#14 Serbia Agriculture Bulletin, BFC

11/2016

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14 S e r b i a Agriculture Bulletin Farmers to Receive RSD 1.2 Billion for Investments RSD 2 Billion Increase in Agriculture Budget Go towards Machinery and Beef Exports UNDP to Provide Sector Analysis and Corresponding Development Program Serbian Beef Looking to Come Back to World Markets

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Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4) 5) 6) 7)

EUR 27 Million More from Leasing of State‐Owned Lands than in 2015 ........................................ 2 Farmers to Receive RSD 1.2 Billion for Investments ....................................................................... 2 Agricultural Land Law and Subsidy Schemes Should Be Amended, Say Farmers’ Associations ..... 2 RSD 2 Billion Increase in Agriculture Budget Go towards Machinery and Beef Exports ................. 3 EU Accession Report Highlights Array of Issues .............................................................................. 3 Vojvodina’s Livestock Sector Receives RSD 29.8 Million ................................................................. 3 Serbia Proposes Expanding Free Trade with EEU ............................................................................ 4

Foreign Aid ................................................................................................................. 4 8) 9) 10) 11) 12)

Geographic Information System to Help with Leasing of State‐Owned Land ................................. 4 UNDP to Provide Sector Analysis and Corresponding Development Program ............................... 4 APOLO Satellite‐Based Precision Agricultural Advisory Launches................................................... 5 IPARD Funds May Be Available as Early as Second Half of 2017 ..................................................... 5 EUR 1.2 Million Agri‐Technology Business Accelerator to Launch .................................................. 5

Private Sector .............................................................................................................. 6 13) 14) 15) 16) 17) 18) 19)

Serbian Beef Looking to Come Back to World Markets .................................................................. 6 Agricultural Loans with 80% Less Interest for Bac Farmers ............................................................ 6 Many Farmers Unable to Meet Pension Scheme Payment Obligations ......................................... 6 Pancevo Farmers’ Association Demands 50% per Hectare Subsidy Increase ................................. 7 Corn Exports Slowed by Low Water Levels on Danube ................................................................... 7 EUR 650,000 Honey Processing Facility to Be Built in Raca ............................................................ 7 While Neglected in Serbia, Cooperatives are EU Development Cornerstones ............................... 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)

EUR 27 Million More from Leasing of State‐Owned Lands than in 2015

November 28th, 2016, http://www.rts.rs/page/stories/ci/story/5/ekonomija/2542075/nedimovic‐od‐zakupa‐zemljista‐27‐ miliona‐evra‐vise‐.html

Agriculture Minister Branislav Nedimovic announced that the government of Serbia generated EUR 27 million more than last year from the leasing of agricultural land. The increase is largely due to 120,000 hectares of state‐owned land being opened up this year for leasing. In 2016, a total of 460,000 of the estimated 600,000 hectares of state‐owned agricultural land was leased.

With the recent announcement of a geographic information system being introduced to make leasing simpler, more efficient and more transparent, it is expected that the revenue created from leasing agricultural land will continue to rise.

2)

Farmers to Receive RSD 1.2 Billion for Investments

November 28th, 2016, http://sremska.tv/2016/11/12‐milijarde‐dinara‐za‐poljoprivrednike/

Agriculture Minister Nedimovic has announced that his Ministry will pay RSD 1.2 billion for planned investments instead of the initial RSD 520 million, meaning that each of the approximately 6,000 farming households receiving the investment funds will have around RSD 200,000 to use for the purchase of equipment, cold storage and drying facilities. In addition, the state will make use of funds from the Development Fund of Abu Dhabi for irrigating Serbian fields. It is estimated that EUR 100 million will be used from the fund over the next three years to help revitalize Serbia’s fruit‐ and vegetable‐related industries.

3)

Agricultural Land Law and Subsidy Schemes Should Be Amended, Say Farmers’ Associations

November 22nd, 2016, http://www.stips.minpolj.gov.rs/sadrzajv/ne‐sme‐vi%C5%A1e‐biti‐zapu%C5%A1tenih‐njiva

At a Novi Sad forum gathering Vojvodina‐based agricultural associations, participants argued the law governing the use of state‐owned agricultural land should be amended, while certain subsidy schemes should be extended. The forum heard Vojvodina has 120,000‐140,000 hectares of unexploited state‐ owned arable land. Participants agreed the following points: the young farmer subsidy age limit should be extended to 42 years; state‐owned land lease periods should be extended to 30 years; maturity periods for corresponding development loans should also be extended to 30 years; and facilities and infrastructure linking farmers to processing enterprises should be developed. As it is unclear whether Serbia will join the European Union, land should not be leased to foreigners, according to Pancevo Farmers’ Association Director Jovan Negovan.

