Report Highlights

In 2003 and 2004, Bulgaria continued to be a net importer of pork and beef. Imports are forecast to increase in 2004 to meet the demand, especially in the second half of the year. Currently, demand for pork and high meat prices stimulate imports and encourage farmers to keep their animals in an effort to restore animal numbers which declined as a result of the feed shortage in 2003/2004, especially in the pork sector. The U.S. export opportunities are favorable, both for beef, including high quality beef steaks; and for pork, mainly for processing. Bulgaria allows entry of U.S meats and no additional import requirements are likely before the accession in the EU by 2007.

Executive Summary

Over the last CY2003 and in early-2004, Bulgarian livestock industry faced difficulties related to the grain deficit and higher feed prices. These problems led to bankruptcy of small farms which slaughtered more than usual number of livestock, especially in the pork sector. The number of sheep and goats also decreased significantly due to feed problems, and due to the fact that sheep/lamb meat remained the cheapest meat for rural population, usually consumed on-farm. Especially alarming is the fact that the number of sows, ewes and she goats has declined and possible reproduction potential will be negatively affected in the longer run. A positive sign is the increase in cattle numbers since this sector was not so severely affected by the grain shortage; and due to the fact that the dairy processing sector is developing successfully and stimulates keeping of cows for milk production.

As a result of the above trends, beef production in 2003 was lower and imports increased. Production of pork and sheep meat was close to the projections. Pork imports were traditionally high to meet demand for certain cuts and products, mainly for the meat processing industry. For the first time, the declining sheep numbers and alarming situation in this export oriented sector led to imports of live sheep in an attempt to restore genetic resources and establish more commercially oriented farms.

In 2004/2005, good grain supply and cheap feed are expected to lead to lower slaughter animals in the pork and sheep sectors, and to normal rate of slaughter in the cattle sector. Cattle numbers are likely to stabilize and continue to increase.

In 2004-2005, the livestock and meat industries are to undertake major transformations and restructuring related to new investment in improved breeds; better meat quality; adoption of stringent hygiene practices and food safety standards; and development of new marketing strategies.

As of August 2004, Bulgaria has several EU approved meat facilities: 4 slaughterhouses for red meats (Svishtov, Vratza, Silistra, Shoumen); 9 slaughterhouses and processors of poultry meat (mainly for ducks and geese); and 5 meat processing facilities for red meats. In addition, Bulgaria has 2 EU approved facilities for game meat and 4 seafood facilities (2 for caviar and 2 for fish).

The EU sanitary and hygiene requirements for the meat processing facilities become mandatory for the Bulgarian industry in 2005. The HACCP is also a required food safety system from January 1, 2006 for industrial facilities and from January 1, 2007 for smaller facilities. These requirements are included in the negotiation agreements under Agriculture Chapter and based on the new EU directives 852/2004, 853/2004 and 854/2004. The Association of Meat Processors (AMP) in Bulgaria will start developing generic HACCP plans for smaller facilities and will assist them in their implementation.

The National Veterinary Service (NVS) together with EU inspectors will increase the number and level of detail of vet inspections. Thus, many of the facilities which will not be able to meet the EU requirements, will be shut down in 2005 and in 2006. In the second half of 2004, EU will make site visits and inspections in country on the following topics: red meat facilities; identification of livestock; animal health; humane attitude towards animals; import control and border inspection points; and food hygiene.

It is expected that due to the new EU rules, the use of MDM, MSM and trimmings under 100 grams will be banned for use in meat products by 2005/2006. This change will have a significant effect on meat imports since trimmings account for a major portion of imports (more than 50 percent).

Meat imports in CY2003 were stable, at CY2002 level, (41,000 MT of which 19,000 MT of pork and 22,000 MT of beef), as more beef was imported due to lower local production, and less pork was imported due to higher slaughter rates. Imports of processed meat products and meat foods also stayed stable at 33,000 MT-34,000 MT. There was higher demand for certain pork cuts for processing. The forecast for CY2004 and CY2005 is for higher imports, both for pork and beef, due to lower slaughter rates, and higher local meat prices. Some imports of sheep meat are also possible due to declining supply. Only in July 2004, Bulgaria imported record high amount of pork meat under double zero EU quota, 9,000 MT, compared to the usual rate of use of this quota, 3-4 months, in the past.

