STUDY ON COMPETITIVENESS AND REGIONAL POTENTIALS OF AGRICULTURE IN SERBIA Focus on fruit and vegetables
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The Study on the Competitiveness and Regional Potentials of Serbian Agriculture was prepared with a goal to inform investors, policy makers and public about the competitiveness of agriculture production and processing industries in Serbia. Publication of this Study was made possible through cooperation of the USAID Competitive Economy Project and SeeDev doo Beograd.
January 2020
This Study is made possible by the support of the American people through the United States Agency for International Development (USAID). The contents of this Study are the responsibility of SEEDEV and do not necessarily reflect the views of USAID or the United States Government.
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Content: INTRODUCTION AND METHODOLOGY ...... 7 AGRICULTURE IN SERBIA ...... 9 Producers ...... 11 Trade agreements ...... 11 Good infrastructure and favorable position ...... 12 Market chains developed ...... 13 Agriculture competitiveness in Serbia ...... 15 Cereal and industrial crop sector competitiveness ...... 16 Fruit sector competitiveness ...... 19 Competitiveness of the Vegetable Sector ...... 23 Meat sector competitiveness ...... 29 Dairy sector competitiveness ...... 30 Competitiveness of wine sector ...... 31 Competitiveness of fishery sector ...... 32 Position analysis ...... 33 FOOD PROCESSING INDUSTRY IN SERBIA ...... 36 Structure of the food processing industry ...... 36 Competitive F&V processed products ...... 37 Structure and performance of agricultural processors ...... 38 Regional distribution ...... 43 FRUIT AND VEGETABLES: REGIONAL ACPECTS ...... 45 Vojvodina region ...... 46 Šumadija and Western Serbia region ...... 52 Southern and Eastern Serbia region...... 56 Belgrade region ...... 58 SUPPORT POLICY ...... 61 Support policy in Serbia ...... 61 Demarcation between national and IPARD measures ...... 63 Provincial and municipal agrarian budgets ...... 63 RECOMMENDATIONS ...... 65 Development ...... 65 Investment possibilities ...... 70 Support policy ...... 72
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Sectorial recommendations ...... 73
Tables: TABLE 1: RANKING TOWARDS WORLD ...... 34 TABLE 2: RANKING TOWARDS EUROPE ...... 34 TABLE 3: ORCHARD AREAS AND IRRIGATED ORCHARD AREAS PER REGION ...... 45 TABLE 4: FRUIT PRODUCTION IN 2018, GROWTH TREND IN 2014 – 2018 PERIOD IN VOJVODINA REGION. PRODUCTION SHARE IN TOTAL PRODUCTION IN 2018 IN SERBIA ...... 46 TABLE 5: PRODUCTION OF VEGETABLES IN 2018, GROWTH TREND IN 2014 – 2018 PERIOD IN VOJVODINA REGION AND PRODUCTION SHARE IN TOTAL PRODUCTION OF SERBIA IN 2018 (GREEN COLOR: LEADING PRODUCTION REGION, YELLOW: SECOND IN SHARE SIZE) ...... 50 TABLE 6: PRODUCTION OF FRUIT IN 2018, GROWTH TREND IN 2014 – 2018 PERIOD IN ŠUMADIJA AND WEST SERBIA REGION AND PRODUCTION SHARE IN TOTAL PRODUCTION OF SERBIA IN 2018 (GREEN COLOR: LEADING PRODUCTION REGION, YELLOW: SECOND IN SHARE SIZE) ...... 53 TABLE 7: NUMBER OF SPECIALIZED AH FOR CROP PRODUCTION, VEGETABLE PRODUCTION AND FRUIT PRODUCTION BY USED AGRICULTURAL LAND IN SERBIA ...... 54 TABLE 8: VEGETABLES PRODUCTION IN 2018, GROWTH TREND IN 2014 – 2018 PERIOD IN ŠUMADIJA AND WESTERN SERBIA REGION. PRODUCTION SHARE IN TOTAL PRODUCTION OF SERBIA IN 2018 ...... 56 TABLE 9: PRODUCTION OF FRUITS IN 2018, GROWTH TREND IN 2014 – 2018 PERIOD IN SOUTHERN AND EASTERN SERBIA REGION AND PRODUCTION SHARE IN TOTAL PRODUCTION OF SERBIA IN 2018 (GREEN COLOR: LEADING PRODUCTION REGION, YELLOW: SECOND IN SHARE SIZE) ...... 57 TABLE 10: PRODUCTION OF FRUITS IN 2018, GROWTH TREND IN 2014 – 2018 PERIOD IN SOUTHERN AND EASTERN SERBIA REGION AND PRODUCTION SHARE IN TOTAL PRODUCTION OF SERBIA IN 2018 (GREEN COLOR: LEADING PRODUCTION REGION, YELLOW: SECOND IN SHARE SIZE) ...... 57 TABLE 11: PRODUCTION OF FRUITS IN 2018, GROWTH TREND IN 2014 – 2018 PERIOD IN BELGRADE REGION AND PRODUCTION SHARE IN TOTAL PRODUCTION OF SERBIA IN 2018 (GREEN COLOR: LEADING PRODUCTION REGION, YELLOW: SECOND IN SHARE SIZE) ...... 59 TABLE 12: VEGETABLE PRODUCTION IN 2018, GROWTH TRENDS IN 2014 - 2018 IN THE BELGRADE REGION AND PRODUCTION SHARE IN SERBIA'S PRODUCTION IN 2018 ...... 59 TABLE 13: DEMARCATION OF IPARD AND NATIONAL MEASURES BY BENEFICIARIES SIZE ...... 63 Graphs: GRAPH 1: AGRICULTURAL PRODUCTION IN PRODUCER PRICES ...... 11 GRAPH 2: COMPETITIVENESS OF AGRICULTURAL PRODUCTS COMPARED TO THE WORLD ...... 15 GRAPH 3: COMPETITIVENESS OF AGRICULTURAL PRODUCTS COMPARED TO THE EU ...... 15 GRAPH 4: COMPETITIVENESS OF AGRICULTURAL PRODUCTS COMPARED TO CEFTA ...... 15 GRAPH 5: CROPS - TOTAL CULTIVATED AREA IN SERBIA ...... 17 GRAPH 6: CROPS – TOTAL PRODUCTION IN SERBIA ...... 17 GRAPH 7: COMPETITIVENESS LEVEL OF CORN AMONG EUROPEAN COUNTRIES ...... 17 GRAPH 8: COMPETITIVENESS LEVEL OF WHEAT AMONG EUROPEAN COUNTRIES...... 18 GRAPH 9: COMPETITIVENESS LEVEL OF SOYBEAN AMONG EUROPEAN COUNTRIES ...... 18 GRAPH 10: FRUIT COMPETITIVENESS BY FRUIT SUBSECTORS ...... 20 GRAPH 11: PRODUCTION STRUCTURE OF FRUIT GROUPS IN SERBIA ...... 20
