#07 BFC Serbia Agriculture Finance Bulletin

04/2016

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7 Serbia Agriculture Finance Bulletin Beekeeping Subsidies Increase in 2016

Spain to Provide Serbia with Agricultural Expertise

Serbia World’s Largest Raspberry Producer Chinese Company Interested in Investing in Serbian Agriculture

All materials are published “as is” and are the property of their respective owners.

Agriculture Finance Bulletin Edition #7, April 2016

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

Nursery and Seedling Farms to be Subsidized................................................................................. 2 Of Planned Milk, Food and Phytosanitary Laboratories, Only the Latter Functional ...................... 2 Beekeeping Subsidies Increase in 2016 ........................................................................................... 2

Foreign Aid ................................................................................................................. 3 4) 5) 6)

Spain to Provide Serbia with Agricultural Expertise ........................................................................ 3 IPARD Applicants Will Lose Rights to State Subsidies ..................................................................... 3 Prijepolje Receives 23 Raspberry Processing Units worth RSD 4 million ........................................ 3

Private Sector.............................................................................................................. 4 7) 8) 9) 10) 11) 12) 13) 14) 15) 16) 17) 18) 19) 20)

Freezing Temperatures Cause Fruit Damage in Northwest Serbia ................................................. 4 Serbia World’s Largest Raspberry Producer .................................................................................... 4 Record High Wheat Inventories Expected to Affect Prices ............................................................. 4 1,500 Companies to Participate in Novi Sad International Agriculture Fair.................................... 4 Animal Feed Giant to Invest a Further USD 20 Million in Serbia ..................................................... 5 Austrian Owned Meat Processing Facility Opened in Sremska Mitrovica ...................................... 5 Honey Exports Total USD 9.6 Million in 2015 – Beef at USD 5.6 Million......................................... 5 Grain Silo Port Built on Danube in Beocin ....................................................................................... 5 Chinese Company Interested in Investing in Serbian Agriculture ................................................... 6 Seminar Promoting Agriculture Insurance Awareness Held in Novi Sad ........................................ 6 Vojvodina Grants RSD 100 Million to Orchard Hail Nets ................................................................. 6 Details of Agricultural Credit and Insurance Schemes Announced ................................................. 6 Farmer Expectations for this Year’s Crop Yield Low ........................................................................ 7 The “Green Corridor” is Expanding Serbia’s Agricultural Footprint in Russia ................................. 7

Note: The Agriculture Finance Bulletin presents a monthly roundup of headlines and news stories related to investments and financing flows 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.

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

Phone: +41 44 784 22 22 Fax: +41 44 784 23 23

info@bfconsulting.com www.bfconsulting.com

BFC Agriculture Finance Bulletin

State Initiatives 1)

Nursery and Seedling Farms to be Subsidized

April 19th, 2016, http://www.mpzzs.gov.rs/ministar-bogosavljevic-boskovic-drzava-ce-pomoci-rasadnicku-proizvodnju/

Minister of Agriculture Snezana Bogosavljevic Boskovic announced new incentives for seedling and nursery farms would be launched in the near future. Equipment and other materials would also be subsidized, added Boskovic.

The measures were announced during a meeting with local plant nursery and seedling farmers in Mala Drenova, Trstenik. While the Russian market is important – with high demand for fruit, vegetable and grapevine seedlings – new markets must be opened to secure the expansion of the industry, said Boskovic. Funding levels are yet to be determined, according to the Minister.

2)

Of Planned Milk, Food and Phytosanitary Laboratories, Only the Latter Functional

April 13th, 2016, http://www.agronews.rs/laboratorija-za-kontrolu-kvaliteta-mleka-jos-ne-radi/

In the decade since work began on food safety laboratories, and despite EUR 8 million in European Union (EU) funding, only one phytosanitary laboratory is operational, according to Agronews. A milk testing laboratory is fully equipped, yet remains idle due to lack of qualified personnel, according to the Ministry of Agriculture. Training programs have recently been intensified, said Minister of Agriculture Snezana Bogosavljevic Boskovic. A planned food testing laboratory has yet to receive any equipment, according to Agronews.