The United States meat market share in CY2003 was about 9 percent for pork (1,646 MT) and 6 percent for beef (1,353 MT), compared to 12 percent (2,082 MT) in pork and less than one percent in beef, respectively, in 2002.

Despite the BSE temporary import ban on the State of Washington (December 26, 2003 - February 6, 2004 ) Bulgaria continued to allow entry of US beef steaks for HRI consumption and hotel promotions. In 2004, three major US beef promotions take place (May, June, September) in Sofia hotels. Currently, quality U.S. beef steaks are offered in the top six hotels/restaurants.

The prospects for U.S. meat, both beef and pork for processing, as well as higher quality beef steaks for direct consumption, are very good. Since 2002, Bulgarian NVS agreed with USDA/FSIS on new import certificates for U.S. meat and meat products which will allow entry of U.S. meats until Bulgaria becomes a full member of the EU (by 2007). Slowly but steadily increasing consumer income as well as development of the food service sector and tourism will continue to stimulate demand for more and better quality meats.

General

The data in the PSD table for animal numbers was revised based on official GOB statistics and industry data for stocks as of end-November 2003 – January 2004 (see cattle section). AgOffice numbers used in this report are supported by industry groups and independent consultants and experts.

In 2003, short feed supply discouraged most small medium size pork farmers to keep their animals. The pork sector, in general, was the hardest hit compared to the cattle/beef sectors. At the end of 2003, the MinAg reported 8 percent decrease in total swine numbers and 10 percent reduction in sows numbers. Estimated slaughtering was close to the expected (1,900,00 head vs 1,934,000 head). The 2003 pork production was slightly lower than expected due to lower average live weight at slaughter (most slaughter was done at small farms). The birth rate used in PSD table is 18.5 for the three consecutive years. The number of slaughtered animals is a remaining figures after deduction of the loss rate which is estimated at 10 percent to total supply.

After slightly lower but in general stable local pork supply in the first half of 2004, pork meat shortage in June-August was very serious and meat prices are skyrocketing. As a result, after relatively stable pork imports in 2003 (compared to 2002), an increase in imports in the second half of 2004 are very likely. The EU double zero import quota for 9,000 MT was used for less than one month. The Association of Meat Processors declared that the pork shortage is estimated at 10,000 MT and that the industry will request an immediate reduction of import duties or introduction of a TRQ as soon as September 2004. Pork imports in 2004 and 2004 are forecast to higher level due to local shortages.

The major risk the pork farms face today is the restructuring in order to introduce improved breeds in line with the EU requirements, and in order to meet carcass classification EUROP. Pork farms should be licensed by 2007 based on the EU regulations, otherwise they will not be able to work even on the local market. According to the Association of Pork Producers, local pork farms are not ready yet for this restructuring. They estimate their investment needs of about 2.0 million Euro for a farm of 1,000 sows (2,000 Euro per a sow). This is a very high amount which only a few commercial operations will be able to afford. The Association claims that current high pork prices compensate the loss of the sector in 2003, and it is needed to provide higher profitability and revenue to farms in order to make the necessary investment.

Another challenge to the pork sector is the lack of export opportunities due to termination of mandatory vaccination against the classical swine fever. Until Bulgaria will not terminate vaccination, the country will not be able to export pork to the EU.

Production

As of May 2003, the MinAg reported an increase in the number of animals with the most significant increase in the number of pigs for fattening. However, after the feed deficit in the second half of the year, the slaughter rate has been higher which led to reduction in numbers by end-2003. It is likely that the current 2004 good feed crop and cheaper feed will led to lower slaughtering and eventual increase in total hog numbers by end-2004.

Commercialization in the pork sector is the highest compared to other red meat sectors. Commercial pork farms are 1.7 percent of total farms and account for 40 percent of total swine. Pork farms with over 200 sows are about 1.0 percent of total farms and they account for 33 percent of total sows (see the two tables).

Production Factors

Animal health
In 2004, to date, there was one outbreak of classical swine fever (CSF) in May in Bourgas region. Three farmers had 57 sick pigs which were liquidated. The MinAg banned trade in live pigs and any livestock movement in the region. The ban was lifted in July 2004.

