02 BFC Serbia Agriculture Finance Bulletin

11/2015

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2 Serbia Agriculture Finance Bulletin Beef and Lamb to be Exported to China Serbia is World Largest Raspberry Producer – Norovirus Reappears Oil Crop Processor Revenues Total EUR 380 million 13,000 tons of Pork Worth EUR 16.4 million Imported

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Agriculture Finance Bulletin Edition #2, November 2015

Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11) 12) 13)

Beef and Lamb to be Exported to China .......................................................................................... 2 Crop Subsidies to be Paid by December or January ........................................................................ 2 Calls for Withdrawal of Draft Amendment to Agriculture Act ........................................................ 2 Serbia is World Largest Raspberry Producer – Norovirus Reappears ............................................. 3 Traditional Serbian Products to Receive Geographical Indictors .................................................... 3 Illegal Use of State-Owned Arable Land Leads to EUR 100 Million Loss ......................................... 3 Petrovo Proposes Agricultural Development Program ................................................................... 4 Livestock Industry to Receive RSD 15 million in Co-Financing ........................................................ 4 Relaxation of GMO Law Considered ................................................................................................ 4 Sjenica Products to Receive Appellation of Origin .......................................................................... 5 Competition for Agriculture Research Grants Opened in Vojvodina .............................................. 5 No Swine Fever in Five Years – Pork Exports to EU Could Resume ................................................. 5 Truffle Plantations Feasible ............................................................................................................. 5

Private Sector.............................................................................................................. 6 14) 15) 16) 17)

Sugar Industry Uncompetitive ......................................................................................................... 6 Oil Crop Processor Revenues Total EUR 380 million ....................................................................... 6 Serbia - the 2nd Largest Quince Producer in Europe ...................................................................... 7 13,000 tons of Pork Worth EUR 16.4 million Imported................................................................... 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)

Beef and Lamb to be Exported to China

November 27th, 2015, http://inserbia.info/today/2015/11/serbia-to-export-beef-lamb-meat-to-china/

China has agreed to allow the import of Serbian beef and lamb, announced Prime Minister Aleksandar Vucic. Focus must now turn on increasing production capacity, added Vucic.

The Prime Minister was optimistic about upcoming talks with his Chinese counterpart, Li Keqiang, regarding the export of Serbian dairy products.

2)

Crop Subsidies to be Paid by December or January

November 27th, 2015, http://www.stips.minpolj.gov.rs/sadrzajv/uskoro-isplata-podsticaja-poljoprivrednicima

Outstanding crop subsidies will be paid by December, 2015, or January 2016, according to Agriculture Advisor to the Prime Minister Dragan Glamočić. Farmers will be able to withdraw the full amount at local banks for a small, unspecified, fee. Those who do not wish to pay the fee may receive the subsidies in installments, added Glamočić. While unable to disclose the total sum owed for crop subsidies, Glamočić said the state is at fault and those responsible will be held accountable.

According to Chairman of the Parliamentary Agriculture Committee Majijan Risticevic, 1.65 million hectares – almost half of total agricultural land – are to receive RSD 9.8 billion in subsidies, however, only RSD 2.72 million has been made available. Farmers receive RSD 6,000 per hectare and RSD 3,000 for fuel and fertilizer. The minimum eligible area has been reduced from 100 hectares to 20 hectares.

3)

Calls for Withdrawal of Draft Amendment to Agriculture Act

November 26th, 2015, http://www.balkaninsight.com/en/article/serbian-new-agricultural-act-creates-corruption-space--11-252015

Farmers’ associations from Vojvodia and several political parties have called for a draft amendment on agricultural land use to be withdrawn, arguing it paves the way for corrupt allocations at the expense of small-scale farmers. Most critics target Article 7, which stipulates that 30% of state-owned arable land in each municipality is to be leased on the basis of investment plans evaluated by a Ministry of Agriculture committee.

Should the draft be passed, 30% of Vojvodina’s farmland will be handed to unknown entities without transparent criteria, said president of the League of Social Democrats Nenad Canak, adding that a new law should be drafted with constructive participation of those living off the land. Former Minister of Economy Sasa Radulovic – now head of Enough is Enough, a political party – agreed, noting the government will have arbitrary power over land allocation, thus inviting corruption, while depriving farmers the opportunity to participate in the auction.

Minister of Agriculture Snezana Bogosavljevic Bošković claimed such worries are unfounded, as most of the land being auctioned is not in use, creating the need to bring in large investors to encourage agriculture development. The Minister reiterated her willingness to discuss issues with farmers’ association at any time. Most of the unused land is not actually productive enough to be profitable, countered Miroslav Kis, Chairman of Vojvodian Farmers’ Association, adding that investors will be allocated prime land, destroying small farms in the process. There are 490,000 hectares of state-owned arable land, of which 250,000 are currently in use, according to the Ministry of Agriculture.

