August 10, 2009

Bulgarian farmers harvested the most expensive wheat for the first time in 20 years.

At 295 kilograms per decare on average, the prime cost of a tonne of wheat will have a producer price of between BGN270 (Bulgarian Leva) (US$196.50) and BGN280 (US$203.42), which is higher than the market price and may push many farmers to the brink of collapse.

Radoslav Hristov, chairman of the National Grain Producer Association (NGPA) said the situation is critical for many farmers and will find it difficult to offset the losses with other production. Only those that have harvested more than 350 to 400 kilograms per decare will stay afloat, he said.

Preliminary estimates put the harvest at around 3.1 million tonnes, a 1.2 million tonnes increase from the previous year. Lab analysis on grain quality should come out next week but experts have mitigated concerns that Bulgaria's bread supply hangs by a thread.

Farmers blamed the skyrocketing production costs on the spike in fertiliser and fuel prices in the autumn and the winter. January's gas row between Moscow and Ukraine almost doubled the cost of the produce right at the time of fertilisation, with ammonium nitrate topping out at BGN 670 per tonne, a farmer said.

The trouble was multiplied by harsh weather that sank both yields and quality, driving down wheat buyout prices. Fodder wheat now sells for BGN 180-200 per tonne, while scanty grain is purchased for BGN 200 to 250 per tonne.

The Bulgarian wheat market takes its cue mostly from commodity prices in Russia and Ukraine, which have seen a sharp drop this year.

Farmers fear that they will be short of cash to prepare for autumn sowing and the industry association is pinning its hopes on the new government to provide the entire national subsidies added to European payments. The Cabinet has earmarked BGN 150 million, which will rise by BGN 167 million provided it surpasses its budget target.

US$1 = BGN1.37 (August 10)