#13 Serbia Agriculture Bulletin, BFC

10/2016

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13 S e r b i a Agriculture Bulletin Serbian Meat to Receive Domestic Certification of Origin More Funds for Agricultural Equipment, Machinery, and Perennials IPARD II Training Organized by Serbia Organica

Corn Harvest Expected at 8 Million Tons

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Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4) 5)

Nedimovic: Increase Revenues through Finished Fruit and Berry Product Sales ........................... 2 Serbian Meat to Receive Domestic Certification of Origin .............................................................. 2 Processing Industry Should be Developed together with Slovenia ................................................. 2 Serbia Permitted to Export Unlimited Quantities of Beef and Lamb to China ................................ 3 More Funds for Agricultural Equipment, Machinery, and Perennials ............................................. 3

Foreign Aid ................................................................................................................. 3 6) 7) 8)

IPARD II Training Organized by Serbia Organica .............................................................................. 3 Dairy Industry Faces Quality and Efficiency Issues .......................................................................... 4 FAO and EBRD Launch Grain and Oilseed Export Expansion Project .............................................. 4

Private Sector .............................................................................................................. 4 9) 10) 11) 12) 13) 14) 15) 16)

Serbia Importing Large Quantities of Vegetables also Grown Domestically ................................... 4 Corn Harvest Expected at 8 Million Tons ........................................................................................ 5 IPARD Funding Hopes Cause Dramatic Drop in Agricultural Machinery Prices .............................. 5 Bluetongue Infects 166 Sheep ......................................................................................................... 5 SCA: Beef Industry Can be Expanded .............................................................................................. 6 Asian Fruit Fly Threatens Serbian Fruit ............................................................................................ 6 Meat Exports to Russia Fall 90% ...................................................................................................... 6 October 17 Deadline for Provincial Agricultural Development Fund Applications ......................... 7

Note: The Agriculture Bulletin presents a monthly roundup of headlines and news stories related to Serbia’s agricultural sector.

This bulletin is prepared by Business & Finance Consulting—a Swiss‐based development finance consulting company. Currently, BFC is implementing “Development of Financial System in Rural Areas in Serbia” programme for KfW. Read more »

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BFC Agriculture Bulletin

State Initiatives 1)

Nedimovic: Increase Revenues through Finished Fruit and Berry Product Sales

October 26th, 2016, http://www.stips.minpolj.gov.rs/sadrzajv/projekat‐fruits‐berries‐doneo‐izvoz‐od‐sedam‐miliona‐evra

During a visit to a cold storage facility near Leskovac, Minister of Agriculture Branislav Nedimovic stressed that the domestic fruit and berry industry needs to increase revenues by selling finished products instead of raw fruit. Revenue from the sale of raw fruit stands at EUR 1.3 million, while revenues from processed fruit total EUR 8.5 million, said Nedimovic, promising that more would be invested in processing capacity. The cold storage facility was financed through the EUR 8.5 million Danish “Fruit and Berry” program. Since its launch two years ago, EUR 7 million of fruit has been exported through the program.

2)

Serbian Meat to Receive Domestic Certification of Origin

October 25th, 2016, http://www.danas.rs/ekonomija.4.html?news_id=330719&title=Oznaka+Srpski+kvalitet+na+mesu

A “Serbian Quality” label will be introduced in a bid to increase the competitiveness of locally produced meat on the domestic market, announced Minister of Agriculture Branislav Nedimovic. Research has shown high domestic demand for non‐GMO Serbian meat, added Nedimovic. The Ministry is working also on policies that encourage the long‐term growth of animal husbandry, said Nedimovic.

Amongst other measures, underdeveloped municipalities are to receive a higher percentage of agricultural incentives, while strong agricultural sectors will also be supported. It is a question of achieving the right balance, according to Nedimovic. While stressing that this year’s agricultural budget has yet to be spent, next year’s will focus on increasing competitiveness through investments in agricultural equipment and cold storage. Nedimovic is also to travel to China to discuss export opportunities.

3)

Processing Industry Should be Developed together with Slovenia

October 24th, 2016, http://www.tanjug.rs/full‐view.aspx?izb=279066

Following a meeting with Slovenian counterpart Dejan Zidan, Serbian Minister of Agriculture Nedimovic said Serbian agriculture must move from selling uncompetitive, cheap raw goods to value‐added, processed goods. He invited Slovenian companies to establish processing facilities in Serbia. While paying heed to specific product demand, the Ministry aims to develop the processing sector over the coming three years, expanding the fruit, vegetable and meat processing industries specifically, said Nedimovic. Only 3% of Slovenian agricultural exports are destined for Serbia, said Dejan Zidan, with only EUR 35 million of Serbian agricultural goods coming the other way. Due to its proximity, Slovenia would like to develop agri‐trade with Serbia, however, standard harmonization remains an issue.