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4)

Serbia is World Largest Raspberry Producer – Norovirus Reappears

November 26th, 2015, http://www.novosti.rs/vesti/naslovna/ekonomija/aktuelno.239.html:578520-Srbija-na-prvom-mestu-usvetu-po-proizvodnji-malina

At an estimated 100,000 tons per annum, Serbia has surpassed Poland (70,000 tons) and Chile (45,000 tons) as the world’s leading raspberry producer, bringing in an estimated EUR 250 million. Exports in the first 10 months this year totaled 80,000 tons. Mainly frozen and exported, the raspberries have brought in roughly EUR 200,000 in foreign currency, according to Zeljko Radosevic, State Secretary at the Ministry of Agriculture. The fruits are mainly destined for Belgium, Germany, France and Scandinavia, while new markets are being opened in Japan and India. The current sales price is RSD 200 per kilogram, said Radosevic. Meanwhile, 347 young people received 15 hectare raspberry plantations funded by the Swiss government Agency for Development and Cooperation.

The Ministry has endeavored to increase yields and food safety standards through the organization of regular workshops focusing on best practice and technology, while subsidizing irrigation and anti-hail systems, as well as crop insurance, according to Radosevic. However, the norovirus has been detected in some Serbian exports, resulting in the return of thousands of tons of raspberries. The Ministry has responded by issuing leaflets to growers, reiterating hygiene best practice.

5)

Traditional Serbian Products to Receive Geographical Indictors

November 25th, 2015, http://www.rtrs.tv/vijesti/vijest.php?id=177663

Roughly 400 exhibitors are presenting 2,000 different traditional handmade organic products at the 10th International Fair of Ethnic Food and Drink, said Minister of Agriculture Snezana Bogosavljević Bošković.

Due to growing demand for authentic, traditional foods across global markets, adding geographical indicators – or appellations of origin – is a high priority for Serbia’s traditional products, said Bošković. As well as providing the customer a guarantee of origin, the labelling provides specific details about the product. Since mainly small-scale producers are involved, the challenge is getting large retailers to distribute the products, said Bošković.

Traditional foods from India, Greece, Macedonia and Italy were displayed alongside Serbian Products.

6)

Illegal Use of State-Owned Arable Land Leads to EUR 100 Million Loss

November 21st, 2015, http://www.novosti.rs/vesti/naslovna/ekonomija/aktuelno.239.html:577782-Bogicevic-i-Jerkovic-oralina-divlje

About EUR 100 million a year is lost due to illegal occupation and registration irregularities over 600,000 hectares of state-owned arable land. The largest areas under illegal occupation were found in Sombor, Backa Palanka and Pancevo, according to Novosti investigatios. More than 1,000 hectares were being used illegally by “Šeri Agrar”, as well as several hundred hectares by Farmakom. Over 9 years, the state has collected only EUR 29 million from the land, while EUR 22 million was collected through the courts.

A law is being drafted that will impose penalties totaling 3 times the nominal rent on illegal exploiters, while produce will be seized and destroyed, according to Minister of Agriculture Snežana Bogosavljević Bošković. Moreover, municipalities will be required to provide a complete survey of agricultural land use or be deprived of state funding. Considering that both large players and local municipalities are

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involved, it is unsurprising that the government faces pressure to maintain the status quo, said the Minister.

The new law stipulates that small-scale farmers with holdings under 30 hectares will be able to by the state-owned land in 20 hectare installments, said adviser to the Prime Minister Dragan Glamočić, adding that foreign entities will be prohibited from purchasing land.

7)

Petrovo Proposes Agricultural Development Program

November 18th, 2015, http://www.rtrs.tv/vijesti/vijest.php?id=176674

Petrovo municipality uses only 50% of its 3,500 hectares of arable land, even though 70% of its residents are engaged in agricultural activities, providing significant scope for development. Minister of Agriculture Steve Mirjanić expects the development program proposed by the Petrovo cooperative to be successful, receiving the full material and technical support of the Ministry.

In the meantime, a cultural center has been built, and roads and other infrastructure upgraded through the state Development Program, said the Minister.

8)

Livestock Industry to Receive RSD 15 million in Co-Financing

November 17th, 2015, http://www.stips.minpolj.gov.rs/sadrzajv/za-farme-i-sto%C4%8Dare-15-miliona-dinara

Small livestock farms and processing facilities, mini-dairies and mini-butchers, as well as agriculture education institutions are to receive RSD 15 million in equipment co-financing, said Deputy Minister of Agriculture Branislav Knezevic, adding that, considering the current state of the livestock industry, the Ministry is focusing more on support measures than increasing competition. Total investment will reach RSD 30 million, said the Deputy.

