#52 Serbia Agriculture Bulletin, BFC

01/2020

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52 S e r b i a Agriculture Bulletin Agricultural complex planned near Sombor

State subsidy program for tractor procurement

EBRD invests record EUR 516 million in Serbia in 2019

Expensive land prices have many farmers walking away

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Agriculture Finance Bulletin Edition #52, January 2020

Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4) 5) 6) 7) 8) 9)

Agricultural complex planned near Sombor.................................................................................... 2 State subsidy program for tractor procurement ............................................................................. 2 Government temporarily approves duty-free wheat imports ........................................................ 2 Foundation stone for new logistics center laid in Ruma industrial zone ........................................ 2 Belgrade hosts Serbia’s first fair specialized in fruit, wine and vegetables..................................... 3 Plan to offer farmers free use of unused state-owned agricultural land ........................................ 3 RSD 36.7 billion for agricultural development incentives ............................................................... 3 State incentives ineffective in livestock sector development ......................................................... 3 New system to increase the efficiency of registering agricultural holdings ................................... 3

Foreign Aid ................................................................................................................. 4 10) 11) 12) 13)

5 IPARD calls expected in 2020........................................................................................................ 4 Serbia’s first food accelerator program finding success ................................................................. 4 EBRD invests record EUR 516 million in Serbia in 2019 .................................................................. 4 IPARD grants could possibly support rural tourism in 2020 ............................................................ 5

Private Sector.............................................................................................................. 5 14) 15) 16) 17) 18) 19) 20) 21)

Poultry farms need to adapt to EU standards ................................................................................. 5 Expensive land prices have many farmers walking away ................................................................ 5 Raspberry prices up 30% worldwide ............................................................................................... 5 Fruit production and export levels dropped in 2019 ...................................................................... 6 Insurance assessment needs overhaul ............................................................................................ 6 Agricultural drone usage becoming increasingly popular ............................................................... 6 Water consumption for irrigation up in 2019 ................................................................................. 6 Possible EU pork exports within a year ........................................................................................... 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 »

BFC Max-Högger-Strasse 6 CH-8048 Zurich, Switzerland

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State Initiatives 1)

Agricultural complex planned near Sombor

January 25th, 2020, http://www.rtv.rs/sr_ci/ekonomija/aktuelno/u-plan

A new agricultural complex is being planned near the city of Sombor. Initial documents indicate that the complex will be built on approximately 1,100 hectares in the Stanisic municipality (to the north of Sombor). The complex will include farms, ponds, cold storage facilities, silos, biogas plants, solar power plants and wind farms. The complex, once completed, is expected to support agricultural production aimed at serving local markets, providing processed food products to other markets and catering to agricultural tourism.

2)

State subsidy program for tractor procurement

January 24th, 2020, http://www.politika.rs/scc/clanak/446523/Kako-do-subvencije-za-kupovinu-traktora

Under a state program, approximately 1,500 farmers unable to meet the requirements to access IPARD funds will have the opportunity to access state subsidies for the procurement of tractors this year. The program only allows subsidies for the procurement of tractors manufactured or assembled in Serbia and will only be provided after farmers have already purchased the tractors. The subsidies are open to registered farmers and cooperatives with at least five members. Eligible farmers will receive the subsidies in the form of a state refund for up to 50% (65% for those active in underdeveloped areas) of the cost of the tractor (excluding VAT), with a maximum amount set at RSD 800,000.

3)

Government temporarily approves duty-free wheat imports

January 21st, 2020, http://www.politika.rs/scc/clanak/446273/Zasto-je-dozvoljen-uvoz-psenice

The government of Serbia has approved duty-free imports of mercantile wheat following a request by flour and confectionery producers, who struggle to find quality grain in the market. Most experts believe that the move will not result in the market being inundated with an excess of higher-quality wheat given that it is more expensive than domestic (lower-quality) alternatives. Only the largest processors (with well-established markets) are expected to take advantage of the measure.

Duty-free imports will be allowed through April 30th of this year, after which the 18% duty fee will be reinstated.

4)

Foundation stone for new logistics center laid in Ruma industrial zone

January 17th, 2020, https://www.ekapija.com/en/news/2753797/foundation

The foundation stone for a business-storage logistic center has been laid in the Ruma industrial zone.

