Bulgaria. Livestock and Red Meat Sector Update. Oct 2015 Oct. 10, 2015
In 2014 and 2015 the Bulgarian swine sector continued to shrink and the ongoing concentration and commercialization was accelerated. While local pork supply declined by 7.5%, demand increased and per capita consumption was 6% higher in 2014, met by competitive EU imports. Thus pork share in red meat consumption reached 80% v.s. 20% for beef. Beef farms were stimulated by the reform in the dairy sector. There was a good growth in the number of beef cows by 24% and a decline in dairy cows inventory by 4%. Dairy farms which are unable to meet EU milk quality requirements or are not competitive enough, have switched to beef production. There was a significant change in beef consumption trends in 2014. The demand for fresh beef meat, especially imported prime beef, flourished and imports jumped by 422% compared to 2013. The U.S. share in total beef imports also increased as a result of active promotions, including FAS/Sofia trade and marketing events.
The Bulgarian red meat sector consists of two sub-sectors, pork and beef, with pork in the prevailing and leading role. Beef production is small and based on slaughter of dairy cattle. In recent years the number of beef cows has grown and there has been a dynamic establishment of beef farms supported by reforms in the dairy sector and EU subsidies. However, these developments have not resulted yet in any increase in beef production. In 2014 pork accounted for 80% v.s. 20% for beef in red meat production. In total meat production poultry led with 55%, followed by pork with 36% and beef with 8%.
Swine and Pork
The swine sector has been shrinking since 2007 from effort to reform, concentrate and become more efficient and commercialized. Despite stabilization of the sector since 2011, the number of swine in 2014 declined by 5.7%.
Total swine farms in 2014 were 22,300, sharply down by 63% when compared to 2013. This resulted in accelerated concentration and the number of animals per farm grew by 152% to 24.8 head/farm compared to 9.8 head/farm in 2013. The decline in the number of farms was concentrated at smaller farms with up to 10 animals, while the inventory at farms with 400-999 animals grew by 28%, and that of farms with 1,000 and more animals by 7.1%. At the end of 2014 86% of all swine were raised at farms with more than 1,000 pigs compared to 75% in 2013.
At sow farms the reduction also came from smaller farms with up to 200 sows. Their number and inventory went significantly downward.
At the same time, growth has continued to occur on commercial farms with more than 200 sows. The number of these farms increased by 22% and their inventory by 14%.
The diminishing role of smaller subsistence farms has been more pronounced since 2012. The number of sow farms declined from 10,991 farms in 2007 to 2,552 in 2014, almost 4 times, while the reduction in sow stocks was 38% for the same period. As a result in 2014 commercial farms accounted for 81% of total sow inventory, although their number was below 2% of all sow farms.
Ongoing concentration and commercialization was accelerated by competitive pork imports from the EU. Smaller farms, despite taking benefits from lower feed prices, were not efficient enough to meet the competition and had to undertake distress slaughter.
Today, the industry is dominated by about 40-50 larger commercial operations which are vertically integrated and have recently invested in expanding of capacities and improvement of farm efficiencies.
The number of slaughtered pigs in 2014 declined by 5.5% and pork output by 7.5%. In parallel with farm development, pork production at commercial farms increased by 1.7% while on-farm supplies witnessed a serious decrease of 31% in slaughtered animals and of 33% in produced pork. Pork production accounted for 69% of total red meat production in 2014.
Bulgaria has 70 small/medium size slaughterhouses, with swine slaughtered at 66 (2014) of them. Total of 57 slaughterhouses are more commercially oriented and accounted for 86% of all slaughtered animals and 82% of meat output in 2014.
In 2014 the number of swine slaughtered at slaughterhouses was 84% of total swine, and the meat produced was 81% of total pork supply (73% in 2012 and 66% in 2011). The average carcass weight was standard at 66 kg/head. Monthly supply has been stable at 60-65,000 head with a peak in December when the output reached about 100,000 head (7,000 MT). Data indicates in 2014 the slaughtered swine in August-November exceeded that in the previous year while in the rest of the year the monthly differences were smaller.
There are three regions in the country accounting for the majority of swine slaughter – South Central with 13 slaughterhouses and 27% share in production; North Central with 10 slaughterhouses and 20% share and North East with 13 slaughterhouses 19% share (2014 data).
The pork supply from commercial slaughterhouses is consistent in quality and is entirely marketed in the retail sector while on-farm pork supply is only partially sold through market channels. Farms with up to 10 swine produce mainly for on-farm consumption.
On-farm pork production in 2014 dropped significantly. The number of slaughtered swine was 31% lower than in 2013 and almost half of that in 2012. The carcass weight is usually higher than at commercial slaughterhouses and varies at 83-84 kg/head, in 2014 it was lower at 81 kg/head. On-farm pork production has shrunk since then and in 2014 and accounted for 19% of all pork output compared to 45% in 2007.
