Last year was unprecedentedly good for grain and it came after an equally strong one. But it is all but certain that the next two would be rough for the sector. The key factor driving wheat, corn and sunflower production and trade has a name - Ukraine. Putin's invasion of the country has shuffled the grain market significantly.
Last spring, fears of a global shortage blew prices to unprecedented levels: over 400 euro per tonne of wheat compared to 230-250 euro this summer, 360 euro for corn compared to 230-250 euro in mid-2023, and a fall from 870 euro for sunflower at the start of the war to 500 euro, or about 40% depreciation, now.
The content of Bulgarian farmers and traders in the first part of 2022 is now over because prices have fallen steadily. And they remain low because of a literal race to the price bottom between Ukraine and Russia, despite the suspension of the Black Sea grain export deal.
This year, farmers are likely to lose money - because they have been using expensive fertilizers and fuel and now claim to be selling below their production costs. By the crude reckoning of Bulgaria's biggest trader, Sevan, the average loss is about BGN 50 per acre, which adds up to BGN 2 billion for the 40 million acres of arable land. Grain growers have reserves from the previous two very strong years, but they are running out, and producers may well be in for another tough year. The reason - because of a lack of funds, they will cut costs by sowing less or fertilizing more modestly, which will mean a weaker harvest and less income next year.
This spring, Bulgaria found itself with an unprecedented amount of unsold grain. Gradually these stocks melted - by the middle of the year there was only about 1 million tons of wheat stored. In the case of sunflower seed, the stored amount was half a million tons. A representative of the sector summarized the situation the following way: "This year it was the rich large farmers who suffered, who have their own warehouses and therefore decided to hold produce until higher prices which never came. But now, with the new harvest and persistently low international prices, all producers could end up with losses."
The big grains in the rankings
At first glance, the average revenue growth of the top 50 is modest - just 12%, i.e. below inflation. However, there is an explanation for it; only one of the participants in the ranking, Agro Board, reported a contraction in business of more than BGN 700 million (EUR 350 million).The explanation is again war, because the company buys Ukrainian grain and sells it on global markets. If this company is excluded from the account, the average revenue growth rate jumps to 21%. The good news is that profits are growing - by more than 67% year-on-year and three times over 2020.
For the first, and probably the last time, two traders of Bulgarian grain and sunflower have revenues of over BGN 900 million. These are the leader Sevan and the U.S.-based Cargill.
The trader with the biggest growth in revenue and profit margin - 317% and 46% respectively - is Svetoslav Ilchovsky's firm of the same name. It became publicly known with Ilchovsky's revelations about corruption in agriculture and the close relations between Boyko Borissov as prime minister at the time and the owners of chicken producer Gradus.
Animal husbandry sent only two companies to the list of the top 50 farmers, with all the others being traders or producers of grain, sunflower or related products. These are Stara Zagora's Ajax-1, which is among the largest owners of pig farms in the country and for the first time has surpassed the BGN 100 million revenuemark, and Elite 2095, owned by the Angelov brothers Nikola and Yanko, who have a duck farm in the Plovdiv region.
The largest local grain trader, Sevan, has often been the leader in the rankings. What is different this year is that its reported revenue is huge - at the foot of BGN 1 billion. The Burgas-based company, owned by Artur Akopyan and his family, has been exporting grain to multiplemarkets for almost 30 years. The group cultivates about 120 thousand acres, half of which it owns, it also owns huge grain silos and about 200 trucks. "Our growth is mainly because prices were higher in 2022, but in terms of volumes we traditionally trade 1.5-1.8 million tonnes and this has not changed," Akopyan told the Capital Weekly.
Akopyan believes the market is heavily influenced by Ukraine, where farmers tend to sell at half the price, for example for fear of whether there will be bombings tomorrow or whether the produce will be needed for the army. And this cheap supply is leading to a collapse in prices, which is, however, advantageous for bringing down inflation in Europe.
The big foreign trio and its Bulgarian counterparts who are catching up
Traditionally, the global traders with offices in the country - U.S-based Cargill and ADM, and China's Cofco - have very high turnovers. Of these, Cargill Bulgaria has the highest sales revenue and growth rate - for the first time above the BGN 900 million threshold.
Two of the largest domestically-owned groups in the sector - Agria and Buildcom, which are fourth and fifth respectively, have similar horizons. They are building their own seaports near Varna to export more easily and to rent out capacity to competitors. There are two representatives of the sector with port terminals on the Danube river who have been operating for years. They are ADM, and Svetlozar Dichevski and his holding Octopus, which holds the concession rights on Oryahovo and Somovit terminals.
Varna-based Agria Group Holding continues to grow because of purchasing other producers' businesses and investment in new companies.
The group cultivates over 150,000 acres of land, of which 80,000 acres in northeastern Bulgaria. The main crops grown are wheat, barley, corn and sunflower. The plan for the seaport is for an investment of 45 million euro and a capacity of 1.0-1.2 million tonnes of grain per year. The Beloslav Lake site is expected to be ready in 2026.