The facility, which is expected to be finished in the summer of this year, is being built with EUR 2 million in investments. In addition to the logistics center, a demonstration greenhouse is also being built for training and presentations. The complex, named the Gresto, is expected to improve yield results in the region and will employ 10 people.

Gresto is the result of 20 years of successful collaboration between Serbian producers and the Netherland’s KG Greenhouse BV and Macedonia’s Balkan Greenhouse.

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5)

Belgrade hosts Serbia’s first fair specialized in fruit, wine and vegetables

January 14th, 2020, http://www.tanjug.rs/full-view_en.aspx?izb=530787

Agro Belgrade 2020, Serbia's first specialized fruit, wine and vegetables fair, is being held through February 1. The event, which features over 500 exhibitors, is also showcasing cutting-edge machinery and hosting 12 conferences on a variety of topics, including current challenges, new trends in production and technical and digital achievements in the agriculture sector.

The event is being sponsored by the City of Belgrade Secretariat for the Economy and the Competitive Economy Project of the United States Agency for International Development (USAID).

6)

Plan to offer farmers free use of unused state-owned agricultural land

January 11th, 2020, http://www.rts.rs/page/stories/sr/story/13/ekonomija/

A recent check of some state-owned agricultural land found that a large number of such parcels were not being used and were neglected. This has prompted Agriculture Minister Branislav Nedimovic to call for a census of all state-owned agricultural land to determine which parcels are not being used and then offer them to farmers for use free of charge for 5 years, with the favorable conditions for its use for the following 25 years.

7)

RSD 36.7 billion for agricultural development incentives

January 10th, 2020, http://www.stips.minpolj.gov.rs/srl/vest/usvojena-uredba-o-podsticajima-u-poljoprivredi

The government of Serbia adopted the Decree on the Allocation of Incentives in Agriculture and Rural Development in 2020. This provides RSD 36.7 billion for measures to improve the competitiveness of farms in underdeveloped areas of agricultural production as well as those operating in difficult areas.

According to the Decree, funds will be in the form of direct payments, credit support and IPARD incentives.

8)

State incentives ineffective in livestock sector development

December 30th, 2019, https://agrosmart.net/2019/12/30/izvestaj-drisubvencije-nisu-pomogle-razvoj-stocarstva/

Serbia allocated approximately RSD 28 billion for incentives in animal husbandry during 2016-2018; however, this has resulted in no significant developments in the livestock sector. In fact, some decreases in the number of certain animals and the production of certain types of meat have been recorded. According to the State Audit Institution, this is due the Ministry of Agriculture failing to provide stable and predictable policies regarding the livestock incentive system as well as failures in the proper processing of subsidy claims. These both lead to uncertainty on the part of livestock producers as to whether or not (and when) funds will actually be made available to them. The State Audit Institution recommended that future similar measures be implemented according to well-planned and well-documented policies.

9)

New system to increase the efficiency of registering agricultural holdings

December 30th, 2019, http://www.agronews.rs/uz-softver-i-cetiri-puta-brza-registracija-poljoprivrednika/

Improved technology (including new software) is capable of accelerating the administrative procedures for registering agricultural holdings by nearly 4 times as well as reducing associated costs by 80%.

Currently processes require farmers to submit 89 pieces of data on more than 10 different documents, much of which is either unnecessary or repeated. Following this, data is then verified and entered into systems manually, unnecessarily wasting time and adding delays in subsidy payments. With a newlyproposed electronic version (which would include a web portal), the process would be reduced from Page 3

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280 minutes to just 75 minutes, and the total cost for farmers would be reduced from RSD 133 million to just RSD 19 million.

Foreign Aid 10) 5 IPARD calls expected in 2020 January 28th, 2020, http://subvencije.rs/vesti/ipard-u-2020-godini-sta-mozemo-da-ocekujemo/

The Ministry of Agriculture plans to announce five public calls from the European Union (EU) IPARD assistance program this year, with incentives expected to total approximately EUR 57.6 million. The first call is expected be for rural tourism and should be published in March. If approved the by the European Commission, support from IPARD under this measure will be available for the construction and improvement of facilities for rural tourism, the purchase of new equipment and furniture and the construction, reconstruction and equipping of facilities for tourist and catering services. Other calls this year are expected to be for: technical assistance in the implementation of the IPARD program itself; the provision of tractors for farmers, cooperatives and small- and medium-sized enterprises; the construction of storage facilities, farms and greenhouses; and the procurement of equipment for orchards and vineyards.