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GRAPH 12: STRUCTURE OF FRUIT PRODUCTION IN SERBIA ...... 20 GRAPH 13: LEVEL OF APPLE COMPETITIVENESS AMONG EUROPEAN COUNTRIES ...... 21 GRAPH 14: LEVEL OF PLUM COMPETITIVENESS AMONG EUROPEAN COUNTRIES ...... 22 GRAPH 15: LEVEL OF RASPBERRY COMPETITIVENESS AMONG EUROPEAN COUNTRIES...... 22 GRAPH 16: LEVEL OF SOUR CHERRY COMPETITIVENESS AMONG EUROPEAN COUNTRIES ...... 22 GRAPH 17: VEGETABLE PRODUCTION IN SERBIA ...... 25 GRAPH 18: TOTAL EXPORT OF VEGETABLES (FRESH AND PROCESSED) FROM SERBIA ...... 26 GRAPH 19: COMPETITIVENESS LEVEL OF PEPPER AMONG EUROPEAN COUNTRIES ...... 27 GRAPH 20: COMPETITIVENESS LEVEL OF CARROT AMONG EUROPEAN COUNTRIES ...... 27 GRAPH 21: COMPETITIVENESS LEVEL OF CUCUMBER AMONG EUROPEAN COUNTRIES ...... 28 GRAPH 22: COMPETITIVENESS LEVEL OF TOMATO AMONG EUROPEAN COUNTRIES ...... 28 GRAPH 23: COMPETITIVENESS LEVEL OF PORK AMONG EUROPEAN COUNTRIES ...... 29 GRAPH 24: RANK ANALYSIS COMPARED TO THE WORLD ...... 34 GRAPH 25: COMPANIES SHARES (NUMBER) BY PROCESSING TYPE ...... 36 GRAPH 26: EXPORT STRUCTURE OF PROCESSED PRODUCTS IN 2017 ...... 36 GRAPH 27: REVEALED COMPETITIVE ADVANTAGE (RCA) INDEX FOR THE MAJOR FRUIT AND VEGETABLE PROCESSED PRODUCTS RELATIVE TO THE WORLD IN 2018...... 37 GRAPH 28: EXPORT OF PROCESSED MEAT PRODUCTS ...... 38 GRAPH 29: NUMBER OF FOOD-PROCESSING COMPANIES ACCORDING TO DIFFERENT INDICATORS ...... 40 GRAPH 30: SHARE IN TOTAL INCOME OF FOOD PROCESSING COMPANIES BY SIZE ...... 41 GRAPH 31: SHARE OF EMLOYEE NUMBER IN FOOD PROCESSING COMPANIES BY COMPANY SIZE ...... 41 GRAPH 32: SHARE OF REGIONAL FRUIT PRODUCTION IN TOTAL FRUIT PRODUCTION IN SERBIA ...... 45 GRAPH 33: SHARE OF REGIONAL VEGETABLE PRODUCTION IN TOTAL VEGETABLE PRODUCTION IN SERBIA ...... 45 GRAPH 34: SERBIA - INTRA-ANNUAL POTATO TRADE DISTRIBUTION 2008-2019 PERIOD ...... 51 GRAPH 35: EXPORT AND IMPORT DISTRIBUTION OF ANNUAL QUANTITIES OF ONION AND PRICE DISTRIBUTION ON WHOLESALE MARKETS IN 2013-2018 PERIOD ...... 51 GRAPH 36: SIZE OF IMPORT AND DEMAND TREND FOR FRUITS AND VEGETABLES IN EUROPE AND WORLD ...... 66
Maps: MAP 1: TRADE AGREEMENTS AND KEY PRODUCTS EXPORTED TO SELECT MARKETS ...... 12 MAP 2: BASIC INFRASTRUCTURE AND EXPORT DIRECTIONS WITH FOOD EXPORT SHARE ...... 13 MAP 3: NUMBER OF VINARIES PER GROWING ZONES ...... 31 MAP 4: REGIONAL DISTRIBUTION OF FOOD PROCESSING COMPANIES ...... 42 MAP 5: GEOGRAPHICAL DISTRIBUTION OF PROCESSING PLANTS ...... 44 MAP 6: NUMBER OF SPECIALIZED AGRICULTURAL HOLDINGS (AH) HAVING PERMANENT PLANTINGS OF FRUIT AND/OR GRAPEVINE ...... 47 MAP 7: DISTRIBUTION AND CAPACITY STRUCTURE OF COLD STORAGES IN SERBIA PER REGION...... 48
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MAP 8: SURFACE AREAS UNDER VEGETABLES, FLOWERS AND ORNAMENTAL PLANTS IN AGRICULTURAL HOLDINGS SPECIALIZED IN OPEN-FIELD PRODUCTION, PRESENTED BY SUB-REGIONS AND THE SIZE OF AGRICULTURAL LAND USED IN OPEN-FIELD ...... 49 MAP 9: SURFACE AREAS UNDER VEGETABLES, FLOWERS AND ORNAMENTAL PLANTS IN AGRICULTURAL HOLDINGS SPECIALIZED IN GREENHOUSE PRODUCTION, PRESENTED BY SUB-REGIONS AND THE SIZE OF AGRICULTURAL LAND USED IN GREENHOUSES AND GLASSHOUSES ...... 49 MAP 10: DISTRIBUTION OF DEEP-FREEZING COLD STORAGES...... 54 MAP 11: F&V PROCESSING FACILITIES - BUSINESS REVENUES ...... 54 MAP 12: SURFACE AREAS UNDER VEGETABLES, FLOWERS AND ORNAMENTAL PLANTS IN AGRICULTURAL HOLDINGS SPECIALIZED IN OPEN-FIELD PRODUCTION, PRESENTED BY SUB-REGIONS AND THE SIZE OF AGRICULTURAL LAND USED IN OPEN-FIELD ...... 55 MAP 13: SURFACE AREAS UNDER VEGETABLES, FLOWERS AND ORNAMENTAL PLANTS IN AGRICULTURAL HOLDINGS SPECIALIZED IN GREENHOUSE PRODUCTION, PRESENTED BY BY SUB-REGIONS AND THE SIZE OF AGRICULTURAL LAND USED IN GREENHOUSES AND GLASSHOUSES ...... 55 MAP 14: SURFACE AREAS UNDER VEGETABLES, FLOWERS AND ORNAMENTAL PLANTS IN AGRICULTURAL HOLDINGS SPECIALIZED IN OPEN-FIELD PRODUCTION, PRESENTED BY SUB-REGIONS AND THE SIZE OF AGRICULTURAL LAND USED IN OPEN-FIELD ...... 58 MAP 15: SURFACE AREAS UNDER VEGETABLES, FLOWERS AND ORNAMENTAL PLANTS IN AGRICULTURAL HOLDINGS SPECIALIZED IN GREENHOUSE PRODUCTION, PRESENTED BY BY SUB-REGIONS AND THE SIZE OF AGRICULTURAL LAND USED IN GREENHOUSES AND GLASSHOUSES ...... 58 MAP 16: SURFACE AREAS UNDER VEGETABLES, FLOWERS AND ORNAMENTAL PLANTS IN AGRICULTURAL HOLDINGS SPECIALIZED IN OPEN-FIELD PRODUCTION, PRESENTED BY SUB-REGIONS AND THE SIZE OF AGRICULTURAL LAND USED IN OPEN-FIELD ...... 60 MAP 17: SURFACE AREAS UNDER VEGETABLES, FLOWERS AND ORNAMENTAL PLANTS IN AGRICULTURAL HOLDINGS SPECIALIZED IN GREENHOUSE PRODUCTION, PRESENTED BY SUB-REGIONS AND THE SIZE OF AGRICULTURAL LAND USED IN GREENHOUSES AND GLASSHOUSES...... 60