The Serbian Ministry of Agriculture is actively seeking new markets, while this year’s land reform invites businesses to invest a minimum EUR 500,000 in agricultural projects on state owned land, said Nedimovic. Serbian crops with high potential include maize and raspberries, with export values of USD 400‐500 million and USD 252 million respectively, added Nedimovic.

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BFC Agriculture Bulletin

4)

Serbia Permitted to Export Unlimited Quantities of Beef and Lamb to China

October 23rd, 2016, http://www.politika.rs/scc/clanak/366243/Dobijeni‐sertifikati‐za‐izvoz‐mesa‐u‐Kinu

The necessary certificates were received to export unlimited quantities of beef and lamb to China, according to Minister of Agriculture Branislav Nedimovic. Trade cooperation was initially agreed in 2015, and while Serbia does not yet have adequate lamb production, the certificates should promote development, said Nedimovic. The same has been witnessed in the fruit industry since the signing of a free trade agreement with Russia 10 years ago, he added.

While inadequate use of land resources has been a problem in the past, the state has succeeded in forcing local governments to lease more arable land, with 120,000 hectares added to the system this year, said Nedimovic. This, in turn, has added EUR 25 million to the budget, he added.

5)

More Funds for Agricultural Equipment, Machinery, and Perennials

October 12th, 2016, http://www.stips.minpolj.gov.rs/sadrzajv/nedimovi%C4%87‐call‐centar‐za‐poljoprivrednike

In the 2017 and 2018, more funds will be allocated to agricultural equipment and machinery, and perennial crops, announced Minister of Agriculture Branislav Nedimovic. The focus will be on areas where value can be added. The money will be drawn from the national budget, the European Union (EU), and the European Bank for Reconstruction and Development (EBRD), said the Minister.

Additionally, in the first 100 days of the new government, a call center for farmers will be established, concluded Nedimovic.

Foreign Aid 6)

IPARD II Training Organized by Serbia Organica

October 30th, 2016, http://www.agrosmart.net/vesti/serbia‐organika‐organizovala‐obuku.html

The process of European integration and the status of Serbia as a candidate for membership in the European Union (EU) have opened up the possibility of using pre‐accession assistance (IPA) and the pre‐ accession funds for rural development (IPARD II). Funding provided through IPARD II is available to Serbian farmers but needs to be implemented through appropriate projects which fulfill certain criteria, necessitating trainings on the program, its propose and its requirements. Such a training was organized

by Serbia Organica in the city of Novi Sad this October.

During the trainings, participants learned of the relevant information regarding the IPARD II program in Serbia, including: program objectives, a description of the deliverables, priorities, necessary documents, legal and financial frameworks and the establishment of IPARD II structures in the Republic of Serbia.

The first phase of the program (through 2017) will support investments in physical assets of agricultural holdings, in physical assets relating to the processing and marketing of agricultural and fishery products, and in the diversification of farms and business development (rural tourism). The second phase (scheduled to begin in 2018) envisages support for the agro‐environmental climate and organic farming measures.

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BFC Agriculture Bulletin

7)

Dairy Industry Faces Quality and Efficiency Issues

October 25th, 2016, http://www.agronews.rs/unapredenje‐kvaliteta‐i‐efikasnosti‐proizvodnje‐neophodni‐za‐vecu‐ konkurentnost/

The greatest challenges for the Serbian dairy industry are efficiency and meeting EU quality standards, with Serbia recording 2.8 cows per household – the lowest figure across Europe – said Food and Agriculture Organization (FAO) economist Dmitry Prikhodko at the 2nd Serbian Dairy Congress in Belgrade. Next year, there will be strong state support for the livestock sector, said the Ministry of Agriculture’s Nenad Terzic, with plans to reintroduce a per liter subsidization according to quality.

Prikhodko, Terzic, and Serbian Association of Milk Producers chair Ljubisa Jovanovic reiterated the importance of National Laboratory accreditation, subsidy restructuring, milk import duties, and the introduction of quality standard labelling and international branding for the development of the dairy industry. The Congress agreed to bring 90% of Serbian milk quality to international standards in three to four years.

The Dairy Congress brings together producers, processors, research institutes, government agencies, associations, and consumer groups, and was held as part a pan industry project encouraging public and private sector dialogue organized by the FAO and the European Bank for Reconstruction and development (EBRD).

