Serbia Newsflash Week 27

EU accession news, increased trade with Russia, Free Trade Agreement enters into force, amazing wheat harvest, maize shortages, CEFTA regional single market progression, rising export figures - The week in Serbian agriculture

Wheat field in sunshine
©PicJumbo
Serbia is expecting a total wheat harvest of 3 million tons, which is 300 thousand tons higher than in 2020.

Agriculture sector would benefit greatly once Serbia becomes member of the EU

As reported in our Serbia Newsflash two weeks ago,  a new law on the Regulation of Agriculture Products Market has been adopted. The Serbian Minister of Agriculture stated that the new Law would enable assistance to farmers and the state when a crisis occurs.

Explaining the law in the Serbian Parliament, the Minister stated that if the price of agricultural products is low, the new Law will give producers the opportunity for private storage of goods with the help of the state, thus enabling goods to be sold when the price is higher. He reminded the parliament of the situation in raspberry production from 2017, when negotiations with raspberry produces took a long time. If such a law had existed then, it would have been easier for the state to react.

"We did not invent the wheel, this was applied by the countries in the process of joining the EU. Agriculture suffers the most until we join the EU, but once we join, the agriculture sector will be the biggest winner. The agricultural policy of the Union is such that Serbia, if it were a member, would have direct benefits of €1.6 billion, and our national budget is now €400 million," the Minister explained.

The Minister criticised the previous government, which, as he says in the Stabilisation and Association Agreement in 2009, negotiated “the worst position for agriculture”, that the 32% protection for the import of agricultural products was abolished, and that a massive influx of goods from Hungary and Croatia was recorded after that. "This law envisages a special market information system, we will have a kind of general staff for the management of Serbian agriculture," said the Minister, adding that the law would be in force until Serbia joins the European Union. 

Serbia expects 3 million-ton wheat harvest

Wheat harvesting started last weekend and will be finished in a week. Wheat fields cover 595 thousand hectares, and the expected yield is 3 million tons, Serbia Grains Association President Suncica Savovic stated for the press.

Ms. Savovic noted that the total yield will be 300 thousand tons higher compared to 2020. “Wheat yields are incredible. In Vojvodina, they range between 6 and 8 tons per hectare. As for the quality of wheat and yields in different regions, the number of samples that have been analyzed so far is still too low to have the whole picture,” Savovic explained.

She pointed out that the weather conditions were ideal for wheat harvesting, which should be done in a week. However, the high temperatures recorded these days are not ideal for plants such as maize and soybeans. According to Savovic, this year’s wheat yield in all of Serbia is expected to reach 5 tons per hectare as opposed to last year’s 4.7 tons. She noted that 1.5 million tons of wheat would be enough to meet domestic needs, adding that the 2021 yield would include a surplus of 1.5 million tons, which would be exported. Quantities not exported will remain in stock for next year. Serbia had started 2021 with wheat reserves totaling slightly less than 300.000 tons.

Initiatives to ban maize exports

Opposition Party of Freedom and Justice (SSP) asked the Ministry of Agriculture to ban maize exports because Serbian farmers were facing a shortage of maize, an important component of animal feed. In a written statement, SSP Vice-President said Serbian maize exports were up by 50% in Q1 2021 because of increased demand in the global market. This has caused the maize price to increase to cca €0.29 per kg, he added. “Taking into account the extremely low wholesale cattle price (liveweight) and the dry summer, reducing the yield, we can clearly see that maize exports jeopardize the survival of domestic cattle breeding, which is becoming economically unprofitable. For that reason, we urge the relevant ministry to prohibit maize exports. Considering the current situation, there is not enough maize for Serbia to meet the needs of the domestic market,” explained the opposition party vice-president. He added that the SSP had also asked the ministry to publicly specify the amount of maize Serbia had, as well as the amount it needed until October.

Berries in boxes
©Couleur
Seven new Serbian companies gained permits to export to the Russian market. The companies produce fruits, milk, meat and animal feed. Serbia's total trade with Russia increased five-fold in a decade.

FTA with EAEU coming into force on July 10

The Serbian Minister of Trade, Tourism, and Telecommunications announced that the Free Trade Agreement (FTA) between Serbia and the Eurasian Economic Union (EAEU) would come into force on July 10. The EAEU includes Russia, Kazakhstan, Belarus, Armenia, and Kyrgyzstan.

“Since this is the most important FTA Serbia has signed, largely because it means an expanded list of goods exported duty-free and another two export destinations, the implementation will notably boost the export of Serbian goods to the EAEU. That way, Serbia’s export potential will be strengthened further, much like the overall economic growth,” the Minister said.

