Review of Bulgarian Agriculture in 2012

Nikolay Valkanov

In the beginning of 2013 the realities of the past year in agriculture are starting to take shape in the first estimates released by the National Statistical Institute (NSI). The data on agriculture and fishery containing data from the official census of European farms in 2010 recently released by Eurostat allows us to compare the development of the sector in comparison with EU-27.

In the past 2012 subsidies in the agricultural sector skyrocketed and have reached record levels (BGN 1.08 bln. according to NSI). In 2012 we have also witnessed a deepening of the processes which have been underway in Bulgarian agriculture – a growing share of crop farming and especially corn production. A temporary correction observed is the decline of the share of industrial crops (because of the bad weather conditions this summer) and the meager growth of livestock breeding. Land leasing expenditures continue to grow (with a yearly rate of 8% according to NSI preliminary estimates) due to increasing subsidies based on arable land and competition for leasing land. Entrepreneurial income from agriculture is growing rapidly – at a yearly rate of 10.7% according to preliminary data – but it is still below its 2001 levels and far below its 2008 levels (when food prices hit new record levels). Basic capital investments have been decreasing for the past two years.

Value of production

Gross value added and the value of the final produce in agriculture have been growing in 2011, respectively by 3.8% and 1.8%, but the sole reason for this is the increase in prices and not an increase of production volumes. The highest growth is in the value of crops, the reason for this is mainly the increased prices of wheat. In the industrial crops sector sunflower seed does not manage to cover completely the losses of rapeseed production. The value of produce in vegetable production keeps declining.

The value of produce in the livestock breeding sector has been growing by about 4%; all main groups show growth – large farm animals, pigs, sheep, goats and birds. This is also likely to be a case of a price effects.

Income

Factor income (income that measures remuneration of all factors of production – labor, land and capital) has been growing by 9.8% in 2012 in comparison with last year, which is primarily due to higher prices of the produce as well as the increasing subsidies in the sector (an increase of over BGN 190 mil.). This income is distributed as follows – employees’ income has increased by 5.6% (current prices), land owners income by 8.1%, net entrepreneurial income has grown by 10.7%.

Bulgarian agriculture has one of the fastest growing factor incomes in EU-27 (second only to those of Estonia, Hungary and the Czech Republic) for the 2005-2011 period, as is shown by Eurostat data.

Concentration of land and capital

Fast growing income however does not mean that all employed in agriculture enjoy growing wealth. The single-area payment scheme stimulated cereal and oilseed production and led to concentration of wealth in these subsectors. Eurostat data show that 5490 farms (a mere 1.5% of all farms) use 82% of agricultural land in Bulgaria, which counts for an average of 672 ha per farm. They possess the main financial resources – in both terms of production value and amount of subsidies received.

Declining livestock breeding

Unlike corn production, for instance, where land is concentrated in big farms, in the livestock breeding subsector the situation is quite the opposite. Compared to the other EU member states, there is a large fragmentation; under a quarter of the livestock is concentrated in large farms, while about 30% are distributed in farms with less than 4000 euro income per year. Bulgarian and Romania are the only countries in the Community with average yearly milk production of less than 4000 liters per cow (as compared with an average of 6457 liters for the EU). This indicates a serious necessity of investment for improvement of the livestock herds. Bulgaria, together with the Baltic states and Slovakia also has the lowest density of livestock (especially if compared to the size of pastures as part of agricultural land).

The role of subsidies

The focus on growing corn and oilseeds and the decline of livestock breeding, vegetable growing and fruit production is a result of the single-area payment scheme. According to Eurostat data, Bulgaria is one of the countries where subsidies have no positive effect on the gross value added produced in the agricultural sector.

Source: Eurostat

Our forecasts for 2013 state that if there is a better harvest on a global level, resulting in a drop of the prices of the main cereal and industrial crops, the income of farmers may decline. Especially if it happens to be a bad agricultural year for Bulgaria, this will definitely lead to a decline in the sector. A possible decline of the price of fodder will allow livestock breeders some freedom to operate, but this is not likely to improve the overall state of the sector. Additional tensions are expected in the “milk” subsector because of its low competitiveness in comparison with the rest of the EU countries as well as the new regulations imposed on milk production.