On August 1, Bulgaria sharply increased tariffs on vegetable imports, caving in to pressure from farmers angry about rising imports from the Middle East and neighbouring Balkan countries. This was the first of series of moves aimed at supporting the tarnished Bulgarian agriculture, writes Ivan Vatahov.
Bulgaria has increasingly imported food in recent years as the agricultural sector slipped into chaos due to faltering reforms. Farmers still trying to emerge from the situation are having trouble competing with imports from Turkey, Macedonia and Middle Eastern countries that Dikme declined to single out by name.
Tariffs were increased from 25 per cent of the declared price to 60 per cent for potatoes and from 64 per cent to 75 per cent for peppers. Tomato import tariffs were increased from 30 per cent of the declared price plus 174 euro ($170) a metric ton, to 40 per cent plus 200 euros ($196) a ton.
Dikme said that next month the Government would raise the tomato import tariff once again, to 60 per cent plus 298 euros ($293) a ton.
This is the maximum increase Bulgaria can afford, Dikme said. In his view, the measure meets local market farmers' demand to protect the production of Bulgarian vegetables.
"Such a measure is applied for the first time in this country," Dikme said. The customs duty is set by taking into account the percentage ceiling prescribed by the World Trade Organisation and Bulgaria's agreement with the European Union.
Having long cast itself in the role of defender of the farmers, the Bulgarian Socialist Party (BSP) was the first to raise the question of supporting the farmers. The BSP's main concern is one shared by others, the purchase price of wheat. According to Prime Minister Simeon Saxe-Coburg, in 2002 Bulgaria produced about 4.5 million tons, which is a record for the country since the start of the democratic transition. Overproduction led traders to cut the purchase price of wheat to levels so low as to anger producers.
A protective customs policy on agriculture is needed, and the state contingency reserve should take an active part in wheat purchase and should help balance demand, MPs from BSP said at the end of July.
The price crisis was caused by a number of factors, they said. The market for agricultural products is overly speculative, and the state, customers and producers cannot cope with the pressure exerted by middlemen.
Last Thursday, Parliament began the procedure for adopting the country's first law giving subsidies for the export of agricultural production. Under the law, the Agriculture Ministry will be able to intervene in wholesale fruit and vegetable markets to influence prices. The state will also subsidise farmers and set minimum prices for wheat, milk and other sensitive products.
In fact, the state undertakes to promote the development of the food industry and the rural areas, and to help producers of quality processed and unprocessed farm produce. The bill entitles producers of unprocessed farm products to state subsidies, an option currently available only to processors of agricultural goods and applicants for financing under the EU SAPARD Programme.
A BSP proposal envisages that the Government should by July 31 each year set a low-end purchase price for wheat, milk and other staple agricultural goods. The proposal is expected to come into force in 2003. The safeguard purchase price will not exceed 85 per cent of the lev equivalent of the average export price of the respective products registered over the three preceding years, the proposal envisages.
Under an agreement with WTO the state has the capacity to subsidise the exports of wheat by about 2.39 million euros annually. The introduction of export subsidies will boost the buyout of grain from the new crop and will speed up export of wheat thus relieving the pressure upon home market players, Sofia Commodity Exchange executive director Hristo Milenkov said. Despite the experts' optimistic forecasts it is not yet clear how the subsidy mechanism will work. The state will be involved in the grain market through the state subsidies and through the state reserve fund.
The introduction of grain export subsidies targets a total production of 5 million tons of wheat in 2002 and an estimated export of 1.5 million tons. After the farmers'protests in Dobrich, northeastern Bulgaria, Dikme acknowledged that there was no market for the grain. He pointed out, however, that the introduction of minimum buyout prices of grain, as the producers want, is not possible, because it contradicts the market logic.
The pressure coming from farmers is serious. The state should intervene immediately on the grain market, purchasing 50,000 to 100,000 tons for the contingency reserve at a minimum price of 170 to 175 leva a ton at least as a token gesture, representatives of the Bulgarian Association of Farmers and the National Farmers Union of Grain Producers told a news conference last Tuesday. In their view, this will ease the tension created on the market by the overproduction of grain.
