Organic Agriculture in Moldova An Opportunity for Greening the Economy

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1 Organic Agriculture in Moldova An Opportunity for Greening the Economy wwww.green-economies-eap.org

2 Organic Agriculture in Moldova: An Opportunity for Greening the Economy Activities of the agricultural sector can have significant impacts on biodiversity loss, the pollution of water bodies, the emission of greenhouse gases, and the alteration of natural nitrogen cycles. Efforts to render agriculture more sustainable are therefore an indispensable component of national efforts to reverse environmental degradation, preserve natural capital, mitigate climate change, as well as ensure for inclusive economic growth and the alleviation of poverty. Eastern Europe and the Caucasus has proven to be an ideal region for the development of sustainable, organic agriculture as a result of historically low levels of pesticide and fertilizer use, availability of agricultural labour, and close proximity to the rapidly growing EU markets. As outlined in UNEP s comprehensive assessment of the region,1 organic agriculture offers opportunities to revitalise its countryside and restore ecosystem functionality; develop new local businesses and agro-tourism opportunities; create new and better paid jobs (particularly in rural communities); as well as mitigate and build resilience to climate change. The promotion of organic agriculture thereby holds tremendous potential for leveraging a broader transition to a Green Economy in Eastern Europe and the Caucasus. In order to realise the multitude of socio-economic benefits offered by organic agriculture and establish it as a model sector for a broader transition to a Green Economy in Eastern Europe and the Caucasus, UNEP is providing support to farms and businesses in Ukraine, Moldova and Armenia for expanding their organic agri-food supply chains and associated trade flows. This project is funded by the European Commission and is part of the Greening Economies in the Eastern Neighbourhood (EaP GREEN) partnership programme.2 The following fact sheet analyses the trade opportunities for organic products from Moldova to the EU market.3 Trade with the European Union Regional perspectives for Eastern Europe AND THE caucasus Opportunities Ukraine 4 In the European Union, the demand for organic products has grown continuously over the past decades - even in times of economic crises - and domestic production has not been able to keep pace. This need for increased production in the organic sector has in turn led to rising demand for organic raw and semi-processed materials. Organic exports to the EU offer high prices and stable future opportunities because of, among other factors, consumer preferences for products that address environmental and health issues. Importers are already aware of this trend and have a growing interest in finding potential suppliers of organic agricultural products. Moldova Armenia 4 The high degree of dependency of the EU on organic imports provides excellent opportunities for producers and exporters in the target region. 4 It is easier to build up organic supply chains and trade relations in sectors in which exports of conventional products already exist in the supplying 1 UNEP, Organic Agriculture. A step towards the Green Economy in the Eastern Europe, Caucasus and Central Asia region. Case studies from Armenia, Moldova and Ukraine. 2 For more information on EaP-GREEN, please go to: 3 The following paragraphs present the findings of a market assessment study for Armenia, Moldova and Ukraine, prepared for UNEP by Organic Services

3 country. Several traders in the EU that formerly worked only with conventional products have established an organic product line to service clients who are seeking organic products to broaden their own product ranges. Hence, traders of conventional products with experience in the target region should also be taken into account when considering the establishment or expansion of organic product lines. 4 Leading organic processors in the EU tend to move away from China, India and South America as sources of organic products, seeking greater product traceability and reliability by importing from European countries. These circumstances provide an opportunity for Eastern Europe to become a major source of EU organic imports. However, the challenge of establishing reliable organic food supply chains in the target region would need to be addressed. Challenges 4 Export bans in Eastern Europe are a particular threat for organic value chains, which require long-term engagement and reliability of supply. In the past, export bans have proven detrimental to trade relations and the overall development of the organic sector in the region. 4 While they offer stable trade relations, the EU s organic clients have highly stringent product quality and life cycle requirements. Small scale organic producers are faced with the challenge of not only adhering to these criteria but also of providing evidence to confirm the eligibility of their products for the EU marketplace.

4 Moldova Opportunities and Challenges in Promoting Organic Agriculture 4 With favourable climatic conditions and fertile soils, Moldova s agricultural sector produces surpluses that are available for export. Many agricultural products in Moldova, including cereals, oilseeds, dried pulses, herbs, honey, fruits, berries and nuts, are particularly well suited for being exported to the EU. 4 In 2014, Moldova signed the Deep and Comprehensive Free Trade Agreements (DCFTAs) with the EU, which will create opportunities for Moldovan exporters by eliminating import and export duties. However, some agricultural goods that are considered sensitive in the EU, such as cereal products, will be subject to monitoring of trade flows. The cooperation between the EU and Moldova aims to promote policies and control mechanisms for organic farming in Moldova. Furthermore, the agreement aims to facilitate and promote trade and foreign direct investment in environmental goods and services by eliminating related non-tariff barriers, among other measures. 4 Moldova has the competitive advantage of being a GMO-free country, which can strengthen its image as a reliable organic sourcing region if this is credibly communicated to potential trading partners. 4 Repeated frauds in the organic grain commodity business have damaged the image of Moldova s organic sector. In order to build trust and demonstrate reliability, organic producers should demonstrate their willingness to make their products traceable back to the point of origin.