Progress has been made, however, according to State Secretary of Agriculture Zeljko Radosevic. While in 2014 and 2015 only two municipalities in Vojvodina, and only thirty municipalities across the rest of Serbia, had land leasing schemes, this year all municipalities have such a program, said Zeljko. Resulting funds go directly into municipal and state agricultural budgets, noted the Secretary. This year, for example, Vrbas raised an additional EUR 1 million following the introduction of a leasing program, said Zeljko.

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4)

RSD 2 Billion Increase in Agriculture Budget Go towards Machinery and Beef Exports

November 22nd, 2016, http://www.politika.rs/scc/clanak/368369/Za‐poljoprivredu‐dve‐milijarde‐vise

The agriculture budget for 2017 is estimated at RSD 29.89 billion, up from this year’s RSD 27.95 budget.

The almost RSD 2 billion in additional funding is expected to go towards renewing Serbia’s ageing stock of agricultural machinery and boosting beef exports, according to Politika sources. The last census in 2012 revealed more than 95% of Serbia’s half million tractors were close to retirement age, while almost the entire combine harvester, plow, and harrow fleets were older than ten years.

Requesting anonymity, a source told Politika the beef industry would receive additional funding in an attempt to boost exports to European markets. Serbia’s European Union (EU) baby‐beef export quota stands at 8,700 tons; however, barely any is exported, according to Cooperative Association of Serbia President Nikola Mihailovic. Instead, half of Serbia’s beef exporters are declining, he added. In the short term, there are not enough cattle to increase beef exports, according to analyst Vojislav Stankovic. The EU beef shortfall stands at 300,000 tons annually, noted Stankovic. In Serbia, the focus is on rearing dairy cattle, which do not produce high quality meat, said Stankovic. Promoting domestic consumption is an alternative approach, with per capita consumption at 14.5 kilograms compared to 30 kilograms across the EU, concluded Stankovic.

5)

EU Accession Report Highlights Array of Issues

November 12th, 2016, http://www.agrosmart.net/vesti/izvestaj‐evropske‐komisije‐napretku.html

The European Commission released a progress report on Serbia’s accession to the European Union (EU).

Regarding agriculture and food security, many issues remain unresolved. Serbia is yet to build the institutional capability requisite for Instrument for Pre‐accession Assistance in Rural Development (IPARD) fund accreditation, according to the report. Moreover, it hasn’t developed the integrated administration and control system (IACS) for agricultural payments and land parcel identification system (LPIS) required of all member states. The Farm Accountancy Data Network (FADN) – an EU agricultural holding census and legislation harmonization project – concluded Serbia lacks formal definitions of institutional responsibilities.

The report claims no progress has been made regarding food safety, and veterinary and phytosanitary policy harmonization. The national milk testing laboratory is not yet operational and aflatoxin levels have increased to five times the permitted level. While there were no cases of swine flu, the report noted the spread of lumpy skin disease in cattle. Additionally, the report recommends the implementation of a legal framework for sustainable pesticide application. Additionally, no progress has been made in harmonizing genetically modified organism (GMO) legislation, which is a precondition on Serbia acceding to the World Trade Organization (WTO). Finally, more organic production need to be developed, which currently stands at just 15,000 hectares, or 0.4% of total cultivated land, concluded the report.

6)

Vojvodina’s Livestock Sector Receives RSD 29.8 Million

November 10th, 2016, http://www.rtv.rs/sr_ci/vojvodina/za‐opremanje‐farmi‐17‐7‐miliona‐dinara_773269.html

A further 29 grants worth RSD 17.7 million were awarded to livestock farms through the Vojvodina Development Fund, bringing this year’s total to 50 grants worth RSD 29.8 million. Almost all funds earmarked for livestock farming have now been disbursed, according to Vojvodina’s Provincial Secretary of Agriculture Vuk Radojevic. The Secretary is confident further funds will be allocated to the sector in Page 3

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the near future. The measures are aimed at building production capacity and quality standards, as well as providing equipment for small‐scale butchers and dairies, said Radojevic.

