BULGARIA has thrown its hat in the ring as part of the solution to the global grain supply crisis stemming from Russia’s invasion of Ukraine. In a speech in Brussels last week, the Bulgarian prime minister said the aid could come in two forms, exporting physical grain from its own exportable surplus and shipping Ukrainian grain through its Black Sea port of Varna.
Ukrainian President Volodymyr Zelenskyy Meeting with the Bulgarian Prime Minister Kiril Petkov At the beginning of May, and the two governments subsequently agreed to use the port of Varna, located around 600 kilometers south of the Ukrainian Black Sea port of Odessa, as a logistics hub for the export of Ukrainian grain and sunflowers.
This agreement complements the agreement concluded in April between Ukraine and Romania on the use of the port of Constanta, also on the Black Sea. However, the biggest obstacle to using either option remains the logistical challenges of getting the grain out of Ukraine and getting it in position for export in an efficient and timely manner. Recent reports suggest that at least 20 million tonnes (Mt) of grain is stuck in Ukraine, unable to leave the country due to infrastructure problems and blocked Black Sea ports. Wheat and corn would make up the majority of this total.
The new Bulgarian stance stands in stark contrast to its initial reaction to Russia’s invasion of Ukraine in late February, when the government announced plans to bolster its grain reserves by buying enough from domestic producers to meet domestic demand for a year.
The plan was to buy around 50 percent of the 3 Mt remaining in the country’s silos, and even toyed with the idea of restricting exports, at least until the purchase program was completed. While official restrictions were never put in place, additional customs controls have slowed loading of grain ships in recent months in what the manufacturer says was an unofficial attempt to halt exports.
Prospects for winter grain production in Bulgaria remain favorable due to the relatively mild winter, excellent soil moisture reserves and good snow cover in mid-winter. Cumulative rainfall readings through the end of April were close to average in northern regions, but well above long-term averages in southern and coastal areas.
However, precipitation records have been below normal for the past four weeks and some regions are developing moisture deficits that are threatening production prospects. Phenological development of winter crops is still delayed in some districts after wet weather and suboptimal soil conditions delayed sowing last year.
According to the European trade association Coceral, Bulgarian farmers planted around 1.2 million hectares (Mha) of wheat in autumn 2021, slightly more than last year’s wheat plantings but 8.7 percent less than the record 1.314 Mha planted in the autumn 2013
Coceral has set the wheat yield at 5.19 t/ha for a production of 6.22 million t, compared to last year’s yield of 6.05 t/ha and a production of 7.17 million t. This is almost identical to the most recent JRC MARS yield estimate of 5.2 t/ha versus a five year average of 5.04 t/ha. This is down from 5.38t/ha in the April Bulletin and brings production to 6.24Mt when applied to the Coceral area. Both of these figures are well below the production forecast of 7 million t recently expressed by the Bulgarian Prime Minister in Brussels.
Bulgaria’s domestic wheat consumption is currently around 1.7 million tonnes, including human consumption, fodder and seeds. This leaves an exportable surplus of between 4.5Mt and 5.3Mt for the upcoming harvest, plus sizeable stockpiles for 2021-22 after last year’s huge harvest and below-average exports this season.
Assuming the government is comfortable with its wheat reserves given the regional uncertainty, it seems safe to expect Bulgaria to export around 5 million tonnes for the 2022-23 season, some 25 percent more than the current season. The vast majority of Bulgarian wheat exports traditionally went to European Union markets, with Spain being the largest, followed by Italy and Greece. But that could change this year as African destinations are very likely in the current environment.
Meanwhile, a Bulgarian cargo appeared on the list of successful sales in the latest Egyptian wheat tender. Egypt’s General Authority for Supply Commodities (GASC) announced last Wednesday that it had signed a deal to purchase 465,000t of wheat from Bulgaria, Romania and Russia for payment with 180-day letters of credit. This is Egypt’s largest wheat purchase since Vladimir Putin’s forces invaded Ukraine in late February and the first tender for supplies in the 2022-23 season, which begins July 1.
GASC said it would accept bids from all approved origins and would also allow bids for Ukrainian wheat if it can be shipped from neighboring countries such as Poland, Romania, Bulgaria or the Baltic States. About 300,000 tons of Ukrainian wheat booked earlier in the year by GASC for delivery in February and March has yet to be shipped, with one shipment stuck in port and four others still to be loaded.
According to GASC, it bought 240,000t from Romania, 175,000t from Russia and 50,000t from Bulgaria. Two Russian cargoes with a total of 115,000 t are to be shipped in the time window from July 20th to 31st. The four 60,000 t Romania shipments were purchased for shipment in the August 1-10 window. The last Russian cargo of 60,000 t and the only Romanian soil are scheduled to be shipped from August 1 to 20.
All successful shipments cost US$480/t including costs and freight, down 2.9 percent from the US$494.25/t paid for 350,000 t in the last tender in April. However, it is still 41 percent higher than what Egypt paid for wheat before the war in Ukraine.
Although the global wheat market has eased over the past two weeks, the balance sheet is still tight. There are big production issues in major export centers like the United States, Canada, Ukraine and France, which has suddenly gone dry. Ultimate wheat production in China and India remains great unknowns. As modest as it may seem, export contributions from countries like Bulgaria could well be the salvation for small importers in this high-price environment.