In 2004, Bulgaria started to introduce EU required termination of mandatory preventive vaccination which was the reason for EU to ban Bulgarian pork exports to EU member states.

In 2005, Bulgaria has to start to use marker vaccines for one year until 2006 as a transition to the complete abolishment of hog vaccination (from 2006 on). Many experts and industry representatives doubt that the country will be able to meet these deadlines. They fear that gradual elimination of the vaccination will lead to more outbreaks, lower pork supply and continued ban on exports of Bulgarian pork and pork products to the EU markets.

To date, Bulgaria used live vaccine type “K”. Despite the mandatory vaccination, in the period 1996-2002, limited outbreaks of classical swine fever were registered with nonvaccinated pigs at small farms. The genetic analysis has showed the source of the infection was wild boars crossing national borders. In 2002, Bulgaria registered its largest outbreak of CSF, 32 outbreaks in 16 regions; in 2003, there were 11 outbreaks in 4 regions; and in 2004, as of August 2004, there was one outbreak. Over the last 4 years, all outbreaks were in south Bulgaria (regions of Bourgas, Sliven, Plovdiv, Blagoevgrad, Kiustendil)

Feedstuffs
The MY2003/2004 short grain supply very negatively affected pork sector. The feed accounted for 70-75 percent of pork production cost. The average feed conversation rate was 3.20- 3.70 kilos of feed for a kilo of growth.

The compound feed prices increased considerably to reach 420 leva/MT in January 2004 ($262), and 430 leva/MT in June ($269). In August 2004, the good grain crop caused a 14 percent drop in feed prices to 370 leva/MT ($231). It is expected that the reduction will continue in the fall due to abundant grain crop.

Prices
Between July 2003 and April 2004, pork prices were relatively stable as a balance of more expensive feed and increased slaughtering.

As of July 2003, pork prices were as follows: Ex-farm prices in LWE – 1.20- 1.50 leva/kilo ($0.69 – $0.87) Wholesale carcass without skin – 3.00 – 4.00 leva/kilo ($1.74 - $2.32) Retail prices were about 5.50-6.00 leva/kilo ($3.20 – $3.50)

In 2004, farm-gate prices for pigs were stable from January until April and have gradually increased after April as follows: For sows (LWE): from 1.25 leva/kilo in January 04 to 1.45 leva/kilo in June 04; and 1,50- 1.80 leva/kilo in August 2004 For fatted pigs (LWE): from 1.70 leva/kilo to 1.95 leva/kilo in June 04; and 2.0-2.20 leva/kilo in August 2004.

Wholesale pork prices (shoulder): They remained relatively stable between 5.25-5.30 leva/kilo from January to April 2004, with an increase after April to reach 5.60 leva/kilo in June. Retail prices followed a similar trend, being stable at 5.60 leva/kilo from January till May and a sharp increase after May to reach 5.80-5.90 leva/kilo in June/July.

Pork Meat Production
Average LWE for swine in the PSD table for CY2003 and CY2003 is 110 kilos per head and 68 percent meat to the carcass or 75 kilos CWE per head (based on the last 5-years average index). For 2004 and 2005, slightly higher average live weight is used due to no necessity of earlier slaughter like in 2003 (113 kilo/head). Due to relatively high percent of commercial farms, about 55 to 60 percent of total slaughtered swine is estimated to be slaughter at slaughtering houses.

In 2004, good feed supply will discourage slaughtering, thus the meat production is likely to decline, to increase pork prices, and stimulate imports. The AgOffice estimates pork production in 2004 at 125,000 MT and slightly higher in 2005.

Pork Consumption
Pork continues to hold the largest share in local meat production and consumption, usually about 60 percent of red meats and 40 percent of total meats. In 2003, consumption was lower than in 2002 but at the projected level and accounted for 58 percent in red meat consumption and 40 percent in total meat consumption. The major reason was lower supply.

In 2004, further reduction in consumption is likely, especially in the second half of the year due to lower local supply (despite higher imports) and climbing prices. Expectation for better supply and lower pork prices by 2005 may increase consumption closer to the traditional levels.