7)

Serbia Proposes Expanding Free Trade with EEU

November 1st, 2016, http://beta.rs/ekonomija/ekonomija‐srbija/44629‐srbija‐nudi‐evroazijskoj‐uniji‐piletinu‐sir‐secer‐cigarete‐ i‐automobile

Minister of Trade Rasim Ljajic sent a document to the Eurasian Economic Commission detailing free trade proposals between Serbia and the Eurasian Economic Union (EEU). The document is based on discussions held with an EEU delegation in Belgrade in September. It proposes expanding existing Serbia‐Russia free trade arrangements to include all EEU members, as well as removing import duties on Serbian poultry, sugar, cigarettes, Fiat vehicles, and certain cheeses, according to Ljajic. The EEU consists of Russia, Kazakhstan, Belarus, Armenia and Kyrgyzstan.

Foreign Aid 8)

Geographic Information System to Help with Leasing of State‐Owned Land

November 28th, 2016, http://www.mpzzs.gov.rs/geografskim‐informacionim‐sistemom‐do‐efikasnijeg‐i‐jednostavnijeg‐ planiranja‐i‐koriscenja‐drzavnog‐poljoprivrednog‐zemljista/

Within the “Improvement of Land Management at the Local Level in the Republic of Serbia” project, a geographic information system has been presented to help simplify the leasing of state‐owned agricultural lands. In this way, the Directorate for Agricultural Land and all local governments will be able to more efficiently and easily plan the use of state‐owned agricultural land. Agriculture Minister Nedimovic stated that land is the greatest resource of the state of Serbia and that new information technologies will help ensure that the approximately 600,000 hectares of agricultural land owned by the state are managed properly.

The “Improvement of Land Management at the Local Level in the Republic of Serbia” project is being implemented by the German Agency for International Cooperation (GIZ). The project will last for three years in total and has a budget of USD 3 million.

9)

UNDP to Provide Sector Analysis and Corresponding Development Program

November 24th, 2016, http://www.ekapija.com/website/sr/page/1605119/UNDP‐poma%C5%BEe‐Srbiji‐u‐izradi‐analize‐svih‐ oblasti‐poljoprivredne‐proizvodnje‐do‐2020‐godine‐Najavljena‐podr%C5%A1ka‐prera%C4%91iva%C4%8Dkom‐sektoru

The United Nations Development Programme (UNDP) will compile a Serbian agricultural sector analysis by 2020, which will provide the basis of an agricultural assistance program, it was announced following talks between Minister of Agriculture Branislav Nedimovic and UNDP Resident Representative in Serbia Irena Vojackova‐Sollorano. The UNDP will assist with market expansion as well as the development of profitable meat, fruit and vegetable processing sectors. Nedimovic also held meetings with representatives of UN Women, the UN Environment Programme (UNEP), the Food and Agricultural Organization (FAO) and the World Health Organization (WHO).

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10) APOLO Satellite‐Based Precision Agricultural Advisory Launches November 19th, 2016, http://subvencije.rs/vesti/apolo‐projekat‐prvi‐bilten‐o‐preciznoj‐poljoprivredi‐u‐2016‐godini/

APOLO – a satellite‐based precision farming service – has launched in Serbia, according to Communications Manager Nefeli Politi‐Stergiou. Beneficiaries will receive access to data gathered through satellites as well the EU’s Copernicus program. APOLO will provide information on crop status, health, and yields, along with precise advice on when, where and how to sow and plough; and when, where and how much fertilizer and irrigation are required, according to Politi‐Stergiou. The comprehensive platform should improve yields and reduce inputs, increasing profitability and competitiveness.

APOLO includes nine partners from five countries – Greece, Spain, Austria, Belgium and Serbia – including Ruma Municipality Farmers’ Association of Serbia and Agricultural Cooperative Pela from Greece. The project aims to address small‐scale farming issues in particular, said Politi‐Stergiou. By 2050, farmers will need to produce twice as much food while available land becomes scarcer. Moreover, Serbia faces erosion and water shortages, notes Politi‐Stergiou. The agriculture sector also faces pressure to produce sustainably, using less pesticides, fertilizers, water and fuel, he added. APOLO helps address these problems by providing precision advice limiting inputs. APOLO is funded by the European Union (EU) through the Horizon 2020 project.

11) IPARD Funds May Be Available as Early as Second Half of 2017 November 8th, 2016, http://www.rtv.rs/sr_ci/ekonomija/aktuelno/paorima‐novac‐iz‐fondova‐eu‐u‐drugoj‐polovini‐ 2017._772376.html

Access may yet be granted to the European Union’s (EU) EUR 175 million Instrument for Pre‐accession Assistance in Rural Development (IPARD) funds in the second half of 2017, according to Danilo Golubovic, a member of the Serbian EU negotiating team. The government is in the process of meeting EU requirements for accreditation, including the hire of an additional 106 people to implement the program, said Golubovic. Serbia is required to take responsibility for the IPARD tender process, fund distribution and other procedures, according to Golubovic. The Directorate for Agrarian Payments is currently being strengthened to accommodate the program. Serbia received accreditation for the decentralized use of EU funds in 2014. IPARD beneficiaries will receive reimbursement of up to 50% of total project costs. However, initial investments cannot be sourced from state programs, said Golubovic.