Diagrams: DIAGRAM 1: AGRICULTURE MAIN FIGURES ...... 9 DIAGRAM 2: PRESENCE OF ALL ACTORS NEEDED ...... 14 DIAGRAM 3: FRUIT – MAIN FIGURES ...... 19 DIAGRAM 4: FRUIT – SIMILARITIES AND DIFFERENCES ...... 21 DIAGRAM 5: VEGETABLES – MAIN FIGURES ...... 23 DIAGRAM 6: PEPPER – MAIN FIGURES ...... 24 DIAGRAM 7: CUCUMBER – MAIN FIGURES ...... 24 DIAGRAM 8: CARROT – MAIN FIGURES ...... 25 DIAGRAM 9: TOMATO – MAIN FIGURES ...... 27 DIAGRAM 10: PHASES OF PRODUCT DEVELOPMENT AND ECONOMIC CONCENTRATION ...... 65 DIAGRAM 11: EXPANDING AND IMPROVEMENT OF ECONOMIC CONCENTRATION ...... 68
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INTRODUCTION AND METHODOLOGY The goal of The Competitiveness and Regional Potentials of the Serbian Agriculture (Study) is two-fold: (а) inform investors regarding the competitiveness of the agriculture sector and the food processing industry in Serbia; (b) inform policy makers that concentration of production and product competitiveness in certain regions needs continuous support through creation of an enabling business environment so that innovation can easily be transformed into business. The first part of the Study reviews all segments of the agricultural industry in Serbia, and the second part focuses on the fruit and vegetables sector as the most competitive segment within Serbia’s agricultural industry. The second part presents the conclusion of the analyses related to the specificities and concentration of fruit and vegetables production in four regions, including: Vojvodina, Belgrade, Šumadija and Western Serbia, and Eastern and Southern Serbia. The third part analyzes policy support implemented in Serbia at the central, regional and local levels. Lastly, the Study presents recommendations on how to improve the business enabling environment in order to lead to economic development and concentration. Special attention is given to the goals and policy support measures, as well as to recommendations provided to investors on where and why to invest, presented by type of fruit and vegetable. The Study is based on three types of research analysis, including: competitiveness analysis, rank analysis and Revealed Competitive Advantage (RCA) analysis. The companies operating in the food processing industry were analyzed based on income, capital assets, number of employees and level of exports. The methodology used to calculate competitiveness was developed by SEEDEV using both existing theoretical and methodological knowledge, and information and experience from past research studies, relying fully on data related to trade, production, yield, harvest area, number of livestock units, prices and other objects of the review, all analyzed against 30 indicators. Products were ranked and then evaluated. A rank is obtained for each of the criteria, so that the highest share product, i.e. a product with the best trend is given a value of one, and the lowest share product is given the highest number, subject to the number of products observed. In this way, a ranking list was developed by level of competitiveness of each product and product group. A scale rate of one to ten was introduced, on the basis of the preset criteria. A unique value is calculated on the basis of the average rate for each product, to define the competitive position of a product relative to other products. The study also uses internationally recognized databases offering comparative data for each country, thereby ensuring the same methodology is used for data collection, and so that the level of error does not affect relations between countries/regions. The most frequently used databases include the following: Statistical Office of the Republic of Serbia (SORS), FAO, Eurostat, ITC, UN Comtrade, FAO-OECD, reports of business operators registered in the Business Registers Agency, and official statistics available from various countries. Data from the aforementioned databases represents the sources that the authors of this study used to create all graphs, tables and charts. The relative importance of the fruit and vegetable processing sector in total trade was measured by the RCA (Revealed Comparative Advantage) index or the so-called Balassa specialized index. This index was used for calculating the relative advantage of disadvantage of a certain country in a certain class of goods as evidenced by trade flows. Apart from the desk research and analysis, interviews and field visits were conducted to producers and other relevant stakeholders in the market chain of the fruit and vegetable sector. We appreciate all their suggestions and are grateful for the data and recommendations provided.
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A special thanks goes to Mr. Darko Jakšić and colleagues at CEVIN for their assistance with the analysis of the wine sector in Serbia and the production of maps.
