“This project will oblige the tenants to sign contracts requiring them to make fixed payments towards the rent regardless of the amount of the harvest’, says Stayko Staykov, Chairman of the Bulgarian Association of Agricultural Land Owners. Stayko Staykov is the Chairman of the Board of Directors of the Bulgarian Association of Agricultural Land Owners. Owners of the largest agricultural land plots in the country are members of the Association. Mr Staykov was born in 1969 in Sliven. In 1996, he graduated Aleko Konstantinov Institute of Tourism in Burgas. He also has a degree in Tourism from Burgas Free University and specialised Finances in St. Cyril and Methodius University in Veliko Tarnovo. He has been the Managing Director of Staven Ltd since 2010.
-Mr. Staykov, yet another law concerning agricultural land is now in a drafting process, however, grain producers have already declared themselves against it-they believe that it will interfere with free trade. Where do you think the problem lies?
-The proposals are completely chaotic thus our negative attitude. Instead of improving the relationship between owners and land users, we make them worse. It turns out that we will not get any clear foreseeability but a chaos that will in fact violate the constitutional law of every citizen. First of all, the deadline for public discussions of the proposed texts was extremely inadequate-the proposals were released just before Christmas and the discussions ended soon after. One of the biggest problems is the imposition of fixed amount for a minimum payment, which must be stipulated in the contract and must be higher than the average payment. This violates free bargaining and leads to abnormalities. For an agricultural land plot falling in a lower category, for example, will be paid as much as for a higher quality agricultural land plot. This is not the only problem however, heavy administrative rules are also imposed and impossible deadlines for their implementation are set. What’s more, lease contracts are meaningless because they practically can not be terminated, or in the cases they can be, it is a very difficult procedure and takes more than one business year. In short, the proposed law, instead of providing the so much needed help, it will actually incur more difficulties. Laws that violate the Constitution shouldn’t be made. In addition, the problem with the so-called ‘white spots’ also persists. This will bring neither Bulgarian nor foreign investors. Every businessman wants to plan investments in the long term and these proposals will make it highly unlikely for that to happen.
-In that case, what follows next?
-First, we will be awaiting for a response from the Ministry of Agriculture and whether it will take any measures as regards the issues above. Together, we have formed a working group but so far only a single meeting has been held. In order to come up with a proper law, recommendations from all parties concerned must be considered. Agriculture, along with Tourism, is an industry that is leading Bulgarian Economy. It is the only one that is 100% following the market principle. I am absolutely confident in my claim because on the first place the production is exported, and then it is also stock-exchange tradable at market prices. For us and for the agricultural land trade this is very good. Certainly, there have been a number of problems since 2007, but still, this is the only industry that has continued to work and has not plunged into such a deep crisis. Speaking of problems, there's something else which needs to be mentioned. Currently, land expropriation executed by the state and the local municipalities, is carried out at prices, which are relevant to the ones of 30-40 years ago. Therefore, the compensation amount does not in any way allow one to buy land as it is highly insufficient. One can only appeal in court the amount paid as compensation, but this is practically fictitious. In some cases, huge sums of money must be paid for bureaucratic procedures: for having a land plan issued by the relevant authorities, to have tax assessments prepared, visits to various institutions, waiting in lines, etc. In the end, the compensation given back turns out to be a lot less than the money invested to get the whole set of paperwork required.
-Is it true that there is high demand for land but supply is almost inexistent?
-Usually, at the beginning of each calendar year agricultural activities tend to be inactive. This is a quiet and far less active period of about a month and a half. There are buyers but in Bulgaria agricultural land is very fragmented and there is no irrigation. This can in no way appear attractive and can neither motivate big investors to establish their activities in Bulgaria. Initially, there is an interest on their behalf but once they realize there is no land consolidation and proper irrigation, they reconsider and move away. All of them are looking for plots sizes of more than 1000 acres, even of 5000 acres. There is something else-foreign investors expect very low prices. Everyone who comes with investment money assumes that in Bulgaria there are no people with purchasing power and that all must be sold at low prices. The expectation is, for example, for a consolidated agricultural terrain to be sold at 1000 BGN per acre! Prices have long passed these rates!
-What are the prices right now?