The large number of applicants to the laboratories’ training programs caused the existing competition system to grind to a halt, according to the Minister. As a result, in 2012, the EU decided to halt funding until the situation improved. Recruitment was intensified, and the EU funding resumed, said the Boskovic. The Ministry expects the necessary funding for equipment and training to be available; however, as the funding comes from the EU it cannot be guaranteed, said Boskovic.

3)

Beekeeping Subsidies Increase in 2016

April 2nd, 2016, http://www.mpzzs.gov.rs/ministar-bogosavljevic-boskovic-u-petrovcu-na-mlavi-despotovcu-i-paracinupovecane-subvencije-za-pcelare-i-povoljni-krediti/

Beekeepers will continue to benefit from subsidized hives, centrifuges, pumps, pollen dryers and honey fillers, announced Minister of Agriculture Snezana Bogosavljevic Boskovic. Per hive subsidy levels have increased this year, with organic honey producers receiving an extra 40%, she added. The Ministry will also continue with its preferential credit scheme, said Boskovic. Finally, a National Beekeeping Program has been developed in accordance with the European Union’s (EU) subsidization regulations.

Beekeepers should focus on developing a strong and internationally recognizable brand, said Boskovic.

The development of beekeeping is essential to the productivity of other horticultural activities, contributing to increased yields. Cooperation between beekeepers and the agriculture sector should be increased, said the Minister. Serbia has 677,000 bee colonies across 31,000 farms, with production averaging 5,500 tons over the past decade, according to Boskovic.

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BFC Agriculture Finance Bulletin

Foreign Aid 4)

Spain to Provide Serbia with Agricultural Expertise

April 21st, 2016, http://www.novosti.rs/vesti/naslovna/ekonomija/aktuelno.239.html:601723-Spanija-ce-pomoci-Srbiji-urazvoju-poljoprivrede

Spain will help Serbian agricultural reach European standards by sharing its expertise, said Head of the Economics Department at the Spanish Embassy Aitor Mate. The country will exhibit at this year’s International Agricultural Fair in Novi Sad. The secret to Spain’s success is state-of-the-art agricultural machinery and irrigation systems, according to Mate. Spain has 40 agricultural equipment manufacturers, as well as design and installation companies, with combined sales of over EUR 2 billion a year – 40% of this figure comes from exports, said Mate. Last year, Serbia imported EUR 7.9 million worth of Spanish agricultural equipment, said the diplomat.

5)

IPARD Applicants Will Lose Rights to State Subsidies

April 19th, 2016, http://www.rts.rs/page/stories/sr/story/13/ekonomija/2287909/ili-novac-iz-fondova-eu-ili-subvencijedrzave.html

The Ministry of Agriculture called on farmers to apply to the European Union’s (EU) Instrument for Preaccession Assistance for Rural Development (IPARD) fund by mid 2016, while warning that applicants would lose their right to state subsidies regardless of the success of their application. The EU funds may be used for the primary production and processing of meat, milk, fruit and vegetables, the purchase of agriculture machinery, as well as rural tourism. Applicants must provide a business plan as well as 5070% of investment capital. Grants will total between EUR 5000 and EUR 2 million.

The government assuaged fears only large agricultural enterprises would receive funding, saying well prepared applications were likely to be successful. Local government will provide basic information regarding applications – one or two advisors per municipality will be on hand to help with business planning and documentation, according to Dragan Mirkovic of the Ministry of Agriculture. Alternatively, prospective beneficiaries can hire a consultant at an estimated cost of between EUR 300-3,000 depending on the size of the project.

6)

Prijepolje Receives 23 Raspberry Processing Units worth RSD 4 million

April 14th, 2016, http://www.stips.minpolj.gov.rs/sadrzajv/nove-ma%C5%A1ine-za-prijepoljske-malinare

The Turkish International Cooperation and Development Agency (TIKA) donated 23 raspberry processing units worth RSD 4 million to Prijepolje municipality. The local Raspberry Producers’ Association agreed to divide the units amongst its members.

