The Financial Times

by Andrew MacDowall

Bulgaria’s farm sector has started to look up after years of under-investment and fragmentation, with export-oriented agro-industry doing well and smaller farms seeing opportunities to sell quality produce abroad.

But damage wreaked during the 1990s is still far from repaired, holding the country’s farmers back from achieving their potential.

The country’s agro-industry is focused on grain, especially in the Dobrudzha region which has been a European breadbasket for thousands of years. Bulgaria exports around 2.5m tonnes of grain a year – not bad for a small country.

On the other hand, Bulgaria’s cattle herd has halved since the fall of communism, from 632,359 in 1989 to 314,900 last year, according to local press reports cited by Reuters. The drop is a symptom of the decline in agriculture and the depopulation of parts of the countryside as the economy has gone through a troubled transition.

Agriculture generated 3.64bn levs (.4bn) in 2011, or 5.6 per cent of GDP before adjustments, according to the Bulgarian National Bank. But this understates the sector’s importance outside Bulgaria’s main population centres, particularly now that many small-town industries have died out.

One result of the break-up of communist-era collective farms in the 1990s is the current fragmented state of landholdings. In that decade, with a few exceptions, farming and agro-industry (like most of the country) was starved of investment, both public and private. Things have started to pick up over the past ten years as the economy has recovered and EU funds have come on tap, with Bulgaria’s competitive advantages in agriculture making their mark. But many small farmers continue to struggle – and low levels of absorption of that EU cash continue to hamper recovery.

“Bulgaria has the natural resources in terms of land,” says one Israeli investor in Bulgarian agriculture who asked not to be named. “It also has a very good location for exports, on the Black Sea and the Danube, and a good agricultural tradition. But the biggest issue is consolidation of ownership – land is in small plots and it’s very hard to buy large areas of land.”

He adds that the 1990s were “lost years” from which Bulgaria is still recovering.
“Privatisation was done very uneconomically. There used to be great facilities in many cooperatives but most have been destroyed – though there are a few remaining ones that are very successful.”

As for the plummeting number of cattle, one simple explanation is that so many were eaten during the post-communist crisis years.

Evgeniy Spirov, who owns a cattle and sheep farm in central Bulgaria, says he thinks the actual decline in numbers since 1989 may be more than 50 per cent.

“The reasons are complex,” he says, “starting from the very beginning when the large cooperative farms were closed and the cattle were turned back into the hands of numerous small owners who had neither the intention nor the means to look after them. Even if they wanted, the non-privatised meat-processing state enterprises were so inefficiently and corruptly governed that this affected everyone further back in the supply chain until privatisation started in 1998. So the logical end for the cattle was in the slaughterhouse, either locally or overseas.”

He also points out that Bulgaria is not really a beef-eating culture, Bulgarians preferring pork, chicken and (in season) lamb. Only in recent years have they started to show an interest in quality beef.

But despite low domestic demand, Spirov says Bulgaria has potential as a quality meat exporter.

“We have more meadows for cattle breeding and a much lower cattle headcount,” he says. “This makes room for free-range cattle breeding that is unique for Europe. Bulgaria’s proximity to the Middle East is a great advantage for export of high-quality beef and lamb.”

Spirov says the current system of EU subsidies is slanted towards large-scale but low-value-added grain production, and should be restructured to encourage the cultivation of high-value crops — such as Bulgaria’s once-famous roses and their byproducts — and livestock farming.

Companies such as Bio Bulgaria, owned by Bulgarian tennis legend Magdalena Maleeva, are pioneering the export of high-quality organic produce. But these remain niche enterprises, which for the foreseeable future will co-oexist with considerably larger agro-industry. At least, after all those lost years, investments are coming in.

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