Velcourt, the UK farm management group, named Romania as "one
of the world's foremost agricultural investment opportunities" as it unveiled a
joint venture aimed at exploiting the country's rising farmland prices.
Romanian farmland prices have been rising at a rate of 20% a
year since the Eastern European country joined the European Union six years
ago, Velcourt said.
Yet they remain among the lowest in Europe, at roughly E2,700
per hectare, compared with figures of E6,500-7,000 in neighbouring Poland, which
has a better developed agricultural sector – indeed it is the EU's
fourth-ranked grains grower, besides a major producer of crops such as apples
In the UK, where Velcourt manages more than 50,000 of arable
and dairy farms, good land can achieve E30,000 per hectare.
"Land prices in Romania are currently some of the lowest in Europe,
but are expected to strengthen and converge with those of Western Europe," the group
Velcourt, which said it researched markets throughout
Eastern Europe, also rated Romania highly on its "excellent" soil quality, with
20% of the so-called black earth soils renowned for supporting high arable
Romania is also served by a network of canals, fed from the Danube,
to enable irrigation in a country which is, like Russia and Ukraine across the
Black Sea, is prone to droughts.
"Having researched numerous countries, we believe Romania
offers a compelling case for the three central factors that makes land an
attractive asset-class - scope for land value growth, the ability to acquire
freehold land, and the soil quality for farming the land," said James Townshend, the Velcourt chief executive,
and a major shareholder.
Nonetheless, many investors in the past have been dogged by
the difficulty of acquiring land in a country where plots are typically small,
and in multiple ownership, making deals difficult to strike.
Furthermore, the arrival of farmland investors from abroad - other operators there include Copenhagen-listed FirstFarms - has
attracted a backlash in Romania, as in many other countries, and pressure for
limitations on ownership by foreigners.
However, Romania's government, whose room for manoeuvre on farmland
curbs is limited by EU membership, has taken a relatively liberal approach to
agriculture reforms, with priorities including measures to encourage land
consolidation, and the creation of more efficient farms, besides the creation
of a functional land market.
Velcourt has joined up with Mintridge International, an
Eastern European agricultural consultancy, to manage its Romanian business,
which will be open to external investors.
Velcourt says it can offer "multiple projects", of E14m-20m each,
offering investors a potential internal rate of return of 20% over eight years.
The group, based in Herefordshire near the Agrimoney.com offices, was formed in 1967, and in 2011 posted pre-tax profits of £4.6m on £35.3m of sales.