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BFC Agriculture Finance Bulletin

Private Sector 7)

Freezing Temperatures Cause Fruit Damage in Northwest Serbia

April 27th, 2016, http://www.rtrs.tv/vijesti/vijest.php?id=199210

Temperatures below freezing on the night of April 25, 2016 have led to frost damages to pears, plums, apples, peaches and raspberries in the northwestern part of the Republic of Serbia. Damage was also recorded to the some vegetables in the area. The Ministry of Agriculture, Forestry and Water Management will continue to monitor the situation and post updates on the situation.

8)

Serbia World’s Largest Raspberry Producer

April 23rd, 2016, http://www.novosti.rs/vesti/naslovna/ekonomija/aktuelno.239.html:601982-Malinjaci-najvece-fabrike-u-Srbiji

At 79,000 tons, Serbia was the world’s largest raspberry producer in 2015, followed by the US (66,000 tons), Poland (60,000 tons) and Chile (38,000 tons), according to the International Raspberry Organization (IRO). The sector employs between 30,000-35,000 people, with seasonal workers increasing the total to 150,000, according to news agency Novosti.

Continued development of manufacturing and cooling facilities as well as the stagnation of other sectors explains the fruit’s dominance in Serbia’s agriculture sector, according to Aleksandar Leposavic of the Cacak Institute of Pomology. There has been a rise in unlicensed production, which generates low yields and poor quality, said Leposavic. With high demand for organic raspberries, however, exports can be increased with adequate marketing, added Leposavic. Most of the demand comes from Western Europe, the US and Japan. Due to the raspberry’s importance to the economy, the government should provide per-exported-kilogram subsidies, as well as incentives for professional services, and research and development, according to Leposavic. A looming danger is the potential labor shortage as production increases, concluded the expert.

9)

Record High Wheat Inventories Expected to Affect Prices

April 22nd, 2016, http://www.stips.minpolj.gov.rs/sadrzajv/rekordne-svetske-zalihe-ne-obe%C4%87avaju-dobru-cenup%C5%A1enice

With 580,000 hectares sown, the wheat crop in 2016 is expected at 2 million tons, according to Director of the Zitounija Business Association Zdravko Sajatovic. Given existing unsold wheat reserves of 400,000 tons, significant surpluses are expected. Together with the increase in global wheat stocks, a significant drop in the price of wheat can be expected, according to Sajatovic.

10) 1,500 Companies to Participate in Novi Sad International Agriculture Fair April 22nd, 2016, http://www.novosti.rs/vesti/naslovna/ekonomija/aktuelno.239.html:601902-Na-Novosadski-sajam-stize-30firmi-iz-Kine

The 83rd Novi Sad International Agriculture Fair will be held from May 14-20. Around 1,500 exhibitors from 60 countries will promote their products and services, ranging from organic food to machinery and pesticides. Italy will be this year’s partner country, while, at 30 participating companies, China will have a strong contingent. Visitors will be able to sample premium brands from across China. Companies from the Netherlands, Hungary, Austria, Turkey, the Czech Republic, and, for the first time, Spain, will also participate, according to the fair’s General Manager Slobodan Cvetkovic. Two United Arab Emirates companies – Al Dahra and Al Rawafed Holding – will also exhibit, added Cvetkovic.

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11) Animal Feed Giant to Invest a Further USD 20 Million in Serbia April 21st, 2016, http://www.tanjug.rs/full-view_en.aspx?izb=242508

Royal De Heus Group agreed to invest a further USD 20 million in its animal feed operations in Serbia.

During a meeting with Serbia’s Ministers of Economy and Finance Zeljko Sertic and Dusan Vujovic, the group agreed to increase capacity to 350,000 tons of feed per year, hiring 250 people in the process.