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AGRICULTURE IN SERBIA Serbia is presently undergoing a economic transformation process, requiring many structural and legal reforms. Agriculture is an integral part of these processes. Some of these reforms, including land privatization and credit market creation are being carried out quickly, however, other processes are slower in nature. Still, generally speaking, agriculture is a significant part of the Serbian economy, with a large potential to contribute to future economic growth. Production is being modernized, the number of farmers utilizing modern growing practices is growing, with hundreds or even thousands of hectares of land under cultivation with high yielding crops. Additionally, the structure of production has been changing to meet the requirements not only of the local and regional markets, but also to satisfy global trends and requirements. The main driver for changes in production include liberalization of custom duties, which increased competition and created access to new technologies, preferential access to the EU and other markets, market development based on private initiatives, adaptation to market rules, and frequently changing market dynamics. Over the 2007-2018 period, the average value of total production of agricultural goods and services amounted to 504.4 billion RSD, with an average production growth of 5.9%, and 8.9% growth in 2018 compared to 2017. Serbia has 3.45 million hectares of arable land and ranks 14th in Europe and 39th in the world for its total land resource area. Approximately, 90% of arable land is privately owned. The remaining 400,000 hectares of arable land is owned by the state. This land is either being leased on the market, or it will appear for sale on the market by new/old owners who benefited through the land restitution process. Diagram 1: Agriculture main figures
Source: SORS, Economic Accounts for Agriculture in the Republic of Serbia, UN Comptrade, FAO, data processing: SEEDEV Serbia’s agricultural land is characterized by fragmented land plots and a large number of small agricultural holdings/farms. Still, the country’s structure of producers is not an obstacle for development, as market development initiatives resulted in a gradual division of agricultural holdings into commercial and non- commercial holdings – with the former growing steadily owing to purchase or lease of land from the non-
p. 9/75 commercial farmers and/or the state. These commercial producers are among the best in Europe, in terms of competitiveness, competence and use of agricultural machinery and equipment. Due to being a closed market for a long period of time, a large number of small producers with short market chains and its diverse climate and land characteristics, Serbia’s agricultural sector is characterized with highly diversified production. Not only does Serbia produce a large number of products, but many of these products are exported. A majority of exported products end up on the CEFTA market, owing to the fact that Bosnia and Herzegovina, Albania, Montenegro and Коsovo* have low levels of specialized productions. As such, Serbian products are competitive in these markets despite their lack of competitiveness globally. Serbia is the largest food producer in the CEFTA region and possess the largest resources and market size. The country produces over half of the total share of production of a majority of industrial crops and fruits, while in terms of cereal production, the largest and smallest share include corn and barley, respectively. In terms of vegetables, both perishable and non-perishable, Serbia has the smallest share of production in the region. Globally and in Europe, Serbia has a significant share of production in raspberries, plums and sour cherry, though not by more than several percentage points in relation to other countries (excluding raspberries with over 10 percent market share in global production). Meanwhile, Serbia's share of other products is less than one percent of the total market share. Serbia achieves significant results in the trade of agricultural products. Serbia ranked 56th place on the 2018 global list of exporters of agricultural products, with 3.5 billion USD in total value of exports, out of which, 34% is comprised of processed agricultural products. The average export growth in the last 15 years has been 9.57%. Since 2005, Serbia has recorded a surplus in trade of agricultural products. Fruits and vegetables represent the largest share of total exports, which are exported to 94 countries. The largest export markets include: CEFTA countries with 34.9%, the EU market with 34.5% (out of which the EU15 accounts for 22.6% and NMS for 11.9%), Russia with 10.7%, and the remaining countries make up 18.7%. Meanwhile, in Serbia, imports of agricultural products per capita is extremely low, among the lowest in Europe. Foreign Direct investments (FDIs) in Serbia’s agriculture sector amounted to 459.3 million EUR in the period from 2010 to 2018; while investments in the food processing industry over the same period amounted to 1.2 billion EUR.
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Graph 1: Agricultural production in producer prices
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Vegetables Cereals Industrial crops Fodder Fruit Wine Other crop production Livestock production Production services
Source: SORS, Economic Accounts for Agriculture in the Republic of Serbia
Producers The biggest competitive advantage of Serbia’s agriculture sector are its many small scale farmers and growers. Unlike other socialist countries, the agricultural sector in the Socialist Federative Republic of Yugoslavia recognized ownership of private arable land, which helped farmers gain production experience over the years. Additionally, economic liberalization, land reforms and other policy reforms contributed towards the development of many successful agricultural producers, which organized themselves as family agricultural holdings or businesses. These producers keep pace with global trends, utilize sophisticated machinery and modern technologies, are business oriented towards global markets and use specialized production processes. Importantly, these producers are also some of the biggest investors in the agriculture sector in Serbia. Due to these factors, Serbian farmers are reliable and credible partners to some of the largest agricultural producers in the world. Past experience shows that out of the group of new EU member states (such as Poland), agribusiness experienced the fastest development in countries with a good base of farmers. These countries also managed to attract foreign investments in the agricultural sectors owing to their abilities to serve as viable partners and long-term supply chain members. Serbia has 564,541 registered agricultural holdings, out of which, 301,028 are registered. From the registered agricultural holdings, 99.6% are family farms and 0.4% are business entities. By starting to operate commercially, professional farmers have increasingly improved their efficiency and profit levels, and select type of production based on best available options at their disposal. As a result, this leads to regional specialization, with particular regions gaining reputation for certain products, such as: Oblačina sour cherry, Leskovac peppers, Arilje raspberries, Topola grapes, peaches from Grocka, sunflower from Banat, Futog cabbage, among others. Trade agreements Serbia maintains many favorable bilateral trade agreements. Free trade agreements exist for almost all products with all major partners and countries (including the EU, CEFTA, Russia, USA, EFTA, Turkey, Belarus, Kazakhstan).
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Serbia is a member of the Central European Free Trade Agreement (CEFTA) that allows local companies to export goods customs‐free to a market of close to 30 million people. The Stabilization and Association Agreement (SAA) and Interim Trade Agreement with the EU was signed in April 2008. The EU granted Serbia full candidate status in March 2012. In October 2019, Serbia signed a free trade agreement with the Eurasian Economic Union (EAEU), further opening up a market of 183 million people. Serbia also gained special trade status (Generalized System of Preferences) with the US, providing preferential duty-free entry for more than 4,650 products. In addition, Serbia has a preferential trade agreement with Turkey. Serbia is not a member of the WTO. Map 1: Trade Agreements and Key Products Exported to Select Markets
Source: Development Agency of Serbia, UN Comtrade, data processing: SEDEEV
Good infrastructure and favorable position Serbia is located in a good geographic position, with well-developed traffic infrastructure for exporting goods to diverse markets. Goods and articles are exported to the EU market, EFTA, CEFTA, Turkey, Australia, Japan and the Eurasian Economic Union by motor ways, the Danube River and railway to several seaports. The Danube is the most cost-effective way of transport to Constanta at the Black Sea, and represents an important route for export of cereals, which have been increasingly exported by Serbia. The Danube riverbank can be used for free trade industrial zones, and sites for potential processing facilities.