Recently, there has been a trend of higher consumer preferences toward lean pork meat and chicken as a substitute for pork. Pork consumption stays rather seasonal – in the winter the demand is higher for local purchases (traditional local holidays) and in the summer, the demand is driven by tourism and the HRI sector.

Trade

Exports
In 2003, Bulgaria had an export quota to the EU at duty free access for 2,500 MT. In 2004, the quota is 3,000 MT (July 1, 2003 – June 30, 2004). The annual increase in this quota is 500 MT.

There is an export quota for 200 MT of pork to Macedonia at 50 percent reduction in import duty or 10 percent plus 0.21 Euro/kilo.

Currently, Bulgaria does not export pork to the EU due to mandatory vaccination of hogs against swine fever. Other reasons are related to the poor quality of local pork which has thicker fat layer. In addition, the EUROP carcass classification is not adopted yet. Thus, pork exports are small, usually 140-170 MT per year. In 2003, total pork exports were 143 MT ($0.5 million) at average export price of $3,300/MT. The traditional market was Macedonia: the quota for exports of pork (200 MT) was filled at 16 percent.

Imports
In CY2003, the GOB approved a reduced import duty quota for only 3,000 MT at a duty of 250 Euro/MT for April 1 - June 30 (vs 7,000 MT at 100 Euro/MT duty in 2002) regardless the origin of the product. The quota was filled in for less than one day. In 2004, for the first time, the GOB did not introduce any such TRQ due to protests of local pork producers.

Over the last three years (2002-2004), the EU double zero quota for pork, currently 9,000 MT with 500 MT increase per year, is fully filled.

Since 1995/96, Bulgaria is a net importer of pork. Over the last 2-3 years, pork imports stayed high. In 2003, pork imports were 3 perc ent higher than in 2002, 18 780 MT ($19.0 million, average import price of $1,013/MT). Frozen pork usually accounts for 90 percent of imports (96 percent in 2003). Demand for imports of certain frozen cuts for processing is increasing due to higher consumer demand fro processed meat products versus fresh pork. This demand is also stimulated by significant tourist inflow in the summer months. In 2003, imports of “other” pork meat products were also significant. Imports of pork edible offal were 8,912 MT total ($3.2 million) of which frozen pork liver were 1,570 MT, at average

import price of $324/MT. Pork fat imports in 2003 were 8,036 MT. There was a EU duty free quota for 9,000 MT which was 85 percent used in 2003. Imports of cured and salted meat were 1,760 MT. Additionally, 997 MT of meat processed products, and 217 MT of ready foods from pork were imported. Thus total imports of pork products, other than pork cuts, were 19,922 MT or higher than imports of pork meat.

The United States had a very good portion of the 2002 TRQ for pork with about 2,100 MT or 12 percent of total pork imports. In 2003, the U.S. share (1,646 MT) was smaller due to the tight competition from the EU (Denmark, France, Greece). Another competitor in 2003 was Poland.

Tariff Rate Quotas
In 2004, there are annual autonomous tariff reductions as follows:

Pork fat – 0%, not limits;
Frozen pork liver – 10% duty, no limits;
Pork edible offal – 10% min 70 Euro/MT, no limits;


Trade Agreements
EU: For the second half of 2004, there is a duty free import quotas for 9,000 MT only for EU origin products.
Turkey, Israel and Macedonia: no preferences
Croatia: The max import duty for HS#0203 is 25 percent without any quantitative restrictions.

Agricultural Policy
There are not any specific programs for the pork industry as well as for cattle/beef industries. The State Fund Agriculture soft credit lines are for purchasing of breeding stocks and construction of farms. SAPARD funding is also available for pork farms.
EU accession agreement: There are no production quotas for pork or direct support for producers. In general, export subsidies will be applied after 2007 and intervention on the market will be executed based on the EU rules.

U.S. Market Opportunities
Market opportunities for U.S. pork for processing are very good. The limiting factor are relatively high import duties and duty free import quota for the EU origin pork which discriminates against U.S. pork products. The favorable import period for the U.S. in 2004 is after August due to the higher local pork prices and utilization of the EU pork import quota.

Further Information

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