Arable land prices Euro 2 500 – 5 000 /ha Euro 40 000 /ha

Total loans to the agricultural sector 2013

Loans Average Debt / farmer

Romania Euro 3.5 billion 1 300 Euro

Netherlands Euro 40 billion 600 000 Euro

Total agricultural loans in Romania

2012 2013 Aug. 2014

75% granted by banks 10 613 10 879 11 600

annual growth rate 3%

25% granted by Non-Bank Financial Institutions (NFI)

2 847 3 501 4 006

annual growth rate > 20%

*Commercials credit (offered by agribusiness players) is estimated at RON 2.5 – 3 billion per year.

Million RON

What is being financed?

Working Capital Needs (Banks, NFI, Commercial Credit)

66%

Investment Loans Equipment (NFI) Projects with European grants (Banks) Others, such as arable land

acquisitions (Banks, NFI)

33%

What investment and development options does a Romanian farmer has?

Extension of the

agricultural area

Milling bakery

Energy (biogas wind)

Silos Trade in cereals FNC

Agricultural

service delivery

Livestock breeding

(pigs, cows)

Vegetable and fruit

growing

Development

» Defensive» Low risk» Moderate increase in cost efficiency» Liquid fixed assets and an increasing trend in the market value during the next period» Facilitates the densification of land

▪ Increases the indebtedness▪ Investment paid off in the long term▪ The market becomes extremely competitive, decreasing negotiation power

Acquisition of agricultural land

» It may generate a significant profitability in the future» Multiplies the profit centers» Limitation of the specific seasonal character» Using renewable resources» A market with a growth potential in the future» Possible access to non-reimbursable funds

▪ High risk▪ Increase in exposure, significant investments▪ Low expertise level, it does not depend on the underlying activity▪ Dependent on tax incentives that are highly uncertain

Energy (biogas, wind)

» Defensive» Storage» Immunity» Allows a better capitalization on one’s own production» Possible access to non-reimbursable funds

▪ Average risk▪ Increase in exposure, significant investments▪ Money blocked▪ Risk of extra capacity▪ The risk of deterioration of the production stored is taken over

Silos for one’s own needs

» Integrated model» Average profitability» Legal limitations that are to reduce the access to the market of the small producers, generating growth opportunities» A market with an increase potential» Possible access to non-reimbursable funds» The integration of activities related to large crops increases profitability

▪ Average risk▪ Expenses on initial investments▪ Liberalization of the milk market in 2015, pressure of imports

Livestock breeding (pigs, cows)

» Integrated model» Low risk» Average profitability» Market with an increase potential» Possible access to non-reimbursable funds

▪ Expenses on initial investments▪ Pressure on the price by imports

Fruits and vegetables growing

Distribution of development options

Low risk High risk

High profitability/ efficiency

Low profitability / efficiency

Energy

InputsLivestock breeding

Silo

Services

Vegetable growing Fruit growingLand

Shops

FNC

Trade

Milling, bakery

In conclusion, Romanian agriculture

Has great potential for improving performance Can contribute significantly more to economic development

and export growth Is hugely under-financed both in terms of working capital

needs and investment loans Will benefit from a significant increase in European

funds/subsidies

NFI’s are ideally placed to satisfy the farmers needs for credit

Specialized loan providers, understanding the farmers business

Can provide fast, innovative and flexible credit solutions Better collateral valuation Better collection mechanisms

AGRI-FINANCEWHERE AGRICULTURE MEETS FINANCING

Thank you !