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Map 2: Basic infrastructure and export directions with food export share
Source: Development Agency of Serbia Market chains developed Similar to the producer structure, Serbia’s market chains are characterized by two types. On the one side, market chains are short and based on small producers. Market chains need to become more formal and longer by including small producers in modern market supply chains. However, since the domestic market constitutes approximately seven million people, small producers manage to find market niches for their products and articles. Also, the domestic market has plenty of room for new products and growth. On the other side, the export-oriented market chain is well-developed for production of final products for various markets, ranging from local green markets to globally recognized retail and supermarket chains. Both types of market chains are based on family farms that plant, grow and own more than 75 percent of the land and animal resources, and form the basis of all production in Serbia. They are the result of the market competition that followed the privatization of collective farms and processing facilities, creation of the agricultural loan market, land market development, certification schemes and the companies that implement them. This was also boosted by development of services based on private initiatives and entrepreneurship, establishment of support institutions in accordance to EU models (including certification, payment, registration, labeling and marking or other institutions) and other mechanisms that contributed to further market development.
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These positive factors were recognized by leading input suppliers (including Pioneer, KWS, LG, Syngenta, Dekalb, Bayer, Du Pont, Haifa, Yara, Linzer, etc.) that opted to enter the Serbian market, often not only as sellers but also as producers. In addition, there are local companies engaged in seed selection and breeding. Diagram 2: Presence of all actors needed
Source: Authors' systematization
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Agriculture competitiveness in Serbia Why are some countries successful and others are not? Why are some regions, sectors and companies more successful than others? The answer to these question lies in the competitiveness phenomenon, defined as the ability of an individual, business, sector, region and/or a state to offer certain goods and services to a particular market. Competitiveness is always observed against other market participants, particularly when it comes to agricultural competitiveness. In this study, SEEDEV analyzed the level of competitiveness of Serbian agricultural products in relation to the World, the EU and CEFTA countries, and the competitiveness of individual countries in terms of key products and articles.
Graph 2: Competitiveness of agricultural products compared to the World
0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1
0
Pigs
Milk
Pear
Bean
Plum
Wine
Apple
Cattle
Maize
Grape
Peach
Onion
Sheep
Carrot
Cherry
Wheat
Potato
Pepper
Apricot
Tomato
Soybean
Cabbage
Pig Pig meat
Hazelnut
Blueberry
Rapeseed
Raspberry Cucumber
Sunflower
Sugar Sugar beet
Strawberry
Sour cherry Sour
Cattlemeat
Sheep meat Sheep
Watermelon Poultry birds Poultry Poultry meat Poultry Graph 3: Competitiveness of agricultural products compared to the EU
0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1
0
Pigs
Milk
Pear
Bean
Plum
Wine
Apple
Cattle
Maize
Grape
Peach
Onion
Sheep
Carrot
Cherry
Wheat
Potato
Pepper
Apricot
Tomato
Soybean
Cabbage
Pig Pig meat
Hazelnut
Blueberry
Rapeseed
Raspberry
Cucumber
Sunflower
Sugar Sugar beet
Strawberry
Sour cherry Sour
Cattlemeat
Sheep meat Sheep
Watermelon Poultry birds Poultry Poultry meat Poultry Graph 4: Competitiveness of agricultural products compared to CEFTA
0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1
0
Pigs
Milk
Pear
Bean
Plum
Wine
Apple
Cattle
Maize
Grape
Peach
Onion
Sheep
Carrot
Cherry
Wheat
Potato
Pepper
Apricot
Tomato
Soybean
Cabbage
Pig meat Pig
Hazelnut
Blueberry
Rapeseed
Raspberry Cucumber
Sunflower
Sugar Sugar beet
Strawberry
Sour cherry Sour
Cattlemeat
Sheep meat Sheep
Watermelon
Poultry birds Poultry Poultry meat Poultry
Fruits Vegetables Cereals Industrial crops Animal products Live animals Wine
Souce: UN Comtarde, FAO, data processing: SEEDEV
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Cereal and industrial crop sector competitiveness In Serbia, cereal and industrial crops are produced on an area of over 2.2 million hectares, representing close to 44% of the total arable land. Total production is approximately 14 million tons, with the largest share of corn (6 million tons), followed by wheat (3 million tons) soybean (650,000 tons) and sunflower. Over the 2013-2018 period, the average annual value of Serbia’s cereal and oilseed exports amounted to 934 billion USD. Serbia's competitiveness in the crop sector varies depending on the specific agricultural product, and the end market destination. Soybean and sunflower are competitive in the EU market, as EU countries generally lack a tradition in this type of production. On the other hand, in relation to the rest of the world, Serbia is uncompetitive in comparison to South American countries, which have the highest production, price and other favorable factors. In terms of corn competitiveness, Serbia ranks in a highly competitive position (6th out of 46 European and CIS countries). It immediately follows other countries that exhibited the following: (1) countries that are intensively increasing production and exports, both at the expense of new areas and higher yields, with a primary competitive advantage in large areas of arable land (CIS countries); (2) countries that have good trends, such as increasing yields and exports, and base their competitiveness on significant land areas, advanced technology and lower labor costs - such as Romania, Poland, Czech Republic, Lithuania, Hungary; and, (3) countries with high yields, good quality, and high prices - such as France, Germany, Denmark etc. Corn is among the highest exported products (average 29.9 million per month) with constant growth of on average 15% higher than the world average over the 2013-2018 period. The rise in world prices was the main driver of the increase in global production and export, and the rise in yields significantly contributed to increasing competitiveness. The large yield increase in corn production is primarily due to the professionalization of producers in the Vojvodina region, high purchase prices and the increase in quality of inputs, particularly seeds. As for wheat competitive, Serbia ranks 25th out of 46 European and CIS countries on the global and European market, despite the fact wheat yields have increased significantly over the recent period. However, increased yields are still insufficient to catch up to more competitive countries, which have based their competitiveness on a steady rise in area under cultivation, yield increases and/or leveraging the latest technologies. Even so, Serbia is the largest and most competitive wheat producer in the region. The majority is exported as flour, and 20% is exported as wheat to regional countries. The most important sales channel for wheat is the port of Constanta, from where it is distributed to other markets.
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Graph 5: Crops - Total cultivated area in Serbia Graph 6: Crops – Total production in Serbia
2.5 18 16 2 14
Million haMillion 12 1.5 Million tonsMillion 10 1 8 6 0.5 4 2 0 0
Wheat Barley Maize Oats Wheat Barley Maize Oats Rapeseed Sugar beet Sunflower Soybeans Rapeseed Sugar beet Sunflower Soybeans Rye Triticale Rye Triticale
Source: SORS, FAO Source: SORS, FAO
The increase in exports can be attributed to new investments in production improvements and storage capacities, which allows for wheat to be sold at a later point in time. Unlike CIS countries, Serbia does not have an opportunity to significantly increase area under cultivation, so it is necessary to invest in new technologies to improve production. The competitiveness of sugar beet has declined since the reform of the EU sugar policy and the abolition of quotas, but it still ranks high - 17th place compared to EU and CIS countries. However, sugar beet plot areas have been declining over the last 10 years, as have the level of exports. Serbia is highly competitive in soybean production, compared to EU and CIS countries, ranking 4th place - behind Russia, Ukraine and France. Production and exports continue to grow. Serbia is the only country in Europe completely self-sufficient in soybean production. Also, Serbia is the only country to fully produce and consume non-GMO soybean and soybean meal. However, this market opportunity is not leveraged sufficiently through product positioning and labeling. In sunflower production, Serbia continues to exhibit growth. Over the 2015-2018 period, area under cultivation increased from 166 thousand hectares to almost 240 thousand. Sunflower and sunflower oil exports averaged over 150 million USD over the 2012-2018 period.
Graph 7: Competitiveness level of corn among European countries
0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1
0
Italy
B&H
Spain
Malta
Latvia
Serbia
France
Cyprus
Poland
Ireland
Greece
Austria
Croatia
Finland
Estonia
Belarus
Albania
Ukraine
Georgia
Sweden
Belgium
Bulgaria
Slovakia
Slovenia
Armenia
Hungary
Portugal
Moldova
Romania
Germany
Denmark
Lithuania
Tajikistan
Azerbaijan
Czech Rep. Czech
Macedonia
Kyrgyzstan
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Kazakhstan
Netherlands
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Turkmenistan United Kingdom United Russian Federation Russian
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Graph 8: Competitiveness level of wheat among European countries
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Czech Rep. Czech
Macedonia
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Turkmenistan United Kingdom United
Russian Federation Russian Graph 9: Competitiveness level of soybean among European countries
0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1
0
Italy
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Spain
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France
Cyprus
Poland
Ireland
Greece
Austria
Croatia
Finland
Estonia
Belarus
Albania
Ukraine
Georgia
Sweden
Belgium
Bulgaria
Slovakia
Slovenia
Armenia
Hungary
Portugal
Romania Moldova
Germany
Denmark
Lithuania
Tajikistan
Azerbaijan
Czech Rep. Czech
Macedonia
Kyrgyzstan
Uzbekistan
Kazakhstan
Netherlands
Montenegro
Luxembourg
Turkmenistan
United Kingdom United Russian Federation Russian
CEFTA CIS NMS EU15
Source: UN Comtarde, FAO, data processing: SEEDEV
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Fruit sector competitiveness The fruit sector is currently the most competitive sector in Serbia’s agricultural space. According to the competitiveness Index, 6 out of the 10 most competitive agricultural products include fruits, primarily raspberry and stone fruit. Diagram 3: Fruit – main figures
Source: UN Comtarde, FAO, data processing: SEEDEV Raspberry is the most competitive agricultural product, with exports of frozen raspberry averaging 253 million USD annually over the 2013-2018 period. In 2018, production in Serbia was 127,010 tons and, over the past 6 years, production has grown faster compared to the average global growth rate of raspberry production. From 2014 to 2018, area under raspberry cultivation increased from 14,792 hectares to 22,654 hectares. Serbia’s competitiveness in terms of raspberry is based on leveraging innovative technology and production models from 50 years ago that is based on smallholder production, which over the years led to quality harvesting and competitiveness at producer-, processor- and exporter-levels. The most competitive stone fruit is frozen sour cherry. The country’s competitiveness is based on specific characteristics of varieties suitable for industrial processing, and positive export trends over the previous period. In recent years, sweet cherry production has been modernized, with organized and intensive cultivation leveraging attractive sorts and varieties. In general, sweet cherry exports exhibit an increasing trend. In the previous period, the high-level of exports of frozen plums contributed most to the improving Serbia’s competitiveness in this article. However, export of dried and fresh plums has a negative trend: the value of dried plums export decreased 3 times in 2014-2019 period - from 19 million USD to 6.5 million USD. The competitiveness of stone fruits, including sour cherry, plum, cherry, apricot is, among other reasons, a consequence of the fact that competition from other countries is diminishing, as some countries are giving up on stone fruit production for various reasons, primarily due to labor shortages and lower profits in comparison to other articles. Over the last few years, largely driven by preferential access to the EAEU market, production and export of strawberry and blueberry has increased. In Serbia, growth in strawberry production is similar to global
p. 19/75 production growth and amounted to 21,735 tons in 2018. Strawberry production has improved due to growing strawberries on raised stacks covered with polyethylene foil and installing irrigation systems, which led to an increase in overall quality, early ripening and higher yields.
Graph 10: Fruit competitiveness by fruit subsectors 0.8 1.2
0.7 1
0.6 0.8 0.5 0.6 0.4 Sour cherry 0.4 Raspberry 0.3 Apple Cherry 0.2 0.2 Strawberry Hazelnut Plum 0 0.1 Pear Blueberry 0 -0.2 Stone fruit Berries Apples fruit Others Nuts
Source: UN Comtarde, FAO, data processing: SEEDEV
In the blueberry segment, the growth in global demand and high prices have generated increased interest among producers and news investors. As such, over a thousand hectares of highbush blueberries under intensive cultivation has been raised with dense planting, hail nets and irrigation systems, along with the introduction of quality standards and modern equipment. According to an estimate by SORS, in 2018 total area under blueberry cultivation was 1,539 hectares, with total production of 5,109 tons.
