Serbia Newsflash Week 10, 2022

The effects of the war in Ukraine on the agro-food industries, the woods industry facing issues due to increased timber exports, expanding foreign investment into agro modernization, news on the IPARD-3 program, and the low percentage of circularity in the Serbian economy - the week in Serbian agriculture

Red apples
Beeld: ©Javier Balseiro
Serbian farmers are now looking for alternative markets for their apple stock, which was originally intended for Russia. A smaller shipment is leaving for India soon.

Ministers of the Western Balkan region discuss food supply

This week the Minister of Agriculture of North Macedonia hosted an online meeting with colleagues from Serbia, Albania, Montenegro, Republika Srpska and Kosovo where Ministers of Agriculture discussed the consequences of the war in Ukraine on the agricultural sector in the region and food supply chains.

It was stated at the meeting that the participants were committed to preserving the stability of the food supply in the region. The Minister of Agriculture of North Macedonia, Ljupco Nikolovski, said that “the mutual conclusion is that the citizens should not be worried.” It was stressed that regional cooperation should continue and that Governments should refrain from introducing unilateral measures of any kind.

“Ministers of the region welcomed the initiative and agreed that cooperation between the countries of the region should be efficient and functional, and the citizens of all Western Balkan countries should be calm because we are working together to maintain a stable food supply,” Minister Nikolovski said.

Serbian apple producers have started looking for alternatives to the Russian market

Due to the war in Ukraine and the difficult possibilities for transporting apples to Russia, apple producers in Serbia have started looking for new markets for huge stocks that have not yet been sold out.

The representative of the Vocar agricultural cooperative from Slankamen, Nikola Kotarac, stated for Beta news agency that two trucks with 40 tons of apples would set out for India in the coming days. “We have another 2.500 tons of apples in cold storage facilities, where they can be preserved until June, and after that, they will start to lose quality. That quantity makes for 70% of the crop, and most of it should have been exported to Russia,” said Mr. Kotarac.

The representative added that the representatives of Vocar would travel to the fair in Berlin next month in order to find new buyers for apples and closer markets because India is very far away and transportation is expensive. Mr. Kotarac said that the problem with exports to Russia is the drop in value of the ruble, which reduces the price of apples. It currently amounts to €0.34/kg, and two years ago it was twice as much.

Zoran Keserovic, a professor at the Faculty of Agriculture in Novi Sad, said that even without the Ukrainian crisis this year, he had expected problems in the placement of apples in Russia because the orchards of that fruit were being intensively raised in the Caucasus. “The cost of apple production in Serbia is high and cannot be measured with the cost of energy and workforce in the Caucasus,” said Mr. Keserovic.

Of the 180 thousand tons of apples that Russia imported last year, 120 thousand tons came from Serbia, which generated a foreign exchange inflow of about $90 million.

More about Serbian apple farming here: Serbia: An apple a day...

Payment transactions with Russia more difficult but possible

Since the outbreak of the war in Ukraine, Serbian companies report that one of the biggest problems they face while operating in Russia has been the payment of imported goods and collecting money for the ones delivered. The expulsion of some Russian banks from SWIFT – the international payment system, blockades of international card systems, and other financial sanctions – has created uncertainty among enterprise managers on how to collect payments.

For now, it is possible through banks that are not sanctioned, and if the payments are not towards or from enterprises owned by individuals who are under sanctions. Bearing in mind that some Russian banks were excluded from the SWIFT international payment system, Serbian companies that conduct foreign trade with the country can make payments and collect money on that basis through third countries, according to the National Bank of Serbia.

Increased export of timber causes troubles for local producers 

Last year, the export of wood from Serbia increased significantly. The volume of export of raw oak and conifers were twice as high it was in 2020.

The export of wooden furniture increased by 20%, informs the national broadcaster RTS. However, the increased export of logs has especially affected the Serbian wood processing industry, warns the public broadcasting service.

The exports of the Serbian lumber industry last year was worth €1.4 billion, accounting for 6.5% of the total exports of Serbia. "When a lot is exported from a certain commodity, the prices on the domestic market are driven up. For this reason, domestic producers have higher input costs from the purchase raw materials. This has led to the decreased sustainability of certain producers in Serbia,” said Bojan Stanic from the Serbian Chamber of Commerce.

Wooden furniture is mostly exported to the countries of the former Yugoslavia and the EU. China is the largest buyer of unprocessed wood not only from Serbia but from Europe as well. For example, the export of wood from France to China has increased sevenfold in the last ten years, which has resulted in a jump in prices and problems with the supply of the domestic wood industry. On the other hand, the import of Chinese wooden furniture to the EU amounts to about three billion euros in a year, RTS reports.

Serbian countryside
Beeld: ©Valentin Salja
Serbian agriculture is now waiting for the launch of the IPARD-3 program. Unofficial sources have put the approval of the program in mid-March, with a supposed budget of €384 million.

Al Dahra investments in the agro sector in Serbia

The company Al Dahra from the United Arab Emirates, which bought the Belgrade-based agriculture corporation PKB three years ago, invested around €60 million in the improvement of operation, introduced technological innovations, and became one of the most modern companies in the agricultural sector in the region, stated the CEO Dusan Radicevic.

“Since arriving in Serbia up until today, Al Dahra has invested twice as much as what was envisaged by the contractual obligation to the Government,” said the CEO and also added that Al Dahra found the infrastructure and equipment, several decades old and that it was necessary to carry out a complete modernization.  

Immediately after purchasing the PKB enterprise, according to Radicevic, a large investment process was initiated. Significant funds, as Mr. Radicevic said, were invested in agricultural machinery, livestock farming, and infrastructure for the company. The largest part of the investments went into the construction of a new factory for processing clover.

Mr. Radicevic pointed out that new solutions have been applied, thanks to which the cultivation of the land was significantly improved. This returned results last year, as record yields have been achieved from the harvest of arable crops – 8.2 tons per hectare in the case of wheat, barley was 8.9 t/h, and rapeseed was 4.4 t/h.

According to Mr. Radicevic, additional there are now plans for another investment of €25 million into state-of-the-art infrastructure and equipment later this year.

Greenlight for IPARD-3

The IPA Committee in Brussels has greenlit the implementation of the IPARD-3 program in Serbia, intended for agriculture and rural development, daily Politika reports based on unofficial sources.

In the next budget period, Serbia will have €384 million at its disposal, which is €150 million more than in the previous IPARD-2 fund. Politika writes, the European Commission will approve the use of the funds by mid-March.  More about the IPARD program here: IPARD - EU assistance to Serbia's agriculture industry

Only 8% of enterprises implement the circular economy principle

The results of the research conducted by the Center for Circular Economy of the Serbian Chamber of Commerce (PKS) showed that only 8% of enterprises have so far implemented practices based on the most important principles of circularity.

The research, conducted within the Support Program implemented by the Ministry of Economy of Serbia, included 365 companies from different sectors and of different sizes in terms of the number of employees and turnover.

More than 20% of respondents have not heard of the circular economy, while 60% have heard about it but have not been able to explain in detail its essence and aspects, such as the reuse of waste as raw material, recyclability, the energy efficiency of production and savings.

On the other hand, despite the lack of accurate understanding of the concept, as many as 46% of respondents believe that these issues should be given high priority within companies while 21% think they are top priority.

The analysis shows that about 60% of the surveyed companies would first turn to PKS for help in transitioning their operation from linear production to the circular model. However, about three-quarters of the respondents did not know who to turn to first for financial or technological support, if they had decided to switch to a circular operation model.

PKS emphasizes that this data is especially important for banks, which are most often the necessary link in the process of transition from a linear to a circular model.