Data for the first 3 months of 2015 indicates that pork produced at commercial slaughterhouses increased by 18% compared to 2014 to about 14,000 MT, which is related to the higher number of pigs in the group 50-80 kg which also includes imported live pigs for fattening. Based on this data and on stabilization of sow inventory, pork production is forecast to stabilize in 2015 and 2016 around the current level at 66-68,000 MT. It is likely that the commercial pork sector will revitalize, driven by recently made investments, expanded capacities and improved efficiencies. Lower feed prices and stable retail prices along with better consumer incomes are expected to lead to higher local sales and consumption. On the other hand, the on-farm pork supply may shrink further due to tough competition from imports and from local commercial supply. Due to favorable domestic demand, exports are unlikely while imports may continue to meet the growing demand.
A long-term projection carried out by the local Agricultural Economics Institute shows pork production to increase by 18% to 87,000 MT by 2019, and to be sold on the local market.
Consumption of pork meat has been in a rise and unlike poultry and beef did not stagnate despite economic difficulties in 2011-2013. The improving purchasing power since 2001 led to constant increase in the amount of consumed and purchased quantities of pork. In addition, pork meat is considered to be the less expensive red meat compared to beef and has enjoyed a good health image.
Pork meat consumption per capita in 2014 reached 8.6 kg, 6% more than in 2013, and 238% more than in 2001. This trend developed in parallel with the general increase in meat consumption. Total meat consumption in 2014 reached the highest level of 32.5 kg, 39% above the 1999 level. In addition, the consumption of processed meat products (it is counted separately) which are made mainly from pork meat, was also on a rise although at a slower rate, and in 2014 it reached 14 kg/capita, 17% more than in 1999. In recent years an increasing number of consumers, especially in urban markets, prefer consumption of fresh meat v.s. processed meat products due to the better health and culinary image of fresh meat.
Domestic pork meat consumption reached its peak in 2014 exceeding 200,000 MT at 202,000 MT, 2.1% more than 2013. Pork meat consumption has been more resilient to outside factors such as diseases and consumer campaigns, and showed stable growth. In 2014, pork meat accounted for 51% of total meat consumption, followed by poultry (41%) and beef (8%).
Growth in consumption of pork meat has been met by imports. The gap between production and consumption was narrower in 2007 with supply meeting 48% of consumption, but since than it had widened. In 2014, local supply accounted for 33% of consumption. Imports initially were mainly in a form of frozen cuts destined for processing while local meat was used for fresh consumption. However, due to faster growth in demand and preferences towards select cuts, lately fresh imports have increased as well (see the Trade section).
A long-term projection carried out by the Agricultural Economics Institute shows pork consumption should increase by 10% by 2019, and most of it will be met by imports.
The local market has developed in recent years towards chilled v.s. frozen product, preferences for lean meat v.s. heavier/fat meat, and to more added-value cuts and convenient packages and preparations. The demand has a seasonal peak around New Year holidays. Almost all meat processed products contain predominantly pork.
Market Price Development
Feed cost is the major factor for local pork prices since it accounts for average 70% of production cost. In 2014 feed prices declined by 22% for barley, 21% for corn and 18% for feed wheat (per MinAg data). The trend has continued in January-May 2015 with further decline of another 17% for barley, 8% for corn, and 13% for feed wheat. As a result, the average prices for pig feed formulas in 2014 were between 5.3% and 11.6% lower compared to 2013. For January-May 2015, these prices were further reduced by 0.6% to 2.0%.
Due to lower feed costs for swine in 2014, ex-farm prices for pigs in LWE declined by 0.4%-0.7% compared to 2013, wholesale prices by 2.9%-3.9% and retail prices by 2.8%-3.7% (depending on the cut). For the first 5 months of 2015, ex-farm prices were respectively 8.1%-9.4% lower compared to 2014, wholesale prices – by 7.5% to 9.4%, and retail prices by 5.% to 5.6%.
According to the MinAg (Red Meat Situation and Outlook Analysis, June 2015), average pork prices (in carcass) in Bulgaria (pork meat class E) in 2014 were at 3,760 leva/MT (U.S. $2,210) or 23% above the average EU price. For the first four months of 2015, local pork prices were 21% above the EU average and the difference has narrowed due to the gradual increase of the EU price and stable local prices.
Live Swine: Imports of live swine since 2009 varied from 16,000 head (2010) to 113,000 head (2012) and included mainly breeding pigs as well as pigs for fattening. The major origins for breeding sows are The Netherlands, Germany and Hungary, and Romania for pigs for fattening. In 2014, imports were at 53,000 head or 104% more than 2013, imported from The Netherlands, Germany and Austria. In 2015 to date (WTA data until April), imports declined to 5,000 head. Due to recently made investments in farm capacities, it is likely that 2015 imports may be similar to 2014 levels.