-In southern Bulgaria, in the nice areas near Bourgas, Stara Zagora, Plovdiv and Pazardjik, an acre price can run between 800-1000 BGN, as in some specific agricultural territories around Stara Zagora, it is as high as 1100-1200 BGN. This, however, depends on the market and the local tenants. There have also been some deals where 1500 BGN per acre were offered, however, the point of discussion is land used for agricultural purposes. The cheapest prices are indicated in Strandja, Sakar, Haskovo and Harmanli. In this areas, the soil is not so fertile, there is less rainfall in summer and accordingly, yields are more modest. In the north, cheap lands are no longer on offer with the exception of the areas near Stara Planina. I won’t be discussing Smolyan area since the arable land available is limited. Similar is the situation along the river Struma, where Greek companies have been working the land for years. Prices do not exceed 1000 BGN per acre. In Dobrudja, buying offers of as much as 2000 BGN and above per acre have been made but even at these price levels, there is no serious supply.
-To what extent do agricultural subsidies determine the cost of land?
-Subsidies are a catalyst for what has been happening in Bulgaria since 2007. Thanks to them, we managed to accumulate funds and thus create a real market. By 2007 there were no subsidies and the prices of the production were very low, there weren’t many people willing to work the land and as a consequence, large agricultural plots were left deserted. Without the subsidies, it would have been very difficult to build a properly working market. And it also helped for the gradual elimination of speculators by distinguishing the genuine-working companies and investors. There are also many agricultural equipment programmes that are closely tied to subsidies and which continue today. These programmes and equipment purchase, in practice, assure the return of the money from the investment. Without these new machines we couldn't get to today's intensive farming.
-How will the market change after 2020, if some of the subsidies are limited or eliminated?
-There will be no upheavals, but rather a balanced demand and supply of agricultural land. Any farmer or investor who is working and has invested in land should have already accumulated some funds. Subsidies will not have such a substantial effect because agriculture in Bulgaria produces stock-market products that are in demand not only on the European but also on the world market. In other words, the cost of agricultural land will be influenced by the price of the grain, rather than the amount of subsidies. And now there's not that much land to sell as for any extraordinary or unusual change to happen. It used to be the opposite-there was a large supply but no buyers. Farmers accumulated funds and this led to real competition between large and small companies, most of which land tenants. Good conditions were created for authentic market sale of agricultural land and not for a speculative one.
-How will Brexit affect the export of agricultural production there?
-Everyone is concerned as regards Brexit because it's hard to predict anything. I hope that ultimately sense will prevail in Europe and in Britain. In Bulgaria at the moment both land owners and land users are very cautious.
-What could be the worst-case scenario?
-A bad scenario would be if, after a possible exit from the EU, customs duties on our products are imposed. We had great difficulties reaching certain markets and if things turned for the worse, new realignment would have to be considered. We will have to seek new markets again but within the framework of highly competitive Europe, that will be very difficult. For example, our wine is exported to England at relatively good prices. European markets are difficult because a number of countries are getting much more support compared to our producers and this makes them more competitive. A possible levy on our producers would lead to serious market stress.
-What about exports to the so-called third countries-Russia, China, the Arab world?
-The state itself must work much more closely with branch organizations and have a strong policy. We can offer production, but if there is no government policy and guarantees, how do we go out on our own in a new market? You see, for example, Turkey, how it advertises its tourism and how it supports its agriculture. They have created the largest water project, thanks to which 38 million acres of agricultural land is irrigated by using the water source of Tundja and Maritsa rivers. Greece operates in a similar mode, which is equal to Bulgaria in terms of land size. Greece managed to solve the irrigation problem through drilling. In contrast, how do we proceed in this case-we have water meters installed and we pay the price for drinking water which we use for irrigation. And at the end of the day, if we need to irrigate, we have to sell our production at a loss. Back in the past, southern Bulgaria used to produce everything on its own and the area would even sometimes have two harvests per calendar year. Not to mention that there were two varieties of beetroot, cotton and other crops grown widely. However, nowadays we are forced by circumstances to grow only one crop type. It's just that everyone is aiming towards production of easily tradable agricultural commodities due to the higher prices offered.
-Part of the agricultural land in Romania is cheaper, are there Bulgarian farmers who prefer to develop their business there?
-The arable land in Romania is exactly three times more than that in Bulgaria-120 million acres, however, it isn’t cheaper everywhere in Romania than in Bulgaria. The area near Hungary is more expensive and there is no great supply. There are Bulgarian investors who buy land but not for agricultural purposes. Still, there are some agricultural land investments indeed, but they are very difficult to manage. Romanian market has been stimulated, still it is twice cheaper there than in Bulgaria. The average cost of the acre near Calarasi is about 350 EUR per acre, while on the other side of the Danube-in the region of Silistra, it is significantly more expensive-about 750-800 EUR per acre.
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