Farmers also insist that the state tighten customs and border controls to prevent the smuggling of milling wheat and fodder grain and to be more efficient in seeking external markets.
Milk producers from the Independent Association of Milk Producers also added pressure by circulating an "obituary" of Bulgarian agriculture. They warned that on October 1 they would stage a protest in front of the Ministry of Agriculture and Forestry. They consider their purchasing prices low, too.
No matter what protective measures the state introduces, however this could not have a long-term effect and the farmers themselves have to change their attitude at the market. Recent analyses show that agriculture producers are not efficiently using the support of State Agriculture Fund and the money coming from EU programmes like SAPARD.
Therefore, another move that the Government is planning could be the step in the right direction.
The State Agriculture Fund will start extending direct subsidies for grain, milk, potato farming, livestock breeding and the planting of perennial crops from 2003, a Government strategy for Bulgarian agriculture for the period 2003 to 2006 envisages. The strategy will be submitted to Parliament in the autumn of 2002.
The size of the subsidies for grain production will be calculated on the basis of the area of arable land sown under grain crops and subsidies will be extended only for premium quality grain. Aid for potato farmers will be calculated on the basis of the area of the farms and will depend on the region where the potatoes are grown.
Funding from the Agriculture Fund is currently extended to grain producers for buying seeds, fertilisers, plant protection chemicals and fuel, and for the storage of grain at licensed public warehouses.
Subsidies will also be available from 2003 for the production of quality seed grain. The strategy will entitle sheep and goat milk producers to state subsidies from 2003. Only producers of cow and buffalo milk currently receive Government subsidies. The size of the subsidy for milk production will be tied to the number of animals bred and producers will be required to meet strict hygiene standards.
An option for extending state subsidies for the planting of perennial crops including vineyards, orchards, strawberry and raspberry fields, essential oil crops and herbs is envisaged in the strategy. The subsidies will be dependent on the availability of funds and will be paid out until the first harvest is gathered.
Financial support is currently available only for restoring fields, which have previously been planted with perennial crops, and not for new plantations. Domestic production of red peppers might also be included in the list of sectors entitled to state financing if there is a surplus of resources in the fund's budget after 2003.
Bulgaria has increasingly imported food in recent years as the agricultural sector slipped into chaos due to faltering reforms. Farmers still trying to emerge from the situation are having trouble competing with imports from Turkey, Macedonia and Middle Eastern countries that Dikme declined to single out by name.
Tariffs were increased from 25 per cent of the declared price to 60 per cent for potatoes and from 64 per cent to 75 per cent for peppers. Tomato import tariffs were increased from 30 per cent of the declared price plus 174 euro ($170) a metric ton, to 40 per cent plus 200 euros ($196) a ton.
Dikme said that next month the Government would raise the tomato import tariff once again, to 60 per cent plus 298 euros ($293) a ton.
This is the maximum increase Bulgaria can afford, Dikme said. In his view, the measure meets local market farmers' demand to protect the production of Bulgarian vegetables.
"Such a measure is applied for the first time in this country," Dikme said. The customs duty is set by taking into account the percentage ceiling prescribed by the World Trade Organisation and Bulgaria's agreement with the European Union.
Having long cast itself in the role of defender of the farmers, the Bulgarian Socialist Party (BSP) was the first to raise the question of supporting the farmers. The BSP's main concern is one shared by others, the purchase price of wheat. According to Prime Minister Simeon Saxe-Coburg, in 2002 Bulgaria produced about 4.5 million tons, which is a record for the country since the start of the democratic transition. Overproduction led traders to cut the purchase price of wheat to levels so low as to anger producers.
A protective customs policy on agriculture is needed, and the state contingency reserve should take an active part in wheat purchase and should help balance demand, MPs from BSP said at the end of July.
The price crisis was caused by a number of factors, they said. The market for agricultural products is overly speculative, and the state, customers and producers cannot cope with the pressure exerted by middlemen.
Last Thursday, Parliament began the procedure for adopting the country's first law giving subsidies for the export of agricultural production. Under the law, the Agriculture Ministry will be able to intervene in wholesale fruit and vegetable markets to influence prices. The state will also subsidise farmers and set minimum prices for wheat, milk and other sensitive products.