In 2014 the ratio of pork imports (including processed products) to consumption was at 68% compared to 65% in 2013 and 58% in 2012. Annual 2014 imports were 6% more than in 2013 and record to date. In perspective, 2014 imports were 44% more than that of 2012.
Within total pork imports, frozen pork imports kept its level stable at about 52,000 MT for the last 3 years, along with pork fat at 13-14,000 MT. Both categories are destined for the meat processing industry and show slight decline compared to 2010/2011. On the other hand, imports of fresh meat in 2014 had a sharp growth of 43% to 56,000 MT which is a record to date. For the first time, imports of fresh meat exceeded that of frozen pork. Imports of processed pork products (salted/cured/smoked pork) were 42% lower.
The reasons for increased pork imports and for the growth in fresh imports are related to higher availability at competitive prices on the EU market due to limited EU exports to select export markets (Russia), along with the decline in the Bulgarian supply, and favorable consumer demand. Another reason is the expanding market share of retail chains which carry out own, independent imports of select cuts, which enjoy better sales. Prices of imported pork in 2014 were below those of locally produced pork, another reason for higher imports.
Major suppliers of pork to Bulgaria in 2014 were Spain, Germany, France, Poland and the Netherlands. France and Spain were leading suppliers of fresh meat; Spain and Germany for frozen meat. Pork fat came mainly from Poland while processed pork products were supplied by Italy.
Pork exports are small at 2,000-4,000 MT. In 2014 exports were at 2,400 MT and 42% lower than that in 2013. Exports are limited due to the deficit market and good local demand, as well as due to uncompetitive prices. Major markets are Romania and Greece, with small quantities to Kazakhstan, Armenia, and Macedonia.
Cattle and Beef
The cattle sector has been on the decline since 2007 due to the ongoing reform and commercialization in the dairy sector.
The number of cattle in 2014 declined by 4% and the number of cows by 0.7%. There was a good growth in the number of beef cows by 23.8% to about 50,000, and a decline in dairy cows inventory by 3.8%. Thus the beef cattle now account for 14% of all cattle.
Total cattle farms in 2014 were 53,700 or down by 24% compared to 2013. Despite the decline in inventory (4.0%), the ongoing concentration resulted in higher number of animals per farm which grew by 26% to10.3 head/farm. Reductions were concentrated at smaller cattle farms.
At the end of 2014, 87% of beef cows are concentrated at farms with 10 and more animals. The average size of a beef cow farm increased from 13.3 head/farm in 2013 to 14.3 head/farm in 2014.
The development of beef farms is stimulated by the reform in the dairy sector. Dairy farms, which are unable to meet EU milk quality requirements or are not competitive enough, have switched to beef production. In addition, EU subsidies for suckling calves and for cattle for slaughter are also supportive. Finally, local beef meat production is very limited and demand is favorable. In 2014 industry reports indicated higher demand for meat breed genetics as well as an emergence of larger specialized beef farms with imported livestock.
Animal Health: The outbreak of Bluetongue in late 2014 and the following vaccination and trade restrictions were the main issue in the sector. Although the disease affected mainly sheep and goats, in April 2015, cattle were also vaccinated. In July 2015 there was an isolated outbreak of anthrax and two animals died while about 240 cattle were vaccinated in a village in Northeast Bulgaria. The outbreak did not affect the commercial farms or supply and was quickly eradicated.
Beef Supply and Demand
Beef production and consumption account for 8% and 9%, respectively, of total meat. Generally, beef production is sourced from slaughtered dairy cattle and the higher beef cow inventory has not transformed yet in any growth.
Beef meat production is the least commercialized subsector compared to pork and poultry. On-farm slaughter has been significant at 72% of total supply, exceeding by 3 times the commercial output at slaughterhouses.
Beef output declined by 10% in 2014 due to the decrease in the number of slaughtered cattle by 3% and 7.5% lower average carcass weight. The reduction occurred both at commercial farms (-17.0%) and on-farm (-6.8%).
Cattle was slaughtered at 39 commercial slaughterhouses (2014). The number of cattle slaughtered at slaughterhouses was 18% of total cattle, and the meat produced was 28% of the total beef supply. Commercial beef output was 17% less than in 2013 due to a 14% decline in the number of slaughtered cattle and 2.5% lower average carcass weight at 210 kg/head compared to 218 kg/head in 2013. In recent years, the average carcass weight varied between 205 and 218 kg/head and is not very consistent. Since 2007 commercial beef output has been relatively stable at 5,000 MT.
