Saturday, August 9, 2008

Western investors discover Romania's underused rice paddies

Thursday, August 7, 2008

VLADENI, Romania: Romania's Communist leader Nicolae Ceausescu loved the Italian specialty risotto, but he probably would have hated to see Romania's rice farms being taken over by Italian and other Western companies.

As the world price of rice has risen - tripling this year and leading to scarcity worries and export curbs by big producers in Asia - European farmers have begun to expand eastward.

In particular, they are buying up rice paddies in Romania, many of which were abandoned after the overthrow of Ceausescu and the end of Communism in Romania in 1989. This gives Romania, an impoverished Balkan state with water-rich lowlands, a hot climate and rich soil, the chance to become a top European rice producer in coming years.

"Western expertise gives rice a new future in Romania," said Ion Dragusin, 63, who headed rice farming in Vladeni under Ceausescu.

Rice has never been a popular food in Romania, where wheat and corn are major crops. But Ceausescu was known to like risotto, and, according to a cook who prepared food for him at a hunting lodge in the Carpathian Mountains, he often enjoyed a bowl of rice pudding.

In the 1970s, following the example of China and North Korea, Ceausescu forced thousands of newly landless peasants and convicts to work vast paddies around the village of Vladeni in eastern Romania, part of a grand plan to make Romania self-sufficient.

Now, the rice days are returning.

"Romania has a great potential," said Jean-Pierre Brun, president of the London Rice Brokers Association. "You need flat land, an easy source of water, which is the Danube, and warm weather. With all these available, Romania has very good conditions to produce rice."

Rice also has potential, on a smaller scale, in Bulgaria, Ukraine and Hungary, Brun said.

The Danube River has 20 times the water reserves of the Po Basin, which supplies Italy's paddies. That gives Romania a competitive advantage over Italy, the top European rice producer, and No.2 Spain.

"We will produce at lower costs," Angelo Dario Scotti, chief executive of Riso Scotti, the first Western company to get a foothold in Romania.

Since 2003, Riso Scotti, which is based in Italy, has invested tens of millions of euros to buy 7,000 hectares, or 17,300 acres, of fragmented plots in Romania and to build a processing plant in Vladeni.

"We knew lots of abandoned land was available and the climate was perfect," said Ugo Perruca, a Riso Scotti executive. "We aim to stop buying at 10,000 hectares by next year but the rest will be grabbed by Italian, French and local investors. We are in the process of convincing farmers to come to Romania."

A handful of Italian and Spanish farmers have begun to exploit smaller acreage near the Danube port of Braila, in eastern Romania, and in western Romania. Their rice is processed at the Vladeni plant. Land prices have soared to €1,000, or $1,530, a hectare from €200 five years ago, but they are still six times lower than in Italy.

Most of the world's rice is grown and consumed in Asia. The European Union produces around 2.2 million tons of rice a year on 500,000 hectares of land, and imports an additional one million tons. Perruca said Romania would produce 40,000 tons of rice this year, and estimated Romania's rice-growing land at 40,000 to 50,000 hectares in the next five years.

With the planned doubling of capacity at the Vladeni plant in the next five years, Romania could become an exporter of more than 100,000 tons a year, cutting EU imports by 10 percent.

According to the Agriculture Ministry, Romania has 15 million hectares of arable land, of which around 3 million to 5 million are unused.

But the cost of modern farming methods and the fragmentation of ownership that occurred when nationalized land was privatized after the fall of communism means it will take time for Romanian farmers to embrace rice.

The ministry is encouraging small holders to consolidate production.

Riso Scotti spent up to €1,500 a hectare to improve the quality of land, rebuild and expand a vast network of canals and revive pumping equipment inherited from the Communist era.

Without cash, owners of tiny patches of muddy soil will struggle to irrigate their land and are eager to sell, Dragusin said. Modern rice cultivation, using specially designed harvesters, employs only a handful of workers compared with the thousands of peasants working in Ceausescu's rice fields.

"I remember seeding and harvesting by hand with the sickle," Dragusin said. "Walking barefoot through wet fields was very hard," he said. "Yields were large, but losses were huge. Those times are gone."

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