Voluntary Report - public distribution

**Date:** 8/27/2007

**GAIN Report Number:** BU7025

BU7025

**Bulgaria**

**Grain and Feed**

**Grains and Oilseeds Update**

**2007**

**Approved by:**

![](media/image1.wmf)Susan Reid

U.S. Embassy

**Prepared by:**

Mila Boshnakova

**Report Highlights:**

The food and feed deficit in Bulgaria has further deepened in August
with an anticipated 50 percent reduction in the corn crop and a more
than 30 percent decline in the sunflower crop. Lower stocks and lack of
price competitive alternatives for imports are driving all staple food
prices upward. In MY07/08, corn imports are most likely to come from
Hungarian intervention stocks and/or Latin America. In July, Bulgaria
exported 43,000 MT of barley to non-EU destinations. Reportedly, most
cross-border trade in wheat will be with Greece and Romania.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Sofia \[BU1\]

\[BU\]

#  

[Supply 3](#supply)

[MY07/08 crop estimates 3](#my0708-crop-estimates)

[Fall planting, MY08/09 3](#fall-planting-my0809)

[Trade 3](#trade)

[Exports and Imports 3](#exports-and-imports)

[Stocks 4](#stocks)

[According to government sources, grain and oilseed stocks as of July
are: 150,000 MT of wheat; 80,000 MT of corn; 30,000 MT of sunflower.
These figures do not include on-farm stocks Intervention Agency
4](#according-to-government-sources-grain-and-oilseed-stocks-as-of-july-are-150000-mt-of-wheat-80000-mt-of-corn-30000-mt-of-sunflower.-these-figures-do-not-include-on-farm-stocks-intervention-agency)

[Intervention Agency 4](#intervention-agency)

[Prices 4](#prices)

[Domestic support 5](#domestic-support)

[Table 1. Grain and oilseeds official production estimates, 2007, HA and
MT
6](#table-1.-grain-and-oilseeds-official-production-estimates-2007-ha-and-mt)

[Table 2. Exports of wheat and wheat flour, MY2006/2007, MT
6](#table-2.-exports-of-wheat-and-wheat-flour-my20062007-mt)

[Table 3. Barley exports in MY2006/2007, and from July 1 to July 30,
2007, MT
6](#table-3.-barley-exports-in-my20062007-and-from-july-1-to-july-30-2007-mt)

[Table 4. Corn exports in MY05/06 and MY 06/07 (until July 30), MT
7](#table-4.-corn-exports-in-my0506-and-my-0607-until-july-30-mt)

[Table 5. Sunflower exports, MY05/06 and MY06/07 (until July 30), MT
7](#table-5.-sunflower-exports-my0506-and-my0607-until-july-30-mt)

[Table 6. Sunflower oil exports, MY05/06 and MY06/07 (until July 30), MT
8](#table-6.-sunflower-oil-exports-my0506-and-my0607-until-july-30-mt)

#   {#section-1 .unnumbered}

# Supply

## MY07/08 crop estimates

In July and August, the grain deficit has deepened further in
anticipation of final crop estimates for corn, rapeseeds and sunflower.
(See official grain and oilseeds estimates in Table 1). Traders and some
farm groups continue to argue that wheat crop was lower than the
official figure, at 1,850,000 MT.

There are still no official government estimates for corn and sunflower.
Corn estimates vary widely, from 200,000 MT (industry sources) to
800,000 MT (government sources). This is compared to previous April
estimates of about 1.5 MMT. According to farm groups, half of corn areas
are completely killed by drought, and the other half will produce very
low yields. In major production regions, 28 percent of corn crop is in
mediocre condition while 72 percent is in bad condition. Corn yields are
likely to vary from zero to 2.0 MT/HA. The prevailing opinion is that
corn crop will be half or less of the previously expected. The AgOffice
current estimate is at 600,000 MT. Corn deficit is seen as critical, and
with the highest negative effect on the meat, dairy and poultry sectors.