9)

Relaxation of GMO Law Considered

November 14th, 2015, http://www.novosti.rs/vesti/naslovna/ekonomija/aktuelno.239.html:576711-Srbija-dozvoljava-prometGM-hrane

Transit of products containing genetically modified organisms (GMOs) and the use of genetically modified (GM) animal feed is set to be allowed. A repeal of the transit ban is a necessary prerequisite to Serbia’s accession to both the WTO and the EU. In 2009, Serbia banned the trade, import, cultivation and processing of products containing more than 0.09% of GM ingredients.

The Ministry of Agriculture insists that a new law on GMOs is not on the agenda. According to adviser to the Prime Minister Dragan Glamočić, however, the Ministry is pursuing harmonization with EU regulations, adding that the cultivation of GMOs and their use in food for human consumption will remain prohibited.

Allowing transit will probably lead to the import of GM products, which will infuriate domestic farmers and processors, who are prohibited from producing GM products, said Professor Miladin Sevarlic of the Economics Institute. Serbia should create a strong “GMO-free” brand for its products, said the Professor.

Last month, 16 EU member states voted for a complete ban of GMOs, while Russia is the sole WTO member who prohibits outright any GMOs from entering its territory.

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10) Sjenica Products to Receive Appellation of Origin November 12th, 2015, http://www.stips.minpolj.gov.rs/sadrzajv/za%C5%A1tita-proizvoda-sa-geografskim-poreklom

In a visit to ALK-MB Pester farm in Sjenica, Ministers of Agriculture and Trade Snezana Bogosavljević Bošković and Rasim Ljajic announced the introduction of an appellation of origin for the region’s products.

Sjenica is well known for its meat, milk and dairy products, particularly its lamb and cheese, said Bogosavljević, adding that exports will be boosted if names and origin are protected.

11) Competition for Agriculture Research Grants Opened in Vojvodina November 7th, 2015, http://subvencije.rs/ostali-podsticaji/ap-vojvodina-bespovratna-sredstva-za-istrazivanja-u-poljoprivredi/

The Ministry of Agriculture announced a competition for grants in Vojvodina for research conducted in the following fields: sustainable plant protection and nutritional products; environmentally friendly intensive farming methods; group consultancy methods; small processor performance factors in the context of rural development; agriculture and rural development support measures; and the effective use of economic indicators in agricultural extension.

12) No Swine Fever in Five Years – Pork Exports to EU Could Resume November 6th, 2015, http://www.stips.minpolj.gov.rs/sadrzajv/svinjska-kuga-u-srbiji-pred-iskorenjivanjem

Due to preventive measures taken by producers and veterinarians, a case of classical swine fever has not been registered in the last 5 years. This paves the way for Serbia to be declared officially free of the disease, allowing exports of pork to the EU to resume, according to Sasa Ostojic of the Ministry of Agriculture’s Veterinary Directorate.

13) Truffle Plantations Feasible November 5th, 2015, http://www.novosti.rs/vesti/naslovna/ekonomija/aktuelno.239.html:575304-Tartufi---bogatstvo-kojenam-izmice

With truffles fetching EUR 2,000-8,000 per kilogram, there is hope of emulating France and Italy’s pioneering plantations. Serbia found on the 45th parallel – the same as Italy – where geographical conditions are ideal. The fungus livesin symbiosis with oak, poplar, and linden, according to truffle expert Lazo Jovicic. The culinary peculiarities of Serbian truffles must be discerned, creating an “identity” which can be branded, said Jovici, adding that the government should support the industry in its infancy.

The harvesting of wild truffles is currently regulated, with the Institute for Nature Conservation informing the Ministry of Agriculture’s restrictions. The Institute estimates that 80 kilograms of white truffles, 400 kg of black summer truffles and 300 kg of smooth black truffles may be harvested this year.

If a party wishes to cultivate truffles, then it must apply for a license from the Ministry of Agriculture.

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Private Sector 14) Sugar Industry Uncompetitive November 19th, 2015, http://www.stips.minpolj.gov.rs/sadrzajv/slatku-industriju-%C4%8Dekaju-gorki-dani http://www.stips.minpolj.gov.rs/sadrzajv/%C5%A1e%C4%87erane-nude-stimulativne-uslove-za-narednu-setvu

Another sugar refinery has closed in Zabalj, while others are yet to pay for sugar beet purchases. Sugar production is estimated at 280,000 tons this year, failing to satisfy both domestic demand – at 180,000 tons – and export quotas – at 181,000 tons – according to Olga Čurović, Director of the Industrial Plant Business Community. Sugar refinery “SFIR” puts domestic demand at 210,000 tons, still leaving a shortfall. The company is actively encouraging sugar beet farmers to sow greater quantities.