12) EUR 1.2 Million Agri‐Technology Business Accelerator to Launch November 1st, 2016, http://katanaproject.eu/news‐and‐events/

A forum on the European Union (EU) backed EUR 1.2 million KATANA business accelerator was held at the University of Novi Sad. KATANA assists European small and medium enterprises (SMEs) and start‐ ups in the agri‐food value chain to access knowledge, technology, capital and markets. The accelerator identifies information and communications technology (ICT) innovations in the agri‐sector with the greatest development potential. The ten selected beneficiaries will also receive EUR 100,000 each, according to Jasna Komatovic of Innocence, a Novi Sad based company. Considering the positive outcome of the Future Internet Enabled Agricultural Applications (FRACTALS) program – which financed 46 businesses with a total EUR 5.52 million – Komatovic expects innovative ICT applications in agriculture to be realized through KATANA. Applications will be received as of December 1. Prospective beneficiaries may present their ideas via a two‐minute video submitted at www.katanaproject.eu.

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Private Sector 13) Serbian Beef Looking to Come Back to World Markets November 27th, 2016, http://www.rts.rs/page/stories/ci/story/5/ekonomija/2541286/moze‐li‐srpska‐govedina‐ponovo‐na‐ svetsko‐trziste.html

Following the news that three Serbian companies have obtained certificates to export beef to China, there are questions regarding whether or not the Serbian beef industry can bounce back to its former levels. In the late eighties, there were more than two million head of cattle and around 20,000 tons of beef being exported. But today, there are only 990 thousand head of cattle with only 1,300 tons being exported, mostly to Bosnia and Herzegovina. The drop‐off is largely due to pastures not being utilized as they once were and slaughterhouses having financial problems.

Chinese and Arab markets are seen as key to revitalizing the industry in Serbia, and many are calling for increased support to make sure this happens. Economist Milan Spacious notes that the certificates to export to China are a big step, but more needs to be done, including state subsidies for the industry and incentives to both not export live cattle and stimulate the production of more live cattle in the country.

All of this, he says, can be accomplished through a long‐term agricultural policy that lays out the goals of the country and how to achieve them.

14) Agricultural Loans with 80% Less Interest for Bac Farmers November 25th, 2016, http://subvencije.rs/vesti/poljoprivredni‐krediti‐sa‐subvencionisanjem‐80‐kamate/

Farmers from the municipality of Bac (South Backa district) will have the ability to use short‐term agricultural loans with an interest rate that is reduced by 80% as part of a subsidy program supporting measures of agricultural and rural development. The loans are intended for the procurement of raw materials, animal feed, and agricultural machinery and equipment as well as for equipment to process agricultural products. The minimum loan amount has been set at RSD 100 thousand, and the maximum loan amount will be RSD 1 million; the repayment period of the loans will be 12 months.

The banks that have signed an agreement with Bac for cooperation with this project are: Credit Agricole Bank, Banca Intesa Bank, OTP Bank, and Opportunity Bank.

15) Many Farmers Unable to Meet Pension Scheme Payment Obligations November 21st, 2016, http://www.agronews.rs/vise‐od‐polovine‐poljoprivrednika‐ima‐nereseno‐penziono‐osiguranje/

About 50% of farmers in Vojvodina and 80% south of the Danube have problems meeting state Pension and Disability Insurance Fund obligations, according to the farmers’ association Banatski Paori. The payment structure was determined when farmers were receiving up to RSD 16,000 per hectare in subsidies. Today, the rate is RSD 4,000 per hectare, leaving many unable to pay. Farmers cannot opt out of the scheme until retirement, leaving some with liabilities exceeding the value of their property.

Banatski Paori recommends the introduction of pay grades determined according to farm size, as well as the option to opt out of the pension scheme.