Sunflower crop is also affected by drought but as a more resistant crop,
the damages are less. Experts estimate average yields at 0.6 MT/HA to
1.2 MT/HA, thus local production is likely to be between 550,000 MT and
730,000 MT. AgOffice current estimate is at 650,000 MT. In major
production areas, 25 percent of sunflower crop is severely hit, the
remaining 75 percent are in relatively good condition. According to
first reports, quality of sunflower is not very good, the fat content is
lower and the percent of foreign matters is higher than usual.

## Fall planting, MY08/09

Farmers from the major grain region, Dobrudja, have voiced their concern
about lack of soil moisture in the surface and sub-surface levels, up to
2 meters depth. Fall planting is in serious danger if no rainfall comes
until September. If drought continues, a catastrophe in fall supplies is
very likely (see also Domestic Support section).

# Trade

## Exports and Imports

*Wheat:* According to Union of Feed Manufacturers, about 200,000 MT of
MY07/08 wheat crop is being sold and/or will be sold in the near future
to Greece and Romania. Official Customs data shows no exports for July.
The State Reserve made an announcement for purchase of 150,000 MT
imported wheat but no actual actions have been taken yet. Traders do not
report any intentions for commercial imports and are waiting to see
Russian and Ukrainian final crop figures and export decisions. In
MY06/07, Bulgaria exported 1.010 MMT of wheat of which 600,000 MT to the
EU (Table 2).

*Barley:* Barley exports in MY07/08 until end-July were 43,000 MT (see
Table 3), all to non-EU destinations. In the previous marketing year,
total exports were 113,000 MT of which 77,000 MT to EU countries.

*Corn:* Traders and government still do not have clear final estimates
about country's import needs. Importers are looking for imports ranging
from 450,000 MT to 800,000 MT, depending on the harvest results; most
likely origins are Hungary and/or Latin America. The

poultry industry estimates its needs in corn at 550,000 MT, and pork
producers at 480,000 MT, or total 1.030 MMT, much above the expected
crop. Bulgaria will have also higher demand due to expanded starch
processing capacity.

The GOB continued to encourage farmers to actively participate in
tenders for purchase of Hungarian intervention corn. A high level MinAg
delegation visited Hungary to support potential Bulgarian buyers.
Bulgaria also tried to negotiate a special country specific quota.

In MY05/06, corn exports were 438,000 MT of which 132,000 MT to the EU.
In MY06/07 (until end-July), exports were 208,000 MT of which 35,000 MT
to the EU. (see Table 4).

*Sunflower:* Imports of sunflower seeds or crude oil are on the horizon,
from price competitive destinations such as Moldova and Ukraine,
depending on the final harvest results. In MY06/07 (until end-July),
sunflower exports were 612,000 MT of which 243,000 MT to the EU (see
Table 5). In MY05/06, total exports were 326,000 MT of which 168,000 to
EU member states.

## Stocks

## According to government sources, grain and oilseed stocks as of July are: 150,000 MT of wheat; 80,000 MT of corn; 30,000 MT of sunflower. These figures do not include on-farm stocks Intervention Agency

## Intervention Agency

Bulgaria does not have a functioning Intervention Agency yet. There are
approved grain storage facilities but there are no legal regulations,
and the assigned personnel is not trained. The Agency can start
operating by the fall of 2008 for the intervention period November 1-
May 31. Bulgaria has the right to purchase 500,000 MT of grains. The
major challenge remains grain quality control upon purchasing.

The GOB decision (July) to establish a new military reserve under the
Ministry of Internal Affairs including grains, was a surprise for many
observers. Until now, the military reserve was a part of the State
Reserve. In the new situation, it is not clear what will be the future
of storage bases and grain stocks hold by the State Reserve.

# Prices

*Wheat:* Wheat prices reached about 200 Euro/MT for milling wheat, and
170 Euro/MT for feed wheat, as forecasted earlier. In August, wheat
prices have stabilized, and experts think no further sharp increases are
likely. Bread prices also stabilized around 0.85 Euro/kilo.

