Банкеръ Weekly

Briefs

COUPON SYSTEM FOR GRAIN INTRODUCED BY THE STATE

The first tender for the sale of wheat from the State Reserve on Septemebr 17 ended according to expectations. Milling wheat was sold at BGN240/ton, and fodder wheat was traded at BGN220/ton. 20,000 tons of milling wheat and 6,000 tons of fodder grain changed hands. Acccording to Hristo Milenkov, Executive Director of the Sofia Commodity Exchange, about BGN/ton should be added to that selling price in order to cover the cost for loading, weighing and transportation. Thus, the real price of milling wheat reaches BGN252/ton. Deals on the exchange were effected under the introduced requirements for a maximum amount that could be purchased by mills and fodder enterprises - 1/52 of their annual consumption. Moreoever the purchased quantity had to be used for the respective production. Obviously, the idea was to ensure to each buyer the weekly volume of processed grain and prevent uncontrolled leap of prices. Therefore, this was not real exchange trade as the grain was practically distributed according to a list. However, the market has already found an equibalance position - for a month now trade in Group 2B wheat has been going on at levels around BGN250/ton before VAT and the tender on September 17 only confirmed that. In fact, during the organization of the bidding it became evident again that there were no real statistics about entire branches of economy in Bulgaria. For a long time it has been known that not all quantities of processed grain are declared, and that production by inputs supplied by customers accounts for a considerable share of the market in that branch, which is not reported as a volume. Now it turned out that the Ministry of Economy has a list not about the quantity of milled wheat throughout the year, but about the mills' sales in leva. Nobody could tell the exact amount of processed wheat as it was not clear what prices the calculations were made at. Thus, the brokers had to accept on trust the clients' data and it's good that this did not matter much. The distributed quantities will be sufficient for two or three days, and this is very much like an introduction of coupons for the input, millers who attended the tender commented. The price, according to them, is the same at which they buy wheat from the new crop - BGN250/ton, with delivery to the mills. At the same time, the grain offered by the State Reserve, was from the 1999-2001 crops, with uncertain baking quality and no possibility for reclamation if it is not up to the standard requirements. Moreover, it is not known from which warehouse it comes from. Twelve stores were mentioned prior the tender, only one of which is located in Southern Bulgaria. In other words, if the distance is great, transport costs could exceed the projected ones and additionaly increase the price. That is why, only 38,000 tons of milling wheat were ordered at the price of BGN220/ton, while monthly consumption in the country is about 110,000 tons. And fodder enterprises even failed to fulfill the released quota of 10,000 tons and only 6,000 tons were sold. The next tender will be held on September 24 when 15,000 tons of milling wheat and 9,000 tons of fodder grain will be distributed. If the offered quantities are not sold out, the State's intervention on the market could stop.

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