Serbia Newsflash Week 25

Plantation establishment incentive program, the struggles of the sugar industry, dairy producers facing hard times, EU-Western Balkan business platform launch, agricultural market regulation legislation entering into force - The week in Serbian agriculture

Close-up picture of a ripe apple.
©Mylene
A new incentive program has been launched in Serbia for fruit, vegetable and grapevine plantations. The program, which is financed from IPARD funds, will operate with a total budget of €60 million.

New call for IPARD program incentives

The Ministry of Agriculture of Serbia launched a new public call for applications with the purpose of disbursing funds as incentives from the EU’s assistance for rural development  IPARD funds. Incentives are to be used for investments in agricultural holdings’ physical assets, meaning new on-farm buildings and the purchase of equipment (apart from tractors).

Applicable items include the costs associated with the establishment of fruit, vegetable and grape plantations. The total budget is cca. €60 million, and the deadline for the submission of proposals is September 10th . For the first time, approved proposals will get 50% of the incentives before buying the equipment instead of having money reimbursed after the purchase of the assets.

The incentives will cover up to 65% of the total investment. An investment cannot exceed €1 million. The funds for this call are allocated from the IPARD 2014-2020 program. The first call was launched in 2017. Since the procedures for participating are complex, Serbian farmers can receive support from specialized consultancy agencies, whose services are covered by the IPARD funds and are partially reimbursed from the program itself.

Law on Regulation of Agricultural products market passed  

As announced in our Week 23 Newsflash, Serbia’s Parliamentary Committee on Agriculture adopted the Law on the Regulation of the Agricultural Products Market. Explaining the new Law, Assistant Minister for Agrarian Policy, Mr. Katanic pointed out that “Serbia is regulating the entire agricultural products market for the first time. In terms of standards, it will be a big step towards common policy with the EU, whereby Serbia will protect its agricultural products and trademarks, allowing producers to enter new markets, improve the quality, and have equal rights at the European market”. As he recalled, this regulation entails public interventions in the market, support for private warehousing, special interventions, and urgent interventions. He also noted that the Law sets an obligation for the elementary school system – providing dairy products and fruits in pupils’ meals to ensure a healthy diet. “The Law also entails improving producers’ status. That is to be achieved by the state financing of producer organizations activities over period of five years with the aim of transforming them into business associations so that they can connect with wholesale buyers and processors,” the Assistant Minister explained.

Abolition of the EU sugar quota affects sugar industry in Serbia

After the abolition of the sugar production quota system in the EU in 2017, a hyper-production of this strategically important commodity started in EU member states, negatively affecting the sugar industry in Serbia and the region. This was concluded at a gathering in the Serbian Chamber of Commerce (PKS) last week. At the presentation of the results of a study titled “Sector Analysis of the Sugar Industry in Serbia” conducted by the Faculty of Economics in Belgrade, the Secretary of the Association for Plant Production and Food Industry of the Chamber of Commerce emphasized that the sugar industry in Serbia and the region had been reporting negative trends for years.

Professor Loncar from the Belgrade Faculty of Economics recalled that there used to be 16 sugar plants in Serbia in 2000, whereas now only four of them are operational. “Between 2016 and 2020, local sugar producers contributed €315.8 million to the national budget through various charges. Every RSD 1 coming from sugar sales in retail trade means another RSD 4 in Serbia’s GDP,” professor pointed out. He added that sugar beet areas declines by 7% each year, while sugar beet yields decreased by 3%. Also, sugar production in Serbia is lower by 14% on average every year, whereas the EU has been reporting an upward trend in terms of sugar beet fields, up by around 4% a year.

Raspberry dipped in a spoonful of sugar.
©Myram's Fotos
The abolition of the EU's sugar quota gravely impacted Serbia's sugar industry. While in 2000, Serbia had sixteen sugar factories, today only four remain operational.