Deterioration is due to lack of subsidization, said Čurović. In the EU, if sugar beet is priced at EUR 35 per kilogram, it receives a subsidy of EUR 10 per kilogram, leaving refineries to pay the remaining EUR 25, according to Čurović. No such subsidy exists in Serbia, increasing costs and prices, and reducing competitiveness. Refineries have rationalized operations as much as possible, leaving no room for maneuver, added Čurović. Moreover, EU is lifting export quotas, raising the specter of cheap imports flooding the Serbian market. The state needs to introduce subsidies to support the industry, concluded Čurović.

In 2015, sugar beet cultivation totaled 42,000 hectares, down from 70,000 hectares in 2014. Sugar exports totaled RSD 150 million last year, dropping from RSD 171 million in 2013. Only 5 of the 11 refineries in Vojvodina are still in operation: the MK Group refineries in Vrabas, Kovacica and Pecinci; the SFIR refinery in Senta; and the Hellenic Sugar Refinery in Crvenka.

15) Oil Crop Processor Revenues Total EUR 380 million November 6th, 2015, http://www.novosti.rs/vesti/naslovna/ekonomija/aktuelno.239.html:575463-Od-agrara-zaradili-380miliona-evra

Oil crop processor Victoria Group reported earnings of EUR 380 million from September 2014 to August 2015, a 15% increase year-on-year, while operating profit was up 33% to EUR 10 million. Growth was recorded on both domestic and international markets, with exports accounting for 40% of total revenues. Despite difficult economic conditions induced by drought and expensive raw materials, the results can be attributed to investments in energy efficiency, the upgrading and expansion of production lines, increased sales and a record purchase of oilseeds.

The “Sojaprotein” and “Victoria Oil” factories processed 500,000 tons of soya bean, sunflower and rapeseed to EU standards. Revenues from Victoria Oil totaled EUR 141.6 million, a 32% increase year-onyear, with exports totaling 41% of sales, a 16% increase year-on-year. Operating profit, underpinned by the sale of 90 million liters of bottled sunflower oil, increased 40%, exceeding EUR 15 million. Revenues from the Sojaprotein totaled EUR 113.3 million, a 15% increase year-on-year, while operating profit stood at EUR 16.1 million, a 62% increase, according to Victoria Group. The company holds a 50% share in the EU market for textured soy protein.

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16) Serbia - the 2nd Largest Quince Producer in Europe November 5th, 2015, http://www.stips.minpolj.gov.rs/sadrzajv/gajenje-dunje-isplativo-ve%C4%87-od-prvih-plodova

Serbia is the 2nd largest quince producer in Europe after Spain, with 13,000 tons produced annually over 1,600 hectares – though the total cultivated area was higher in the 1980s. Demand on the domestic market is greater than supply. The largest manufactures are found in Blaca, Aleksandrovca and Kraljeva.

There is room for expansion, both in the type of fruits produced and value-added products such as jams, juices and sweets, according to Nenad Budimovic of the Serbian Chamber of Commerce.

17) 13,000 tons of Pork Worth EUR 16.4 million Imported November 4th, 2015, http://www.novosti.rs/vesti/naslovna/ekonomija/aktuelno.239.html:575140-Srbima-se-vise-isplati-tovsvinja

To date this year, 13,000 tons of live pigs worth EUR 16.4 million were imported, while only 238 tons worth EUR 337,000 were exported, heading mainly for Croatia, Hungary, Germany and Denmark, according to the Customs Directorate. Over the same period, about 14,000 tons of pork worth EUR 30 million were imported – mainly from Spain, Hungary, Germany and Romania.

Pig breeders are dissatisfied with the RSD 130 per live weight kilogram, excluding VAT, offered by middlemen and slaughterhouses, while the Ministry of Agriculture has failed to disburse subsidies. The resumption of exports to Russia would be beneficial, according to Ferenc Major, President of pig breeder Bačka Topola. However, Serbian pork currently lacks the requisite quality levels and contains too much swine flu vaccine, while the EU embargo and the distance of the Russian market pose additional problems, said Major.

According to Professor Ivan Radović, head of the Department for Pig Selection at the Faculty of Agriculture in Novi Sad, breeders do not implement all of the requisite selection measures, reducing quality, while imports of pork are much too high, diminishing local production. To get a better measure of quality, pricing should be determined by percentage of meat, not live weight, concluded the Radović.

The largest pig exporters are Rakic-Kom and Mivej, while the largest importers are Agrkor Group and Rumiks.

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