Graph 11: Production structure of fruit groups in Graph 12: Structure of fruit production in Serbia Serbia
1.8 2
tons 1.6 1.8 1.6
1.4 Million tons Million Million 1.4 1.2 1.2 1 1 0.8 0.8 0.6 0.6 0.4 0.4 0.2 0.2 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 0
Apple Pear Plum Walnut Grapes
2011
2012
2017
2013
2015
2014
2010 2018
2016 2009 2008 Strawberry Raspberry Blackberry Cherry Sour cherry Apples fruit Stone fruit Berries Nuts Apricot Peach Quince Hazelnut
Source: SORS
Over the last 10 years, apple has been the most attractive fruit in terms of investors’ interest, who have significantly contributed to improving apple production and sales. The entry of new players into the market
p. 20/75 chain has led to structural changes among producers, which in turn led to intensification of production and improved quality of the final product. In 2018, production stood at over 430,000 tons, with total ULO cold storages capacity of 107,830 tons. Since 2006, the Russian Federation has been a major end market for Serbian apples. Serbia’s privileged access to the EAEU market, combined with the 2015 mutual sanctions with the EU, resulted in no EU producers exporting to the EAEU. In the last 5 years, the value of apple exports has averaged 102 million USD per year, and growth of apple exports from Serbia is 15 percentage points faster than the world average. Diagram 4: Fruit – similarities and differences
Source: UN Comtarde, FAO, data processing: SEEDEV
Graph 13: Level of apple competitiveness among European countries
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Moldova Romania
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Czech Rep. Czech
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Graph 14: Level of plum competitiveness among European countries
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0
UK
Italy
B&H
Spain
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Latvia
Serbia
Russia
France
Cyprus
Poland
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Austria
Croatia
Finland
Estonia
Belarus
Albania
Ukraine
Georgia
Sweden
Belgium
Bulgaria
Slovakia
Slovenia
Armenia
Hungary
Portugal
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Romania
Germany
Denmark
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Tajikistan
Azerbaijan
Czech Rep. Czech
Macedonia
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Uzbekistan
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Montenegro Luxembourg Turkmenistan Graph 15: Level of raspberry competitiveness among European countries
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Russia
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Sweden
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Armenia
Hungary
Portugal
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Tajikistan
Azerbaijan
Czech Rep. Czech
Macedonia
Kyrgyzstan
Uzbekistan
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Netherlands
Montenegro Luxembourg Turkmenistan Graph 16: Level of sour cherry competitiveness among European countries
0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1
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CEFTA CIS NMS EU15
Souce: UN Comtarde, FAO, data processing: SEEDEV
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Competitiveness of the Vegetable Sector A competitiveness analysis measuring 37 agricultural products compared to the World, the EU and the CEFTA region, places vegetable crops primarily in the middle or in the first half position on the list of all analyzed products. The high competitiveness of certain vegetables is primarily due to the entrepreneurial spirit of producers, who managed to take advantage of opportunities that arose in regional, European and/or other distant markets. Diagram 5: Vegetables – main figures
Source: UN Comtarde, FAO, data processing: SEEDEV The most competitive vegetable is pepper, with the main drivers including: (1) high-skilled professional producers, particularly producers based in the Vojvodina region who concentrated on exporting fresh or frozen peppers; while producers in Šumadija, Western Serbia and Southern Serbia regions remain more focused on processing and selling to the domestic market; and (2) a decline in Northern Macedonia's production, which enabled Serbia to better position itself as a significant player in regional markets. In 2014, the rise in the minimum wage in Germany was a major driver for increasing gherkin production growth in Serbia. Today, production no longer relies solely on partners and organizers from Germany, but has diversified significantly in Serbia. The share of small area production using espaliers with a large percentage of high-quality sorts continues to grow, providing further stabilization in the sector.
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Diagram 6: Pepper – main figures
Source: UN Comtarde, FAO, data processing: SEEDEV Production and purchase of gherkins is organized not only with assistance from foreign partners, but local exporters have formed their own production bases in Serbia. Carrot production, as a prime example of non-perishable vegetables, is highly competitive, especially in the region. Nowadays, Serbia is the dominant supplier for most regional markets (primary markets include Montenegro, Bosnia and Herzegovina, Croatia, etc.) due to good strategic decisions taken by producers, and new investments in production modernization and added value. In Serbia, vegetables production covers approximately 120 thousand hectares (ten-year average), which makes up 3.5% of the total arable land. Serbia ranks 67th in the world and 10th in Europe in terms of area under vegetable cultivation. Over the last ten years, the total average production of vegetables stood at 1.7 million tons, with an average annual rate of decline of 4 percent. Diagram 7: Cucumber – main figures
Source: UN Comtarde, FAO, data processing: SEEDEV The production of non-perishable vegetables is dominated by potatoes, with an average production of 714 thousand tons, and in second place comes cabbage with 288 thousand tons (for the 2014 – 2018 period). In terms of perishable vegetables, melon and watermelon account for 252 thousand tons, followed by tomato with 166 thousand tons and peppers with 132 thousand tons.
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The total export value of vegetables is approximately 160 million USD (average over the 2014 - 2018 period), contributing 5% to total agricultural exports. The vegetable sector ranks sixth in terms of agricultural exports, behind fruit, tobacco, cereals, beverages and oilseeds. The vegetable sector has undergone significant structural changes over the last decade, with producers specializing in production of certain vegetables or groups of vegetables. The vegetable sector is characterized by the concentration of professional producers, who are highly competitive in regional markets. Some Serbian producers are at the same level as the most competitive EU-based vegetable producers. Diagram 8: Carrot – main figures
Source: UN Comtarde, FAO, data processing: SEEDEV Exports of vegetable has exhibited a steady growing trend and, over the last 10 years, exports have increased by 85% in comparison to 2008. The highest export growth can be seen in the cucumber and gherkin sector, with an average annual growth rate of 50%, followed by carrots with 39% growth, tomatoes with 29% and onions with a growth rate of 18%. The biggest share in the total export of fresh and processed vegetables include mixtures of frozen vegetables with 19%, followed by potatoes with 14% and peppers with 11% share.
Graph 17: Vegetable production in Serbia
2.5 2
1.5 Million tonsMillion 1 0.5 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Potato Tomato Peas Cabbage and kale Onion Pepper Beans Melon and Watermelon Carrot Cucumber Garlic
Source: SORS
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Export of fresh vegetables is growing at an average annual rate of as much as 22%, while processed vegetables are growing at a 4% rate. In the structure of exports, the share of processed vegetables (70%) is higher than for fresh vegetable products. Potato production exhibits a low level of competitiveness in comparison to Europe and the world, however, it is still highly competitive in regional markets. The reasons for lower competitiveness levels relative to other countries includes, first and foremost, insufficient use of certified seed, inadequate pest protection, production without irrigation systems, lack of adequate storage capacity and high competition in export markets.