Milk producers ask for minimum wholesale price

Milk producers in Serbia have reported major financial losses because wholesale buyers have been paying the same price for the past six years, Serbian Association of Cattle Breeders President Sanja Bugarski stated for Beta news agency. Mrs. Bugarski explained that the average production price of milk is €0.48 per liter, while the average wholesale price is cca €0.25/l.

“We took out loans hoping to reach some kind of an agreement with the buyers about raising the wholesale price, but no one understands us,” Mrs. Bugarski underscored. She added that another blow for milk producers was a 50-80% increase in the price of cereals and oilseeds. According to the president, milk producers have been getting a premium of €0.05/l from the state for around ten years, noting that the money should be used for the renewal of depreciable equipment. “We have used up all the funds to save the production, and now, the only possibility is either for the state to propose a minimum price for wholesale buyers or for us to wait for court-appointed executors,” Mrs. Bugarski said. She pointed out to the difficult position of milk producers due to “the huge import of dairy products whose quality should be inspected.”

Raspberries are Serbia’s main fruit export

Serbia is a global leader in frozen raspberry production and almost all of its output of the fruit is sold in the markets of developed countries. According to recent figures from the National Statistical Office, Serbia produced 118.674 metric tons of raspberry on 24.028 hectares of land in 2020 and frozen raspberry exports were worth €259 million, accounting for 40% of Serbia’s total fruit exports.

The 2021 raspberry harvest has been delayed by unfavorable weather conditions in April and in May. “Plantations are generally in good condition, with minor variations between regions of cultivation and without observed damage caused by bad weather,” said Mr. Ljubojevic from the Serbian Chamber of Commerce. He said this year’s harvest yield was expected to be an average quantity-wise, but noted that this largely depended on weather conditions in the period to come, and added that producers were mostly encouraged by last year’s price and committed to working on their raspberry plantations and to additionally investment in expansions of production capacities.

Meanwhile, berry, cherry, and sour cherry producers are facing hard times in Serbia. For more details, see our report here.

The eight sectors with the biggest potential in the Serbian economy

As a part of the Serbia Innovates project, an analysis was conducted by the Center for Technology Entrepreneurship and Innovation ICT Hub and the USAID. Results of the analysis show that there are eight sectors in Serbia with the highest the potential for success.

The fields in question are artificial intelligence, block chain technology, high-tech agricultural production, the gaming industry, smart environment solutions, eco-smart energy sources, advanced materials and manufacturing processes, and biotechnology.

The ICT Hub and USAID presented the project to representatives of Serbian businesses, startups, and the academic community. The aim is to make joint efforts to create a favorable investment environment in Serbia. According to an official statement, activities within this project will last four and a half years.

ICT Hub General Manager Mr. Andric said more and more companies, even SMEs, were recognizing the importance of innovations, so they were starting to cooperate, develop digital strategies, and encourage entrepreneurship. “We also have major legislative changes to support innovations and e-commerce in Serbia. What we need now is a bold and concrete strategy,” Andric pointed out.

EU-Western Balkan business platform launched

The European Commission and the Western Balkans 6 Chamber Investment forum (WB6 CIF) have launched a joint EU-WB6 platform, bringing together businesses from the region and EU representatives with the aim of enhancing dialogue and helping Western Balkan economies overcome challenges and prepare for integration with the EU single market. President of Chamber of Commerce of Serbia (PKS) Mr. Cadez, who also chairs the WB6 CIF, highlighted the significance of strengthening the dialogue between the region’s business community and the EU, as well as of the EU single market progressively becoming open to companies and products from the Western Balkans.

Mr. Cadez said he expected early integration to be available sectors that were compliant with EU rules and standards. Welcoming the launch of the business platform, EU Enlargement Commissioner Mr. Várhelyi said it was important for boosting strategic cooperation between the EU and the Western Balkan region. He expects public-private dialogue to facilitate the implementation of the EU’s €9 billion economic and investment plan for the Western Balkans.