8)

FAO and EBRD Launch Grain and Oilseed Export Expansion Project

October 6th, 2016, http://www.agrosmart.net/vesti/fao‐ebrd‐pomazu‐srbiji‐izvozu‐zitarica.html

The Food and Agriculture Organization (FAO) and the European Bank for Reconstruction and Development (EBRD) will assist Serbia with grain and oilseed export market expansion, according to FAO consultant Milos Milovanovic. The Egyptian and Chinese markets for wheat and corn, respectively, offer a huge opportunity for Serbian exporters, however they cannot yet meet phytosanitary requirements.

This is a major obstacle for Serbian exports in general, said Milovanovic. In August, Serbia passed new quality regulations – FAO and EBRD consultants will help with its implementation, said Milovanovic. The FAO‐EBRD project aims also to cut red‐tape, and other costs and obstacles associated with the river‐ based grain and oilseed transport, essential to reaching international markets, said Milovanovic.

Eight joint FAO‐EBRD projects are currently underway in Serbia. The organizations assisted with cooperative legislation enacted in 2015 and are currently helping with its implementation. Other projects include assistance with the Public Warehouse Act, the Pre‐harvest Financing Act, certification of origin labelling, and public‐private sector dialogue and processing standard development in the meat and dairy sectors.

Private Sector 9)

Serbia Importing Large Quantities of Vegetables also Grown Domestically

October 25th, 2016, http://www.politika.rs/scc/clanak/366404/Raste‐cak‐i‐uvoz‐paradajza‐i‐paprike

Serbia imports more tomatoes, peppers and beans than it exports, despite widespread domestic cultivation, according to Serbian Statistical Office (SSO) data. In the first 8 months of 2016, tomato imports totaled USD 14.4 million, while exports totaled USD 3.6 million. Pepper imports totaled USD 3.4 million compared to exports worth USD 2.8 million. Bean imports totaled USD 4.3 million and potato imports totaled USD 1.6 million. The vegetables are imported mainly from Turkey, Greece, Albania and Macedonia. The vegetables fill a domestic supply gap from January to June. There is a free market, and Page 4

BFC Agriculture Bulletin

therefore goods are purchased where available, said the Fruits of Serbia Association’s Evic Mihaljevic, adding that greenhouses should be built to meet demand offseason, with the state subsidizing their construction. Serbia’s vegetable market is also geographically fragmented, increasing costs.

According to SSO figures, however, vegetable exports have increased compared to 2015, while imports of agricultural goods in general have decreased by 11%. The share of fruit and vegetable imports remained high, at USD 200 million.

10) Corn Harvest Expected at 8 Million Tons October 23rd, 2016, http://www.novosti.rs/vesti/naslovna/ekonomija/aktuelno.239.html:631334‐U‐silosima‐osam‐miliona‐ tona‐kukuruza

With 70% completed, this year’s corn harvest is estimated at 8 million tons over 1 million hectares – a 10% tonnage increase since 2014’s record figures. Domestic demand lies at 4.5 million tons, with exports currently totaling more than 3 million tons. Farmers remained dissatisfied with the current RSD 14‐15 per kilogram prices. However, the State Commodity Reserve will purchase 50,000 tons of corn at RSD 16.00 per kilogram, confirmed the Novi Sad Commodity Exchange. With farmers waiting for price increases and the Danube water levels particularly low, export has been slow, according to Vukosav Sakovic of the Serbian Cereals Association. River barges are currently at only 60% of capacity, he added.

11) IPARD Funding Hopes Cause Dramatic Drop in Agricultural Machinery Prices October 14th, 2016, http://www.agrosmart.net/vesti/serbia‐organika‐organizovala‐obuku.html

Although it is not known if and when Serbia will have access to the European Union’s (EU) Instrument for Pre‐Accession Assistance in Rural Development (IPARD) fund, many farmers have decided putting off investment in hope of participating. This has caused agricultural machinery prices to plummet by a third.

Since the possibility of IPARD funding was first raised in 2013, it has caused volatility in the agricultural machinery market, according to Secretary of the Agricultural Machinery Importers Association Dorde Miskovic.

12) Bluetongue Infects 166 Sheep October 13th, 2016, http://www.novosti.rs/vesti/naslovna/ekonomija/aktuelno.239.html:629864‐Bolesti‐kose‐stada‐a‐vakcina‐ nema

Despite 370,717 cattle and 394,936 sheep receiving vaccinations between November 2015 and May 2016, 166 new cases of bluetongue were reported since mid September. The news comes shortly after the lumpy skin disease outbreak had been successfully contained. The infections were reported in 57 farms in 14 villages of the Zlatibor district. There are currently no further vaccines available in Serbia.