Last year, Royal De Heus Group acquired Sabac-based Proteinka at a cost of EUR 7.5 million and creating 100 jobs.

12) Austrian Owned Meat Processing Facility Opened in Sremska Mitrovica April 17th, 2016, http://www.ekapija.com/website/sr/page/1414868/Otvorena-fabrika-Mitros-u-Sremskoj-Mitrovici

Serbian Prime Minister Aleksandar Vucic opened the new Mitros meat processing factory in Sremska Mitrovica. The government invested EUR 5.3 million in the plant, which is expected to create 300 jobs.

Mitros was purchased by Austrian company Gierlinger Holding in January for EUR 800,000.

Owner of Gierlinger, Johan Gierlinger, said the factory – the company’s largest – will supply the Serbian and Russian markets, with plans to eventually distribute to the Chinese market as well. Mitros was founded in 1950 and privatized after bankruptcy in 2009 – it employs roughly 1,250 people.

13) Honey Exports Total USD 9.6 Million in 2015 – Beef at USD 5.6 Million April 16th, 2016, http://www.politika.rs/scc/clanak/353151/Veci-prihod-od-meda-nego-od-juneceg-mesa

In 2015, honey exports totaled USD 9.6 million and were almost double that of beef exports – at USD 5.6 million. Hive numbers increased by 200,000, to 870,000 hives. The increases can be attributed to the opening of foreign markets, as well as better collective organization amongst beekeepers, according to journal Politska. At EUR 4.50 per kilogram, last year’s acacia honey price was also favorable, according to President of the Chamber of Commerce’s Beekeeping Unit Srbislav Vidojevic. Experts predict Serbia’s honey exports could triple in the next few years, with hive numbers reaching 1.2 million. Politska estimates that beekeepers must have roughly 100 hives to break even, at a total investment cost of EUR 17,000. Yet farmers who begin with 20 hives can generate enough capital to expand, according to Vidojevic.

In contrast, while Serbia has a license to export 8,875 tons of baby beef to the EU, it exported only 315 tons. The government does not adequately support the industry according to agricultural analyst Branislav Gula. On the other hand 3 million pigs are produced with no one to sell them to, he added.

Serbia, as part of the former Yugoslavia, used to produce 30,000 tons of baby beef annually, with Greece and Italy the main export markets. The meat can fetch from EUR 450-600 per kilogram.

14) Grain Silo Port Built on Danube in Beocin April 14th, 2016, http://www.rtv.rs/sr_lat/ekonomija/novi-silos-i-luka-u-beocinu_709091.html

A port, including grain silos with a capacity of 24,000 tons, will be built in Beocin, Vojvodina. The silos will be built by Agrogrnja on 2 hectares of land at a cost of EUR 5 million. The Danube port and silos will allow Serbian corn, wheat, soybeans, barley, rapeseed and sunflower to be traded internationally. A further 70,000 tons of storage capacity is in the pipeline.

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BFC Agriculture Finance Bulletin

The port will raise the general competitiveness of the Serbian economy, with direct access to foreign markets via the Danube, according to Director of Cereals Serbia Vukosav Sakovic. It is the only silo-port built on the Danube in the last 10 years, according to Chairman of Cereals Serbia Slavko Jovanovic.

15) Chinese Company Interested in Investing in Serbian Agriculture April 14th, 2016, http://www.tanjug.rs/full-view_en.aspx?izb=241235

China Energy Company Limited (CEFC) is interested in investing in Serbian meat, dairy, fruit and vegetable sectors, according to Minister of Agriculture Snezana Bogosavljevic Boskovic. The company showed special interest in lamb, beef and pork production.

The Ministry of Agriculture and CEFC agreed to cooperate on locating prospective locations and developing an investment plan.