11) Serbia’s first food accelerator program finding success January 24th, 2020, http://www.agronews.rs/kvalitetna-domaca-hrana-na-svetskom-trzistu-uz-pomoc-foodscale-hub-a/

Serbia’s first accelerator program for food companies (including startups) has helped several quality Serbian food products reach new export markets and add a value of close to EUR 1 million in less than a year. Foodscale Hub aims to help develop “Serbia” as a geographical brand that is synonymous with quality for consumers in number of important markets, including Germany, Norway and the U.S. Noting the potential for exporting quality Serbian food products, Foodscale Hub hopes to help them obtain important knowledge regarding processing and packaging, access finance and make contacts in the strategic markets. To this end, the accelerator is dedicated to helping each company it works with develop a unique concept tailored to their specific context.

12) EBRD invests record EUR 516 million in Serbia in 2019 January 16th, 2020, https://www.ebrd.com/news/2020/ebrd-invests-record-516-million-in-serbia-in-2019.html

In 2019, the European Bank for Reconstruction and Development (EBRD) recorded a record level of activity in Serbia, signing 20 new projects worth a total investment of EUR 516 million. Most of these projects are aimed at helping private sector development, especially the green economy. Project highlights include: • EUR 226.2 million in credit lines to commercial financial institutions for on-lending to small- and medium-sized enterprises to enhance the competitiveness of the private sector • Training and advisory support for women entrepreneurs • Financing to rehabilitate a 40-year old landfill • EUR 15 million to finance the rehabilitation and construction of irrigation infrastructure • Assistance in preparing a national irrigation strategy • Support to over 600 households in improving their energy efficiency • Financing to develop two wind farms Since Serbia joined forces with EBRD in 2001, the bank has invested more than EUR 5.6 billion across 255 projects in the country.

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13) IPARD grants could possibly support rural tourism in 2020 January 3rd, 2020, http://www.tanjug.rs/full-view_en.aspx?izb=528851

Serbia’s Ministry of Agriculture has proposed that IPARD funds be extended for two new measures: (1) grants for investments in rural tourism and (2) support for the Ministry's steering body. If approved by the European Commission (EC), Serbian citizens will be able to apply for IPARD grants for constructing and equipping rural tourism facilities. The Ministry’s steering body will also receive financial assistance to carry out information and educational activities aimed at boosting the utilization of IPARD funds and improving the implementation of IPARD programs.

Private Sector 14) Poultry farms need to adapt to EU standards January 21st, 2020, http://www.agronews.rs/zivinarske-farme-da-se-prilagode-standardima-eu/

Serbia’s poultry farms have much work to do in adopting European Union (EU) standards in order to remain eligible for exports to the EU. Meeting the new standards requires a significant shift in how poultry farms operate, especially in the space required for them to operate. For example, EU standards imply a 36% reduction in the number of chickens housed in the same area. Moreover, chickens must be given a nest in which to lay eggs and must have access to all the elements of life in nature.

An estimated EUR 50 million-EUR 60 million will be required to update all poultry farms in the country to these new conditions.

15) Expensive land prices have many farmers walking away January 18th, 2020, https://www.novosti.rs/vesti/naslovna/ekonomija/aktuelno.239

Agricultural land in Serbia is valued at EUR 10,000-EUR 20,000 per hectare, nearly twice as much as in surrounding areas. Moreover, prices are expected to continue to increase in the near future, causing many owners of agricultural land to charge increased rental prices to farmers. This, in turn, has put farmers in a situation where production in increasingly expensive and decreasingly profitable, leading to many to simply quit agriculture. The main problem stems from those in different industries increasing the demand for arable land, which they view as a better investment than buying apartments, gold or saving at banks. Farmers, which often have already thin profit margins, simply cannot afford the higher prices to buy the land and are stuck being renters. But with rental prices increasing, many are moving on to greener pastures in other industries to support their families.

At some point, the situation will become unstable. But until then, the farmers (especially smaller-sized one) are the ones truly suffering.