The disease is spread by insects and cannot infect humans. The animals will be treated with vitamins and antibiotics. Farmers can claim state compensation for succumbed animals. Veterinarians are monitoring the spread of the disease.

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BFC Agriculture Bulletin

13) SCA: Beef Industry Can be Expanded October 12th, 2016, http://www.agronews.rs/zss‐hocemo‐li‐iskoristiti‐ponudene‐sanse‐za‐razvoj‐proizvodnje‐juneceg‐mesa/

The Serbian livestock, beef and dairy industries are currently struggling with only the development of a national, long‐term program and the opening of new markets – especially China – providing the necessary opportunity for expansion, according to a Serbian Cooperative Association (SCA) report.

Currently, the dairy industry is facing a crisis with milk prices dropping dramatically and threatening domestic production. The same problem is affecting producers across the European Union (EU), with oversupply causing prices to dip to an average 25.5 euro cents per liter, said the SCA. These issues will not be resolved in the foreseeable future, according to EU reports, continually affecting neighboring economies.

Except for China – where growth is estimated at 3% annually – and few North African countries, global meat consumption will stagnate, according to Food and Agriculture Organization (FAO) and Organisation for Economic Co‐operation and Development (OECD) reports. Serbia must increase export to China, with already Kragujevac agreeing to export 50,000 tons and Valjevo 12,000 tons of beef annually, reports the SCA. However, as expansion is slow and capital intensive, demand can only be met if a sustained national‐level program is introduced with appropriate long‐term finance instruments available to producers, argues the SCA. According to Statistical Office figures, Serbia currently has 470,000 dairy cows capable of producing 360,000 calves a year. Calves should be cross bred with other varieties – including the Simmental – increasing average live weights, said the SCA.

14) Asian Fruit Fly Threatens Serbian Fruit October 12th, 2016, http://www.politika.rs/scc/clanak/365467/Azijska‐musica‐suzuki‐pretnja‐za‐domace‐voce

Serbian fruit is under threat from the introduction of the Asian spotted wing drosophilia (drosophilia suzukii), according to Dragica Jankovic of the Novi Sad Institute for the Protection of Plants and the Environment. As opposed to other types of “fruit fly” which infest only rotting fruit, the suzukii also attacks healthy fruit. All soft fruit – including raspberries, blackberries, strawberries, peaches, and grapes – are under threat. In Serbia, there are no registered pesticides for dealing with the fly, said Jankovic. The pest probably arrived in fruit imports from Italy, France, Spain and Portugal, where the pest is already prevalent. The problem was exacerbated by producers abandoning the blackberry

harvest due to poor prices. This allowed the pest to reproduce rapidly. Even with the introduction of pesticides, the fly cannot be entirely contained.

15) Meat Exports to Russia Fall 90% October 12th, 2016, http://www.politika.rs/sr/clanak/365403/Kako‐smo‐poceli‐da‐uvozimo‐meso‐iz‐Rusije

At 1,598 tons, in the first 8 months of 2016, meat exports to Russia have nearly ceased. This marks a 90% decrease compared to the same period in 2015. The decline is due to the high price of Serbian meat on the Russian market caused by high transportation costs, according to Dejan Delic of the Serbian Chamber of Commerce. After the European Union (EU) embargo on food exports to Russia, Serbia had to circumvent the block, with goods taking two weeks and 7,000 kilometers to reach Russia. Meanwhile, domestic production in Russia strengthened, further decreasing the need for imports, said Delic. A week ruble further increased costs. Of the ten meat producers with a license to sell in Russia, only five are thought to be trading there today.

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16) October 17 Deadline for Provincial Agricultural Development Fund Applications October 11th, 2016, http://www.stips.minpolj.gov.rs/sadrzajv/krediti‐za‐nabavku‐mehanizacije‐najtra%C5%BEeniji

Farms and agribusinesses have until October 17 to apply for Provincial Agriculture Development Fund loans for the purchase of agricultural equipment, machinery, irrigation systems and greenhouses, as well as beehives and calves, according to the Fund’s Miroslav Stokin. Loans for agricultural machinery are in highest demand, said Stokin. Currently, there is a competition for six pieces of agricultural machinery worth RSD 1.8 million, he added.

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Prepared by Business & Finance Consulting (BFC) www.bfconsulting.com In this bulletin, BFC provides extracts from articles that have been published by others and as a result cannot be held responsible for such content.

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