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16) Pancevo Farmers’ Association Demands 50% per Hectare Subsidy Increase November 15th, 2016, http://www.rtv.rs/sr_ci/vojvodina/pancevo/%E2%80%8Bratari‐od‐viska‐u‐budzetu‐isplatiti‐ podsticaje_774685.html

The Pancevo Farmers’ Association has demanded per hectare subsidies increase from RSD 4,000 to RSD 6,000, according to its President Jovan Negovan. In December 2015, when subsidies where halved, farmers were promised RSD 6,000 per hectare should funding become available. With a budget surplus expected this year, the deficit should be filled unconditionally, argued the President. Currently, the incentive scheme envisages RSD 2,000 for crops and RSD 2,000 for 400 kg of fertilizer. This is only enough fertilizer for springtime farming activities, claimed Negovan. Due to shortfalls, corn has yet to be harvested and wheat was sowed on only half of the projected area, said Negovan. According to the law, farmers should receive 5% of the national budget, which amounts to RSD 50 billion. However, currently they receive only 40.6 billion, added Negovan.

17) Corn Exports Slowed by Low Water Levels on Danube November 8th, 2016, http://www.politika.rs/sr/clanak/367399/Stao‐izvoz‐kukuruza‐sledi‐interventni‐otkup

Low water levels on the Danube have slowed corn exports. With ships facing difficulties entering and leaving ports, corn already sold on international markets has yet to be exported. Price increases have not yet materialized, however, according to Vukosav Sakovic, Director of internet grain portal “Zita Srbije”, the state reserve is likely to purchase 50,000 tons of corn. Individual farms and cooperatives may repurchase up to 100 tons and 200 tons of corn, respectively, at RSD 16.5 per kilogram, according to Commodity Reserve Director Zorica Andjelkovic.

18) EUR 650,000 Honey Processing Facility to Be Built in Raca November 7th, 2016, http://rs.n1info.com/a206386/Biznis/Pcelari‐grade‐pogon‐za‐otkup‐i‐plasman‐meda‐u‐Raci.html

The Beekeeping Association of Serbia (SPOS) has chosen to locate their EUR 650,000 honey processing and packaging facility in the municipality of Raca. The SPOS invited municipalities to tender for the pro‐ ject. Amongst 32 applicants, 6 were shortlisted, including Raca, Srbobran, Cuprija, Surdulica and Mali Zvornik. Raca offered a plot of land and RSD 30 million towards construction, as well as EUR 80,000‐ 100,000 in infrastructure upgrades. Construction is expected to begin next year, according to SPOS President Rodoljub Zivanovic. The facility will provide beekeepers with more negotiating leverage, said the President. This year, producers were offered EUR 1.5 per kilogram of honey, while real prices were around EUR 2.1 per kg, claims Zivanovic. Due to poor weather conditions, 2016 was the worst year in eight decades for beekeepers, with just 1,100 tons of honey produced – five times less than the annual average.

19) While Neglected in Serbia, Cooperatives are EU Development Cornerstones November 1st, 2016, http://www.ekapija.com/website/sr/page/1586328/Za‐obnovu‐zadrugarstva‐u‐Srbiji‐neophodna‐ politi%C4%8Dka‐volja‐Dugoro%C4%8Dna‐stabilnost‐i‐proizvodnja‐za‐poznatog‐kupca‐glavne‐prednosti‐udru%C5%BEivanja‐ poljoprivrednika

According to a 2010 European Union (EU) survey, the main advantage of agricultural cooperatives is the price and production stability they provide for buyers, with the economic interests of cooperatives thus translating into those of their members. In the EU, cooperatives are the cornerstone of agricultural and food industry development while, in Serbia, they are in decline, according to Cooperative Association of Serbia President Nikola Mihailovic. Circumstances are unfavorable in terms of volume, production Page 7

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structure, and policy environment, said Mihailovic. The state prefers focusing on big business at the expense of small‐scale producers, he added. This is illustrated by the absence of state cooperative incentives from 2004‐2012, noted Mihailovic.

Serbia lacks cooperatives focusing on mechanical services, procurement, and surplus sales, according to Belgrade Faculty of Agriculture Professor Miladin Sevarlic. Agricultural policy is a major weakness, says Sevarlic. The government should create a partnership with cooperatives that includes the development of 20‐30 regional procurement, processing and marketing centers, said the Professor, though the political will is lacking. A new cooperative law went into effect on January 7, 2016, simplifying the registration process as well as clarifying ownership structures, according to the Ministry of Economy.

The law stipulates a minimum of five members with stakes of RSD 100 each. Since then, an additional 35 cooperatives have been registered while 70 existing cooperatives aligned themselves with the new legislation, added the Ministry.

There are currently 1,568 registered cooperatives in Serbia with 1,099 submitting financial statements for 2014 and 2015, according to the Serbian Business Registers Agency. In 2015, cooperative revenue totaled RSD 68.3 billion. The highest performers tended to be cooperatives that link production with the final product and have access to large areas of land, modern machinery, and storage facilities, notes Mihailovic.

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