Harvest status: disappointing wheat harvest and very poor corn harvest.

Winter crops:

Wheat: after a very bad start, due to the dry autumn, we saw that all the wheat survived the winter and it took a while for the wheat fields to do well during the spring. It became very dry and hot again during progression and grain-filling, and the process stopped very suddenly in the middle of development. The result was therefore a modest 4 tons per HA.
It’s hard to see a pattern of what is good and bad, but the first-year fields used after a prolonged fallow, as well as the C1 fields are clearly the worst.
However, everything has also been against the wheat:
-extremely dry autumn, which means very small plants/low germination before winter
– very dry spring in the east, virtually the entire period
– much rain in the spring in the west – April, May – but not quite enough water during progression and a sudden halt to development, because during grain-filling there were suddenly a few days with very high temperatures, which definitely stopped development.

Barley has yielded 2.9 tons per HA on the 100 HA. This result is obviously influenced by the weather, just like wheat. We have used a malting barley variety and limited N allocation, but it has still not been possible to get it approved as malting barley. Winter barley is to be grown at Oravita in the upcoming season, with optimum fertilizer, etc., without regard to malt production.

Rapeseed: The one 52 HA rapeseed field that survived yielded 2.44 tons per HA. We continue to believe that the decision that only this field should have a survival chance is correct.

The weather has been acceptable throughout the harvest cycle, so that the winter crops were harvested with water percentages so they could go straight into storage, or ready for sale directly from the combine. The harvest has progressed very well. This year we have increased harvesting capacity with a combine and grain cart at Oravita, and we have now covered the collection sites for crops, so the inward transport can take place faultlessly and securely in relation to crop quality. So the overall picture is therefore that all the winter crops have been harvested successfully and of a good quality, which of course saves costs and increases the value.

The above drought problems are the general picture in Central and Eastern Europe, which has directly caused the prices of crops, already here right after the wheat harvest, to be at levels almost matching the Danish ones. This is very unusual in Romania, because it is usually the buyer’s market at this time. This bodes well for our potential sales prices. We have sold rapeseed at DKK 365 per Hkg and barley at DKK 133 per Hkg, and only a small batch of wheat was contracted before the harvest. Some batches of wheat have been sold at increasing prices in the range of EUR 167 to 186/Hkg (net prices), as well as some batches of wheat and corn for retail sale at prices above this level.

Spring crops:

Corn: Half of our land was sown with corn. Seeding, fertilization and crop protection was fairly successful and satisfactory throughout, although the season has also given rise to additional horticultural optimizations. However, up to about 10 July we were very optimistic regarding the corn results, because there were some nice corn fields with large and well developed plants, and with good initial cob establishment on the plants. However, then the drought and heat came with such vengeance that it prematurely stopped the development of the cobs, so we ended up with some corn fields with undersized cobs and undersized kernels.

The problem was undoubtedly exacerbated by plenty of rain in May-June, which resulted in the plants developing their primary roots in the topsoil and thus roots were not established to a depth that could draw water up once it became dry.
The above factors have meant that the corn harvest is dramatically less than expectations, giving an average of 2.5 tons per HA.

Sunflower: Disappointed almost as much as the corn, but on a much smaller area – 380 HA. This crop had the same process of development as the corn.

The above problems are general in Romania, in the region and in several places around the world. This means, of course, a limited supply of corn and therefore rising prices.

So far we have sold modest quantities of corn for retail sale at a price of DKK 190 per Hkg.

Of course we are continuously active in the market both in terms of corn and wheat. We currently have 7,500 tons of corn and 7,700 tons of wheat in stock, and optimistically backed up regarding attainable prices when we sell over the coming months.

The shortage of corn in Romania is extremely widespread. We had made an agreement to lease one silo, as well as to negotiate the lease of a further one, but our client, a large wholesaler, had to cancel because they were not in a position to buy corn in Romania to fill the silos. We had leased an additional silo out and we of course have been compensated for the cancelled agreement, so we have had revenues for our unused silo capacity.

The seriousness of the situation is further underlined by the fact that the Romanian state has agreed to pay drought assistance to farmers, which, however, we miss out on due to size limitations.

Expected results for 2012:

Based on the above background, we must acknowledge that we cannot achieve the budgeted profit for 2012.

The final result depends greatly on the prices we achieve in sales in the coming months, but we are optimistic regarding this, on the basis of the signals we receive from buyers.

We still expect to come out with a positive result, although profits are expected to be fairly modest.

It is important to emphasize that our financial resources are in order, so we are able to fund operations prospectively, just as the planned FEADR supported investments are funded, in that we have not yet received the amount granted, but construction has been completed and paid for to the extent described below.

FEADR are supporting the construction projects:

We have FEADR funded construction projects underway at Mizil and Oravita where we have approved applications for obtaining half of the construction costs in support. Before harvesting of the winter crops, we managed to complete the upgrading of the electricity supply at Mizil and Oravita, and we did concrete work at both sites, and erected barns that cover the sites for inward transport of crops. Likewise, the permanent high-capacity dryer in Mizil is in place and natural gas has been installed on our ground.

Before the start of corn harvest, we were ready with the establishment of one new silo at Oravita, as well as new inward and outward transport facilities at both Mizil and Oravita.

The facilities have partly been run by manual control throughout the harvest and the final control computers and programs are to be implemented in the coming weeks.

Although yields did not live up to expectations, because of the weather, we have so far avoided actual mishaps and losses, and a significant amount have been saved on the drying and cleaning of crops that were not necessary.

Winter crops 2012-2013.

Generally there have been very good conditions for sowing crops this autumn, just as there has been adequate quantities of rain for a reasonable germination.

We have planted 1,200 HA of winter rapeseed that overall has germinated nicely.

3,800 HA of wheat have been planted. We can also see a very good status at this time regarding the initial sowing.

The above is of course the status at week 42 and there is still a long time to harvest, but the foundation is considered to be good!

October 2012,

Richardt Duus, CEO