Few countries have seen as much change in so short a time as Bulgaria. From a communist-run nation of southeastern Europe, it has gone, in the space of 20 years, to being an E.U. member state with a fast growing economy. The same period has brought major changes for its predominantly arable farming sector.

The International Grains Council (IGC) put Bulgaria’s total grains crop in 2009 at 5.5 million tonnes, compared with 6.4 million in 2008, noting that early summer rains had adversely affected quality in 2009. It put the Bulgarian wheat crop in 2009 at 3.5 million tonnes, compared with 4.4 million in 2008. Bulgaria’s maize crop is unchanged at 1.2 million tonnes, with barley at 800,000 compared with 700,000 in 2008.

Cereals and oilseeds play a dominant role in Bulgarian agriculture. According to information supplied to World Grain by the European Commission in 2004, 58% of arable land was used for cereal production in 2004, with 19%, or 600,000 hectares, used for oilseeds.

According to the Commission, the largest farms specialize mainly in cereals and industrial crops (mainly sunflower). The 2003 census showed 54% of the cereals area and 58% of the industrial crop area as being on large farms.

The same data also showed that cooperatives grow almost 42% of cereals and 47% of oilseed crops. What it calls "agro-companies" grow 17% of cereals and 18% of oilseeds.

It identifies a productivity problem caused by a low level of mechanization, as well as the use of low quality seeds and poor varieties and poor management. Because machinery was in short supply, labor productivity was low. In 2004 there were 32,000 tractors and 10,000 harvesters in Bulgaria and much of the farm machinery was worn out.

The E.U. has put in place a rural development program with a budget of 3.242 billion euros to be spent from 2007 to 2013. However, there have been sharp criticisms of corruption in the way the money has been used. On Sept. 29, the Minister of Agriculture and Food, Dr. Miroslav Naydenov, announced that "all necessary action is taken to put an end to corrupt practices under the Program for Rural Development 2007-2013."

He said he had fired the director of the Rural Development Directorate, Miroslava Georgieva, and was awaiting the results of further investigations. "These checks comprise all the activities of the directorate, and if any officers are found to be involved and being liable under the Criminal Code, they will be forwarded to the prosecutor’s office," a statement from the ministry said.

Minister Naydenov said that the administrative and personnel changes will ensure the interruption of any corrupt practices under the program. In the same week, the National Audit Office launched an audit of the Agriculture State Fund. The European Commission is carrying out its own audit for the previous year.

Peter Hristov, secretary of the Union of Bulgarian Millers, described the benefits to agricultural producers of E.U. membership as significant. "There are real opportunities for modernization of production," he said in an email response to questions from World Grain. "Opportunities are created to modernize the processing of agricultural raw materials," he said. There are funds to improve staff training and qualifications.

MILLING OVERCAPACITY

The amount of actual milling going on in Bulgaria is way below the theoretical capacity of the mills. According to Peter Hristov, they could process 2.9 times the country’s actual needs. At present, 146 of the 369 mills in existence are working with a capacity of 2.3 million tonnes. They could process 1.9 times actual demand, which means they are working at 52.17% of actual capacity. He described competition in the industry as acute.

In 2008-09, around 327 tonnes of special flour for croissants were imported from Greece, Italy and France.

He put the wheat crop in 2009 at 3.65 million tonnes. In 2008-09, Bulgaria’s biggest export market was Spain, followed by Romania, then Greece.

There are some big milling companies.

By far the largest is Sofia Mel with a capacity of 750 tonnes a day. Mill Sliven can process 300 tonnes a day, while Mill Varna and Goliam Dobr. Mill and Koop Simid-1000 all have a 250-tonne-a-day capacity. There are 42 milling companies listed by the millers’ association with a capacity of over 100 tonnes a day.

The milling industry faces a wide range of problems. The low quality of the wheat produced in Bulgaria means that flour millers have to put in additives, adding to costs. The problem could be dealt with by subsidizing seeds to farmers, but what has been done so far has not been enough. That means that only around 50% of area is sown with quality seed.

He also criticized the major role played in the flour milling industry by the socalled "gray" milling sector, which he reckoned accounts for 35% to 40% of production. These are mills which don’t pay tax or social security, something which he said cost the country 25 million leva in VAT (sales tax) alone. "This shady business constitutes unfair competition," he said. He called for political will from the government to deal with it.

At the same time, he complained that the rate of Value Added Tax was high at 20%. The Union of Bulgarian Millers has been pressing for a preferential rate of 8% to 9% for food, which is along the lines of the system in most E.U. countries. The high VAT rate is one of the main reasons which the gray part of the industry exists, he said.

BIOFUELS SLOWLY GETTING GOING

So far, biofuels have been slow to get off the ground, although the European Commission believes that the potential is there. "Renewable energy projects are financed by the National Rural Development Program, which is applicable to all projects related to investment in rural areas," the USDA said as part of a report on the sector E.U.-wide earlier this year. "No other special funds for biofuels exist."

As part of the E.U., Bulgaria is committed to biofuels use targets and has to supply a report on the sector each year. "The use of biofuels in the country is still negligible," it said in its report for

2008. "On the basis of preliminary information from the Ministry of Economy and Energy, in 2008 a total of 1,939 tonnes of biodiesel were produced, out of which 1,898 tonnes were used within Bulgaria and 138 tonnes were exported." This was not enough to hit the country’s target for that year of 2% of fuel consumption being from biofuels.

The report blamed, among other things, the failure to establish tax incentives or to set quality control standards.

When the report was prepared, there were already installations in place to produce around 100,000 tonnes of biofuels, with plans for an installation producing 594,000 tonnes of biodiesel and 55,000 tonnes of ethanol for 2008, followed by another with a capacity of 415,000 tonnes of biodiesel and 55,000 tonnes of ethanol in 2010 and a further plant producing 448,000 tonnes of biodiesel and 107,000 tonnes of ethanol in 2020. "These capacities would exceed the quantities of biofuels necessary for the achievement of the national indicative targets of Bulgaria several times over," it said.

Despite the slow progress made, the Ministry of Economy and Energy, which drew up the report, is enthusiastic. "For Bulgaria, biofuels represent an alternative to petrol and diesel fuels which allows the dependency on the import of fuels to be reduced and contribute to the security of energy supplies," it said. Renewable fuels would create jobs and make better use of arable land.

Chris Lyddon is World Grain’s European editor. He may be contacted at: