Agriculture and Agribusiness in Southeast Europe: an Overview

Nancy CochraneEconomic Research Service

USDAWashington DCMay 20, 2008

We will look at Serbia, Montenegro, Bosnia and Macedonia

The legacy—positive and negative Progress since 2000 But progress is uneven—many

regions are lagging Institutional barriers to growth The future lies with the EU

The legacy of Yugoslavia—the positive

Private land ownership Active trade with the West during

the 1980s, with significant exports of Baby beef Raspberries Grains

Some orientation to the market

The negative… Ten years of war and sanctions led to

deterioration of capital stock The socialized kombinats were

inefficient, subsidized, operated on soft budget constraint

Socialist mentality—we want guaranteed prices and guaranteed markets

Land fragmentation, lack of clear ownership

In the old days

Serbia and Croatia were the major agricultural producing regions

Other republics relied on white elephant industry and were net food importers

This industry has closed down and these regions have reverted to subsistence agriculture

And what now? Serbia is emerging again

Net agricultural exporter Exports to EU are growing

Seven slaughterhouses are licensed to export to the EU

Baby beef exports are growing Raspberry market was never lost

Many former kombinats have been privatized and are once again profitable

Small recovery in cattle numbers

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

thousands

Cattle Sw ine Cow s

Source: Serbian Office of Statistics

Serbia: Sour cherry and raspberry output is growing

0

20

40

60

80

100

120

ton

s

raspberries Cherries Sour cherries

Source: Serbian Office of Statistics

Macedonia: Animal numbers continue to decline

0

50

100

150

200

250

300

350

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

1000 head pigs and cattle

0

500

1000

1500

2000

2500

3000

1000 head sheep

Cattle Pigs Sheep

Source: FAO

Bosnia: Cattle and sheep recover from the war

0

200

400

600

800

1000

1200

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

10

00

he

ad

Cattle Pigs Sheep

Source: U.N, Food and Agricultural Organization

Bosnia fruit production recovers

0

50000

100000

150000

200000

250000

300000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

tons

Plums Apples Pears Cherries Sour cherries

Source: U.N. Food and Agriculture Organization

But Bosnia and the other countries are overwhelmed with imports from Serbia

In the old days Bosnia, Macedonia and Montenegro were food deficit

White elephant industry closed down Leaving population to rely on

subsistence agriculture And they are still net food importers

Cattle from Serbia Processed foods from Serbia, Croatia,

Slovenia

And Serbia itself is diverse Vojvodina is a powerhouse Central Serbia is reviving its fruit

industry But other regions are lagging

Farms in south are very small and fragmented

Farmers do not participate in the market

“Svastarenje” still rules Villages are depopulating

And in the other countries most farmers are not integrated into markets

Macedonia Large slaughterhouses produce their

own pigs rather than buy from farmers Small farmers produce for own needs

or sell to small slaughterhouses Montenegro

Goranovic buys cattle from Serbia Many high quality products in north

never reach the tourist areas

What are the issues?

Infrastructure—poor roads, inadequate or disorganized irrigation, undeveloped wholesale markets

Lack of investment—old varieties, old trees, use of own rather than certified seed

Quality standards, food safety, animal health

Issues continued…

Fragmented land ownership, thin land markets Lack of market information Inadequate collection and reporting of basic

statistics RS in Bosnia doesn’t know how land is actually

being cultivated Montenegro—no data on raspberry production

No strong tradition of modern farmer cooperatives

Need for stronger farmer training

Haphazard, ad hoc policy making based on poor information

Serbia Most policy is in right direction towards decoupling But export ban And Ministry has no idea if support is effective

Montenegro Complex array of per head payments for cattle Investment subsidies for raspberry growers

Bosnia—each entity, each canton has its own set of subsidies aimed at boosting production and reducing imports

Each country tends to rely on protectionist measures to keep out their neighbors’ products

But things aren’t all bad…

Agribusiness is growing Exports to EU are increasing Growing number of

successful commercial farmers

Better situation than in Bulgaria or Romania

A world away from the situation in the CIS—Armenia, Georgia, Ukraine

And the future lies with the EU

EU membership will bring higher farm income, more investment

Farmers and agribusiness can tap rural development funds to finance investments in higher quality production

But…

Open borders will bring more competition

EU will impose strict quality, food safety, animal welfare regulations, and many smaller plants will have to close That could leave those Macedonian pig

farmers without any markets It is not so easy to access EU rural

development funds