5 Organic export products from Moldova Oilseeds, cereals and dried pulses 4 The current export share of organic cereals and oilseeds to the EU is higher than in other Eastern European countries, such as Ukraine. Wheat is the leading export cereal from Moldova followed by corn, with 33 per cent of total exports being supplied to the EU. Regarding oilseed exports, sunflower seeds are the leading export oilseed from Moldova, followed by rapeseed and soybeans. About 47 per cent of total exports of sunflower seeds are exported to the EU. 4 Moldova also exports to other Eastern European countries. For instance, more than 90 per cent of soybeans, more than 30 per cent of sunflower seeds, and almost 20 per cent of wheat exports go to Romania and Ukraine. 4 There is significant demand from the EU organic sector for high protein organic animal feed. This is an opportunity for Molodva to build a reliable supply chain of organic protein sources that is located in proximity to the EU. 4 Current price levels for organic oilseeds, dried pulses and cereals are high enough to pay for the costs associated with obtaining organic certification. Sunflower seeds: Export destinations as % of total exports Soybeans: Export destinations as % of total exports Ukraine (22.5) New Zealand (20.6) United Kingdom (16.8) Romania (9.9) Poland (4.5) Russian Federation (4.2) Lithuania (3.8) Netherlands (3.6) Turkey (3.5) Bulgaria (2.9) Others (7.8) Romania (67.4) Ukraine (26.4) United Kingdom (6.0) Bulgaria (0.1) Serbia (0.1) Wheat: Export destinations 2012 as % of total exports New Zealand (51.7) Romania (14.7) United Kingdom (16.8) Turkey (8.6) Italy (7.8) Ukraine (5.0) Panama (1.7)

6 Fruits, berries and nuts Regional perspective Eastern Europe 4 As a result of EU consumer preferences for brands that they recognize and trust, it is currently difficult to export processed fruits to EU organic markets in the form of finished products that carry brand labels from the country of origin. For this reason, the organic business has a prevailing tendency to carry out the final processing in the country of consumption. It is envisaged that in the short, medium and long term, the Eastern European and Caucasus region will remain a supplier of raw and semi-processed materials. However, there are considerable opportunities to export finished consumer products to new and emerging organic markets, such as those in countries that have only recently joined, or are expected to join the EU. 4 Establishing new EU trade relations is comparatively easier in the dried fruit and nuts segment compared to the fresh fruit market. In addition, the handling and transportation of dried products requires less investment in comparison to other processed goods (e.g. juices). 4 The demand for dried organic fruits is high among the major EU importers and the potential for developing this market further is very significant. The majority of Eastern European dried fruit is exported to the Russian Federation, with the EU making up only 17 per cent of the export share. 4 Conventionally produced dried apricots, prunes, apples and cherries are the main items currently exported to the EU from the Eastern European and Caucasus region, and all of these products are also well suited for organic production. Some additional fruits and nuts (pears, quinces, citrus, kiwis, almonds and hazelnuts) could further broaden the range of traded organic products. National perspective 4 Semi-processed organic fruits from Moldova show good potential in the EU market, and exporting processed organic fruits and berries involves fewer risks than fresh fruits. 4 Fruit juices are the leading processed fruit category exported from Moldova. In 2013, exports of Moldovan juice and preserved fruit to the EU had export shares of 91 per cent and 30 per cent respectively, including both non-organic and organic juices. The broadening of the exported product range to include more organic juices and preserved fruits to existing EU clients is a viable option. 4 Organic and non-organic walnuts are widely available in Moldova and are exported successfully. The Moldovan export share of shelled walnuts to the EU almost reached 90 per cent of total exports in Walnuts are the most relevant nut type cultivated in the target region and have good market potential in the EU s organic segment. Fruit & vegetable juices: Export destinations as % of total exports Germany (41.0) Poland (26.5) Austria (18.6) Ukraine (4.1) Hungary (3.0) Russian Federation (1.8) Kazakhstan (1.6) Romania (1.3) Belarus (0.6) Georgia (0.6)

7 Herbs and honey National perspective Regional perspective 4 The current and future EU market for processed organic herbs and honey from Eastern Europe and the Caucasus looks promising. The EU market for herbal ingredients is steadily growing, and the organic herbal ingredient market is doing so even faster. Certified organic herbs (as well as beeswax) are not only used in organically labelled food products and in natural and organic cosmetics, but also in pharmaceutical products and some non-organic teas. Walnuts: Export destinations as % of total exports France (30.4) Germany (11.7) Italy (7.5) Greece (7.3) Austria (6.4) United Kingdom (5.8) Spain (5.4) Netherlands (4.5) Switzerland (3.5) China (2.1) Others (15.4) 4 The EU is already the main target market for Moldovan non-organic honey exports, where almost 90 per cent of total honey exports were directed in This facilitates the introduction of organic honey in exports to the EU. Moldova could focus exports of organic honey to clients in Germany, France and the United Kingdom, where demand is strong. Honey: Export destinations as % of total exports Germany (26.7) France (23.2) Romania (14.7) Slovakia (10.6) Belarus (8.1) Czech Republic (7.1) United Kingdom (4.1) United States of America (1.9) Canada (1.5) Russian Federation (1.5) Others (0.5) 4Organic medicinal herbs are promising export products for the EU market. Exports of non-organic medicinal herbs to the EU reached almost 40 per cent of total exports in 2013.

8 Recommendations for Expanding Organic Trade Regional perspective Eastern Europe 4 The organic sector in Eastern European countries requires market-oriented support structures, such as agricultural cooperatives, in order to efficiently organise organic producers and exporters. A strong, professional market organisation for the organic sector can facilitate the support and optimisation of local logistics, handling and facilities namely for drying, storing, sorting, pre-processing and final processing. National perspective 4 Market assessments show that organic grain commodities and organic processed fruits and nuts from Moldova are promising export products. The country could make use of transparent certification processes to enhance its credibility as a supplier of GMO-free agricultural products, in particular for soybeans and corn. 4 Private organic certification schemes (e.g. Naturland, BioSuisse) offer good opportunities for stable and long-term trade relations directly with EU organic processors. 4 Governments from Eastern Europe and the Caucasus, and particularly from Ukraine, should exclude organic products from export bans.