*Sunflower:* Sunflower harvest started in mid-August and the first lots
are on the market. Crushing plants are rushing to purchase more stocks.
Shorter supply, lack of imports and higher demand for biodiesel have
pushed the price up to 550-600 leva/MT (275-300 Euro/MT) or double than
in 2006. Traders expect prices to reach 340 Euro/MT in the fall/winter.

Sunflower oil prices also soared, and reached 1.40 Euro/liter at the
retail level. This way, crushers hope to accumulate more revenue to
purchase extra stocks. Recent imports of more price competitive Romanian
oil limited only temporarily this price trend. Another reason for the
price rally is "panic" demand -- retailers report that many limited
income consumers buy 12 and more bottles of oil at once, in fear of even
higher prices in the future. The association of crushers warned
consumers that retail prices may reach 2.0 Euro/liter later in the year.

*Compound feed:* Compound feed manufacturers registered 20 percent - 36
percent higher prices compared to a year ago: 32 percent increase for
feed for hogs; 22 percent higher price for feed for broilers and 36
percent more expensive feed for calves.

# Domestic support

In August, the MinAg began to pay compensation to farmers for 85 percent
or more losses (wheat and barley) from drought. Total about 4.0 million
Euro will be paid to 480 farmers covering 18,500 HA of wheat and 6,000
HA of barley, at a rate of 175 Euro/HA of wheat and 150 Euro/HA of
barley.

According to the Paying Agency, funds will be depleted soon and no
compensation can be paid to corn and sunflower growers although losses
are more significant than those of the fall crops.

The MinAg started two new low rate credit lines: for purchase of wheat
seeds (5.0 Euro/HA); and for purchase of fertilizers for wheat
production MY08/09 (20 Euro/HA), at a total value of 20 million Euro.
Farmers, however, are not satisfied with the size of this support. For
example, Dobrudja farmers' union assessed the planting seeds subsidy of
5.0 Euro/HA as very low compared to actual cost of 45-60 Euro/HA. To
date, 2,800 farmers applied under the planting seeds program for 645,000
HA; and about 3,000 farmers applied under the fertilizers program for
794,000 HA.

The National Grain Producers Association sent a declaration to the GOB
appealing for full size subsidy from the national budget paid per
hectare, 60 Euro/HA, and additional funds for covering of spring crops
losses (estimated at 100 million Euro). As of today, the GOB has not
responded to this letter.

An increasing number of experts, traders and some producers have
calculated that total revenue from the wheat crop in 2006 was 260
million Euro (3.0 MMT at 85 Euro/MT) while in 2007, this amount is 415
million Euro (2.2 MMT at 190 Euro/MT). Wheat production declined 26.7
percent but farmer revenue is 63.9 percent higher. Thus, they expressed
their protest against GOB decision to provide drought compensation to
farmers. This micro calculation does not take into account differences
at the farm level.

## Table 1. Grain and oilseeds official production estimates, 2007, HA and MT

  -------------- -------------- -------------- -------------- --------------
  Grain and                                                   
  oilseeds                                                    
  official                                                    
  production                                                  
  estimates,                                                  
  2007, HA and                                                
  MT                                                          

  Crop           Planted Area,  Harvested Area Av. Yield,     Production, MT
                 HA                            MT/HA          

  Wheat          1,045,459      1,003,081      2.11           2,114,867

  Winter barley  173,331        166,335        2.17           360,144

  Spring barley  13,575         9,627          1.64           15,828

  Rye            4,875          3,057          1.53           4,665

  Triticale      4,892          4,800          1.80           8,666

  Rapeseeds      45,308         43,535         1.75           76,286

  Corn           363,833        NA             NA             600,000\*

  Sunflower      663,157        NA             NA             650,000\*

  Source: MinAg                                               
  bulletin as of                                              
  July 23;                                                    
  \*AgOffice                                                  
  estimates as                                                
  of August, 07                                               
  -------------- -------------- -------------- -------------- --------------

## Table 2. Exports of wheat and wheat flour, MY2006/2007, MT

  ----------------- ----------------- ----------------- -----------------
  Exports of wheat                                      
  and wheat flour,                                      
  MY2006/2007, MT                                       