16) Seminar Promoting Agriculture Insurance Awareness Held in Novi Sad April 13th, 2016, http://www.ddor.rs/en/insurance-promotion-domain-agriculture/

An agricultural insurance seminar, organized by DDOR Novi Sad – an insurance company – and the Cooperative Union of Vojvodina was held in Novi Sad, according to the DDOR website. In 2014, the organizations launched a joint program aimed at increasing agricultural insurance awareness. At the seminar, DDOR’s representatives discussed basic and supplementary crop and livestock insurance, and proposed a target of 30% of agricultural properties insured – the current total is 10%. The benefits of agricultural insurance are mostly recognized by corporations and larger producers, according to DDOR. However, insurance is under-utilized due to lack of information. Seminars were also held in Morovic, Zrenjanin, Kovacica, Palic and Sremska Mitrovica.

17) Vojvodina Grants RSD 100 Million to Orchard Hail Nets April 12th, 2016, http://beta.rs/ekonomija/ekonomija-srbija/29676-vise-od-100-miliona-dinara-za-vocnjake-pod-protivgradnimmrezama

The Provincial Agriculture Department of Vojvodina has allocated RSD 101 million towards hail nets across 132 hectares of orchard. Vojvodina is now the largest exporter of apples in Serbia, according to Department Head Branislav Bogaroski. In 2016, the Provincial Agriculture Department plans to disburse RSD 270 million in grants – farmers are urged to apply as soon as they can, said Bogaroski. Vojvodina’s government also provides a free forecasting and reporting service which has been running for 6 years, according to Bogaroski.

18) Details of Agricultural Credit and Insurance Schemes Announced April 8th, 2016, http://beta.rs/ekonomija/ekonomija-srbija/29398-poljoprivrednicima-krediti-po-kamatnim-stopama-od-triodsto

Ten banks have agreed to participate in a RSD 800 million preferential agricultural credit scheme, according to Minister of Agriculture Snezana Bogosavljevic Boskovic. Interest rates will be 3% with a grace period of one year, said the Minster. The funds can go towards any agricultural activity or equipment. The program will begin in May. Last year’s preferential agricultural credit scheme saw loans worth RSD 6 billion issued, said the Minister. Participating banks are Commercial, Pro Credit, Agricole, Hypo-Alpe-Adria Bank, Intesa Bank, Sberbank, AIK, NLB, UniCredit and OTP Bank.

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Five insurance companies have agreed to partake in a preferential agricultural insurance scheme. The Ministry of Agriculture will subsidize 40% of the premium for crops, animals and other types of agricultural goods, said Boskovic. Participating insurance companies are the Danube, Generali, Triglav, Globos Insurance and DDOR-om.

19) Farmer Expectations for this Year’s Crop Yield Low April 5th, 2016, http://www.novosti.rs/vesti/naslovna/ekonomija/aktuelno.239.html:599059-Manja-ulaganja-manji-rodkukuruza

Preparations for the year’s spring sowing are wrapping up, and many farmers do not have much hope for the success of this season. Worries come as a result of weather hindering the start of spring planting and concerns over missing irrigation during drier seasons.

President of the Farmers Association of Vojvodina, Mirosav Kish, lamented that there are loans, but there are no subsidies; and everything is expensive. He added that with less investment comes smaller production.

20) The “Green Corridor” is Expanding Serbia’s Agricultural Footprint in Russia April 3rd, 2016, http://www.novosti.rs/vesti/naslovna/ekonomija/aktuelno.239.html:598672-Nase-voce-i-povrce-ubrzano-doRusije

The further opening of trade between Russia and Serbia via the “green corridor” is enabling Serbian agricultural products to gain a foothold in the Russian market. Simplified export/import procedures and a more concerted effort in transportation and customs clearance has led to more efficient movement of goods, faster arrival to customers, and higher volumes reaching the Russian market.

In the first 11 months of last year, exports of apples, for example, reached 132,000 tons, compared to 107,000 tons in 2014. Cheese is also more in demand as evidenced by last year’s 6,100 tons exported as compared to 5,000 tons in 2014. Food exports, in general, to Russia have increased to USD 300 million (up USD 80 million from the previous year).

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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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