As she pointed out, the FTA gives Serbia access to a market with over 180 million people, and 99% of all goods are exempt from duties. The Minister underlined that the new agreement maintained the high degree of trade liberalization in line with valid bilateral FTAs that Serbia already had with Russia, Belarus, and Kazakhstan, extending it to two other countries – Armenia and Kyrgyzstan.

It is to be expected that this FTA will encourage domestic and foreign investments in several areas, especially the agri-food industry, transport and logistics, and companies engaged in the rubber, metal, textile, construction, and ICT industries.

Serbia had been exporting a wide variety of goods to the EAEU for years, mostly agri-food products. The Assistant Minister for Trade recalled that as much as 60% of cheese produced in Serbia was exported to Russia.

In the Serbia-EAEU trade structure, Russia is the most significant partner, accounting for 93% of Serbia’s exports to the EAEU and cca 90% of Serbian imports from that market. Serbia’s leading export products going into the EAEU last year were apples, tires for passenger cars, tights, soybeans, and medicines. As for products coming from the EAEU in 2020, Serbia mostly imported natural gas, oil, and industrial oils.

Seven new food companies got export permit to Russia

Last week, seven Serbian companies that produce fruits, meat, milk, or animal feed got permits to export their products to the Russian market. Three of those companies produce fruit (PDM, Farm Fruit, and Rambo), one makes animal feed (Sano), one is engaged in the meat industry (Perutnina Ptuj), and two make dairy products (Sremska Mlekara and Belanova), Serbian Agriculture Minister said after a meeting with his Russian counterpart. The Minister pointed out that trade with Russia in terms of agricultural products has grown five-fold over the past ten years and reached $480 million in 2020, with Serbia reporting a surplus of over $250 million. The Serbian minister announced that by May 2022, the country would be integrated into Russia’s information system monitoring fruit and vegetable deliveries to that country. “That will allow us to know where the goods are at every moment, minimizing potential malpractice,” the Minister said. He confirmed that Russia would allow pork imports from Serbian areas unaffected by African swine fever.

Urgent need for single regional market

Director of the CEFTA Secretariat Mr Djikic pointed out that CEFTA, together with its partners, is making great efforts to realise the idea of a Single Regional Market, as well as to implement key activities from the Action Plan for the Single Regional Market, as soon as possible for the benefit of citizens and companies. "When we summarised the results from 2020, which brought many challenges, we could say that CEFTA made trade easier in challenging times, as well as promise that it would remain our priority in 2021. We are working on various processes, which would save companies time and costs," said Djikic at the summit of the Western Balkan countries in Berlin. Significant work has been done, as he states, at the expert level, and now the adoption of these important decisions should be a priority. 

Serbia’s exports since January worth $10 billion

The Statistical Office of the Republic of Serbia has announced that the value of exports, from the beginning of the year, amounted to $9.9 billion, which is a 40.9% increase compared to the same period last year. Expressed in Euros, the value of exports amounted to €8.2 billion.

The value of imports amounted to €10.5 billion, which is a 18.3% increase compared to the same period last year. The deficit expressed in Euros amounted to 2.3 billion, which was a decrease of 7.5% compared to the same period last year. The export - import ratio was 78.1% and was higher if compared to the same period last year when it was 72%.

The external trade in the reference period noted the highest level with the counties with which Serbia has signed agreements on free trade. European Union member countries account for 62.4% of total external trade. The second major partner of Serbia refers to the CEFTA countries, since the gained surplus in external trade amounted to 826.9 mn EUR, resulting mainly from the exports of oil and oil derivatives, cereals and produces thereof, electrical machines and apparatus, iron and steel and road vehicles. 

UniCredit Bank projects 7% growth for Serbia 

In its latest report on the economic outlook for Central and Eastern Europe and the Western Balkans, the Italian banking group UniCredit Bank has upgraded its 2021 growth forecast for Serbia to 7% from 4.2%. UniCredit forecasts the Serbian economy to grow 4.5% in 2022, supported by domestic demand and further recovery of Serbia’s main trade partners.

Consumption and investment will be among the drivers of Serbia’s growth, the report said. It also said growth of consumption would be underpinned by a wage and pension increase, restricted unemployment growth, new support measures for the employed and increased household demand, stifled during the coronavirus pandemic. The banking group also said Serbia’s budget deficit could drop to 3% of the GDP next year, also resulting in a further decline of the share of the government debt in GDP.