  Wheat                               Wheat flour       

  Romania           93,535            Albania           93

  Greece            27,726            Greece            370

  Spain             516,466           Romania           31

  Tunisia           23,000            Macedonia         10

  Israel            41,847                              

  Portugal          54,711                              

  Phillipines       40,691                              

  Egypt             33,200                              

  India             36,982                              

  Turkey            64,959                              

  Morocco           12,551                              

  Albania           15,269                              

  Algeria           14,234                              

  Total             1,010,393         Total             568

  Inc. EU           606,507           Inc. EU           371
  ----------------- ----------------- ----------------- -----------------

## Table 3. Barley exports in MY2006/2007, and from July 1 to July 30, 2007, MT

  ----------------- ----------------- ----------------- -----------------
  Barley exports in                                     
  MY2006/2007, and                                      
  from July 1 to                                        
  July 30, 2007, MT                                     

  MY 2006/2007                        July 1-30,2007    

  Greece            32,817            Tunisia           10,329

  Israel            15,027            Morocco           7,185

  Spain             28,897            Saudi Arabia      25,000

  Italy             14,316                              

  Syria             14,465                              

  Total             112,813           Total             42,514

  Inc. EU           76,955            Inc. EU           0
  ----------------- ----------------- ----------------- -----------------

## Table 4. Corn exports in MY05/06 and MY 06/07 (until July 30), MT

  ----------------- ----------------- ----------------- -----------------
  Corn exports in                                       
  MY05/06 and MY                                        
  06/07 (until July                                     
  30), MT                                               

  MY05/06                             MY 06/07 (until   
                                      July 30)          

  Italy             12,597            Italy             4,818

  Greece            13,723            Greece            29,935

  Spain             74,265            Spain             4,504

  Portugal          23,000            Albania           5,486

  Macedonia         16,009            Lebanon           2,662

  Romania           24,003            Cyprus            33,564

  Syria             64,252            Syria             3,919

  Israel            30,942            Turkey            100,167

  Tunisia           31,912            Tunisia           16,760

  Egypt             35,018                              

  Algeria           72,159            Algeria           5,761

  Morocco           17,058                              

  Total             437,651           Total             208,228

  Inc. EU           131,703           Inc. EU           34,753
  ----------------- ----------------- ----------------- -----------------

## Table 5. Sunflower exports, MY05/06 and MY06/07 (until July 30), MT

  ----------------- ----------------- ----------------- -----------------
  Sunflower                                             
  exports, MY05/06                                      
  and MY06/07                                           
  (until July 30),                                      
  MT                                                    

  MY 05/06                            MY06/07 (until    
                                      July 30)          

  Turkey            174,236           Turkey            209,954

  Spain             100,174           Spain             68,267

  Romania           10,064            Romania           10,128

  Germany           10,969            Germany           9,903

  Sweden            1,078             Sweden            4,004

  Norway            1,996             Portugal          37,315

  Holland           699               Holland           34,283

  France            5,149             France            61,089

  Finland           4,162             Finland           8,263

                                      Austria           7,098

                                      Hungary           1,371

                                      Pakistan          134,131

                                      Italy             9,446

                                      Morocco           8,025

  Total             325,564           Total             611,810

  Inc. EU           168,442           Inc. EU           243,237
  ----------------- ----------------- ----------------- -----------------

## Table 6. Sunflower oil exports, MY05/06 and MY06/07 (until July 30), MT

  ----------------- ----------------- ----------------- -----------------
  Sunflower oil                                         
  exports, MY05/06                                      
  and MY06/07                                           
  (until July 30),                                      
  MT                                                    

  MY05/06                             MY06/07 (until    
                                      July 30)          

  Macedonia         8,047             Macedonia         9,780

  Serbia and        14,416            Serbia and        9,998
  Montenegro                          Montenegro        

  Albania           2,196             Albania           703

  Turkey            7,577             Turkey            3,624

                                      Kosovo            2,078

                                      Greece            1,218

                                      Spain             5,251

  Total             33,118            Total             33,349

  Inc. EU           459               Inc. EU           6,503
  ----------------- ----------------- ----------------- -----------------