16) Raspberry prices up 30% worldwide January 17th, 2020, http://www.politika.rs/scc/clanak/445971/Svetske-nestasice-pogurale-cenu-maline

Raspberry prices the world over have increased by about 30% thanks to bad weather impacting Chile’s raspberry production. Serbia, as one of the world’s largest raspberry producers and exporters, could benefit from this rise in raspberry prices, although the country has been experiencing its own issues in recent years and saw a production level of only 53,000 tons last year (down from 83,000 tons in 2016).

Serbian raspberry producers are also facing increased competition from new competitor countries, in-

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cluding Bosnia and Herzegovina, Mexico and Ukraine. Still, if Serbia can intensify investments in raspberry production, it could become the dominant raspberry producer worldwide.

17) Fruit production and export levels dropped in 2019 January 15th, 2020, http://www.stips.minpolj.gov.rs/srl/vest/manji-proslogodisnji-rod-voca

Tentative estimates of Serbia’s 2019 fruit production levels indicate that Serbia produced 7-8% less fruit in 2019 than it did in 2018. This equates to approximately USD 625 million-USD 630 million in total export value. These figures include increases in the production and export of apples, apricots and cherries as well as decreases in the production and export of pears, quinces and nuts.

18) Insurance assessment needs overhaul January 13th, 2020, https://www.021.rs/story/Info/Biznis-i-ekonomija/231952/Pomazuci

In recent years, farmers have been hit hard by a number of adverse weather events – from frost and strong winds to inundations and severe droughts. This would lead many to think that insurance is of vital importance to Serbian farmers; however, households and small-sized farmers in Serbia struggle to afford appropriate insurance products, even with state subsidies of up to 70% of the premium. In fact, those really benefitting from state subsidies tend to be the larger producers that do not really need the assistance. This is largely due to the way assessment works in Serbia, which is based on outdated approaches that favor larger farms. For insurance subsidies to truly benefit the intended recipients (i.e. households and small-sized farmers), the government needs to support efforts to revamp insurance assessment.

19) Agricultural drone usage becoming increasingly popular January 11th, 2020, https://agrosmart.net/2020/01/11/bespilotne-letelice-u-poljoprivredi-dronovi-sve-vide/

Drones are taking off to help improve agricultural development around the world. In Serbia, drones are being used increasingly for a number of different tasks, including determining land quality and monitoring against theft. In the near future, the state is also planning to use them to detect illegal pasture plowing, illegal facilities and wild landfills. Research is also being conducted to use drones to monitor plant stress due to a lack of or excess moisture, inadequate nutrition and the appearance of diseases and pests. The sky is literally the limit for how drones can be used to improve Serbia’s agricultural sector.

20) Water consumption for irrigation up in 2019 January 10th, 2020, http://www.tanjug.rs/full-view_en.aspx?izb=530033

According to Serbia’s National Statistical Office, 24.1% more water was consumed for irrigation in Serbia in 2019 than was consumed in 2018, despite the total irrigated surface being smaller. In total, 67,692 cubic meters of water (90.2% of which came from waterways) were used last year to irrigate 46,863 hectares of agricultural land (0.2% less than in 2018). Sprinkling was the most common irrigation method (92.3%), followed by drip irrigation (7.6%) and surface irrigation (0.1%). Of the total irrigated area, arable land and gardens was the most irrigated (94.9%), followed by orchards (4.5%) and other agricultural land (0.6%).

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21) Possible EU pork exports within a year December 29th, 2019, https://www.ekapija.com/news/2736818/ako-se-klasicna-kuga-svinja-ne-vrati-izvoz-mesa-u-eu-za

Serbia suspended vaccination against classical swine flu last month; however, this is only one step towards exporting Serbian pork to European Union (EU) markets. It will be important for Serbia, going forward, to monitor, examine and report on the state of pig health in the country (including pig deaths).

If all progresses as it is expected to, Serbian pork exports to EU markets could resume within a year. The opening of such markets would likely result in an increase in the number of pigs in the country, which currently stands at around 3 million.

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Prepared by Business & Finance Consulting (BFC) www.bfconsulting.com Articles are taken directly from local sources without any fact-checking; they are provided as a convenience and for informational purposes only. Business & Finance Consulting (BFC)’s editing is limited to providing a short summary in English of the texts, highlighting the main points of the original articles.

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