Monthly supply varies, it is at 1,700-1,800 head/month in May-September period, and higher at 2,500 head per month October-January. Data indicates that in 2014 the slaughtered cattle in all months with the exception of October-December period were less compared to 2013. Similar to pork, the beef supply from commercial slaughterhouses is more consistent in quality and is entirely marketed in the retail sector while the on-farm beef supply is for on-farm consumption.
On-farm beef production in 2014 declined but at a lesser extent compared to commercial supply. The number of slaughtered cattle was almost stable (-0.3%) but beef output was 6.8% less as a result of a 6.3% reduction in average carcass weight. The average carcass weight is usually lower at commercial slaughterhouses at 127-130 kg/head; however, in 2014 it declined to 119 kg/head.
Consumption of beef meat has been stable around 30,000 MT. In 2014 consumption was 6.5% more than in 2013. Per capita consumption was reported at 0.9 kg/capita.
Demand is met mainly by local supply although its share is declining due to increasing imports. In 2014 local supplies accounted for 57% of consumption compared to 68% in 2013 and 70% in 2012.
The local market has developed in recent years towards chilled v.s. frozen product, with preferences towards higher quality imported beef cuts and convenient packages. Higher quality imported beef is usually sold in the food service sector while local fresh beef is marketed in the retail sector. Imported frozen beef is destined for processing.
There was a significant change in beef consumption trends in 2014. In addition to the overall growth, the demand for fresh meat, especially imported prime beef, flourished. Imports of fresh beef jumped by 422% compared to 2013 to 3,900 MT. In value, imports were 253% more and reached U.S. $10.1 million. Some of the imported prime beef is marketed in select retail chains (Billa, Piccadilly and Lidl) although the food service remains the main outlet. The U.S. share in total beef imports also increased as a result of active promotions, including FAS/Sofia marketing events.
FAS/Sofia forecasts further stabilization and gradual increase in beef consumption, especially of fresh prime beef in 2015 and 2016 to 32-33,000 MT.
Market Price Development
In 2014, ex-farm prices for cattle in LWE were stable (-0.3%) compared to 2013, wholesale prices declined by 1.5% (for carcasses) but retail prices increased by 2.4%-2.6% (depending on the cut). For the first 5 months of 2015 ex-farm prices were respectively 1.6% lower, while retail prices have stabilized at the 2014 level.
Live cattle imports are very small and consist of dairy cattle for breeding purposes. Exports of cattle are traditionally to the region (Albania and Kosovo). In the past (2012 and 2013) exports were at 28,000 head (calves) but in 2014 it declined by 64% to 10,200 head (worth U.S. $4.8 million) due to lower inventory and export restrictions related to the Bluetongue outbreak. Lower exports are likely to be preserved in 2015.
In 2015 the industry and the MinAg renewed its negotiations with Turkey to open the market for live cattle. The goal was to be able to export calves up to 300 kg for slaughter or for further breeding. Similar negotiations are being held with some Arab countries. As of end-August 2015, the country is not yet allowed to export to these markets.
Annual 2014 beef imports were significantly higher by 46% than in 2013 and close to the record in 2010. Within total beef imports, frozen beef imports increased to 8,700 MT although this is still below 2010 levels. Poland is also leading frozen beef imports. Imports of processed beef declined to negligible level.
The most notable was the increase in imports of fresh prime beef. Leading suppliers were Italy (U.S. $4.4 million), Poland (U.S. $2.2 million), and The Netherlands (U.S. $1.7 million). The U.S. share has been significant although it is not separately registered due to transshipments. In the first 3 months of 2015 beef imports continued to grow by 13% (value) compared to 2014.
Beef exports are small, below 2,000 MT in 2014, although it almost doubled when compared to 2013. Export markets are Greece, Romania, Kazakhstan, Macedonia, with small quantities to Thailand and Turkey.
Agricultural and Trade Policy for the Red Meat Sector
In 2014 and 2015 the pork sector has not been subject to special domestic support programs. Over the last several years, pork farms adopted EU welfare requirements. Since 2012 the MinAg has provided limited subsidies for adoption of higher than EU standards. The program for 2014 was for U.S. $15 million, as the updated welfare programs by pork farms should last for 5 years. A total of 93 swine farms participated in the program in 2014.
The new Common Agricultural Policy 2014-2020 in Bulgaria introduced coupled support of 13% for the several sectors including beef sector. The following subsidies are provided to farmers:
• For beef cows and heifers: eligibility requirements of minimum 5 animals per a farm; estimated subsidies at about 123 Euro/head; total allocation of 13.7 million Euro for support of total 112,000 animals per year;
• For dairy and beef cows under selection/breeding control: minimum 10 animal per a farm; estimated subsidies at about 75 Euro/head; total allocation of 4.9 million Euro for support of total 65,000 animals annually.