In fact, the state undertakes to promote the development of the food industry and the rural areas, and to help producers of quality processed and unprocessed farm produce. The bill entitles producers of unprocessed farm products to state subsidies, an option currently available only to processors of agricultural goods and applicants for financing under the EU SAPARD Programme.
A BSP proposal envisages that the Government should by July 31 each year set a low-end purchase price for wheat, milk and other staple agricultural goods. The proposal is expected to come into force in 2003. The safeguard purchase price will not exceed 85 per cent of the lev equivalent of the average export price of the respective products registered over the three preceding years, the proposal envisages.
Under an agreement with WTO the state has the capacity to subsidise the exports of wheat by about 2.39 million euros annually. The introduction of export subsidies will boost the buyout of grain from the new crop and will speed up export of wheat thus relieving the pressure upon home market players, Sofia Commodity Exchange executive director Hristo Milenkov said. Despite the experts' optimistic forecasts it is not yet clear how the subsidy mechanism will work. The state will be involved in the grain market through the state subsidies and through the state reserve fund.
The introduction of grain export subsidies targets a total production of 5 million tons of wheat in 2002 and an estimated export of 1.5 million tons. After the farmers'protests in Dobrich, northeastern Bulgaria, Dikme acknowledged that there was no market for the grain. He pointed out, however, that the introduction of minimum buyout prices of grain, as the producers want, is not possible, because it contradicts the market logic.
The pressure coming from farmers is serious. The state should intervene immediately on the grain market, purchasing 50,000 to 100,000 tons for the contingency reserve at a minimum price of 170 to 175 leva a ton at least as a token gesture, representatives of the Bulgarian Association of Farmers and the National Farmers Union of Grain Producers told a news conference last Tuesday. In their view, this will ease the tension created on the market by the overproduction of grain.
Farmers also insist that the state tighten customs and border controls to prevent the smuggling of milling wheat and fodder grain and to be more efficient in seeking external markets.
Milk producers from the Independent Association of Milk Producers also added pressure by circulating an "obituary" of Bulgarian agriculture. They warned that on October 1 they would stage a protest in front of the Ministry of Agriculture and Forestry. They consider their purchasing prices low, too.
No matter what protective measures the state introduces, however this could not have a long-term effect and the farmers themselves have to change their attitude at the market. Recent analyses show that agriculture producers are not efficiently using the support of State Agriculture Fund and the money coming from EU programmes like SAPARD.
Therefore, another move that the Government is planning could be the step in the right direction.
The State Agriculture Fund will start extending direct subsidies for grain, milk, potato farming, livestock breeding and the planting of perennial crops from 2003, a Government strategy for Bulgarian agriculture for the period 2003 to 2006 envisages. The strategy will be submitted to Parliament in the autumn of 2002.
The size of the subsidies for grain production will be calculated on the basis of the area of arable land sown under grain crops and subsidies will be extended only for premium quality grain. Aid for potato farmers will be calculated on the basis of the area of the farms and will depend on the region where the potatoes are grown.
Funding from the Agriculture Fund is currently extended to grain producers for buying seeds, fertilisers, plant protection chemicals and fuel, and for the storage of grain at licensed public warehouses.
Subsidies will also be available from 2003 for the production of quality seed grain. The strategy will entitle sheep and goat milk producers to state subsidies from 2003. Only producers of cow and buffalo milk currently receive Government subsidies. The size of the subsidy for milk production will be tied to the number of animals bred and producers will be required to meet strict hygiene standards.
An option for extending state subsidies for the planting of perennial crops including vineyards, orchards, strawberry and raspberry fields, essential oil crops and herbs is envisaged in the strategy. The subsidies will be dependent on the availability of funds and will be paid out until the first harvest is gathered.
Financial support is currently available only for restoring fields, which have previously been planted with perennial crops, and not for new plantations. Domestic production of red peppers might also be included in the list of sectors entitled to state financing if there is a surplus of resources in the fund's budget after 2003.