Graph 18: Total export of vegetables (fresh and processed) from Serbia
200
150 Millions USD Millions 100
50
0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Peas Pepper Cucumber Onion Tomato Potato Beans Melon and Watermelon Cabbage Carrot Garlic Other frozen vegetables Other dried vegetables Other canned vegetables Lettuce Mushroom
Source: UN Comtrade
Serbia is not competitive in tomato production, but in recent years, better production trends can be noticed. Due to climatic conditions, Serbia lacks competitiveness in the production of early tomatoes in relation to regional countries, including Albania and Northern Macedonia. Even so, Serbia is competitive later in the season in certain export markets. In addition to exports, domestic consumption of tomatoes has increased significantly, especially during February and March. In terms of onion production, Serbia is competitive in relation to regional countries, ranking 24th among EU and CIS countries. Similarly with other non-perishable vegetables, there is a clear decline in production and professionalization of producers. In order to achieve better competitiveness, investments in storage capacities are required to achieve better quality and market prices.
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Diagram 9: Tomato – main figures
Source: UN Comtarde, FAO,data processing: SEEDEV
Graph 19: Competitiveness level of pepper among European countries
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Montenegro Luxembourg Turkmenistan Graph 20: Competitiveness level of carrot among European countries
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Graph 21: Competitiveness level of cucumber among European countries
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Sweden
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Slovenia
Armenia
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Portugal
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Azerbaijan
Czech Rep.
Macedonia
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Uzbekistan
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Montenegro Luxembourg Turkmenistan Graph 22: Competitiveness level of tomato among European countries
0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1
0
UK
Italy
B&H
Spain
Malta
Latvia
Serbia
Russia
France
Cyprus
Poland
Ireland
Greece
Austria
Croatia
Finland
Estonia
Belarus
Albania
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Georgia
Sweden
Belgium
Bulgaria
Slovakia
Slovenia
Armenia
Hungary
Portugal
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Germany
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Czech Rep.
Macedonia
Kyrgyzstan
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Luxembourg Turkmenistan
CEFTA CIS NMS EU15
Source: UN Comtarde, FAO, data processing: SEEDEV
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Meat sector competitiveness According to SORS, in 2018, 76 thousand tons of beef, 303 thousand tons of pork, 32 thousand tons of mutton and 106 thousand tons of poultry meat was produced in Serbia. Serbia is the least competitive in meat production in comparison to other segments of the agricultural sector. According to the Competitiveness Index, in the meat sector, Serbia is most competitive in pork production, followed by sheep, poultry and beef.
Graph 23: Competitiveness level of pork among European countries
0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1
0
Italy
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Spain
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Serbia
France
Cyprus
Poland
Ireland
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Austria
Croatia
Finland
Estonia
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Ukraine
Georgia
Sweden
Belgium
Bulgaria
Slovakia
Slovenia
Armenia
Hungary
Portugal
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Kyrgyzstan
Uzbekistan
Kazakhstan
Netherlands
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Luxembourg
Turkmenistan
United Kingdom United Russian Federation Russian
CEFTA CIS NMS EU15
Source: UN Comtarde, FAO, data processing: SEEDEV
In recent years, Serbia has registered a decline in meat exports and an increase in imports. In 2018, total livestock exports amounted to 53.6 million EUR, and total imports amounted to 40.2 million EUR. During 2018, the biggest export was recorded in the beef sector with 16.3 million EUR, and 21.6 million EUR in pork. Serbian meat exports primarily end up on regional countries, including Montenegro and Bosnia and Herzegovina. In terms of beef production, Serbia has the potential to become competitive, primarily due to significant grazing potential, but also because of abundant access to price-competitive cattle feed from Vojvodina. Production is predominantly concentrated in the regions of Šumadija and Western Serbia and in Southern and Eastern Serbia, and in rural areas (as many as 4 out of 5 cattle). The potential for meat production is underutilized, and production is mostly extensive. Most of the production ends up on the local market. In 2018, out of the total production of 69,924 tons, 1,825 tons of beef was exported (2.6%). According to the Free Trade Agreement with Turkey, Serbia has a privileged status to export beef to this country. This is why a significant increase in meat exports was registered to Turkey in 2018, consequently reducing export quantities to traditional regional markets for Serbian beef. Serbia exported smaller quantities of younger categories of beef (with no possibility for contagion of mad cow disease) to the EU, i.e. Italy. In addition, since May 30, 2019, Serbia has been awarded a negligible risk certificate for mad cow disease by the International Organization for Animal Health (OIE), which provided Serbian producers privileged status in the international trade and further helped facilitate exports. When it comes to pig production, Serbia ranks 18th among 46 selected countries of Europe and CIS. Serbia is still unable to export pork meat or thermally untreated pork products to the EU market, due to the lack of use of the classical swine fever vaccination. The Ministry stopped vaccination on December 15, 2019, which is a precondition for obtaining an export license for the EU market. Unfortunately, due to the
p. 29/75 emergence of African swine fever in June 2019, export of pork and meat products to the CEFTA market have been suspended, which represents the biggest market for these types of meat products. In terms of poultry production, the Competitiveness Index ranks Serbia in 27th position among 46 countries of Europe and CIS. In 2018, poultry production grew by 11.7%. At the beginning of 2019, 361 red meat establishments and 78 white meat establishments were registered in the official register of approved slaughterhouses and meat processing establishments maintained by the Veterinary Administration. In 2017, 11 slaughterhouses and other meat processing establishments were licensed for EU export.
Dairy sector competitiveness In general, in comparison to other production sectors, the dairy sector is not competitive. However, this sector is of great importance in terms of food security and rural development, while some segments of production show positive results and market potential in the local and foreign markets. This primarily relates to the production and export of cheese, whose value of 42.7 million USD ranks Serbia in 44th place on the global list of cheese exporters. The potential of custom-free exports to the EAEU represents a significant competitive advantage, with quality and price point representing the most important factors behind the increase. Positive export trends in the cheese sector, with export growth of 11% faster than the global growth rate, can be continued only with further restructuring of the export offer, improving the business and market environment, and through improved promotion in foreign markets. The dairy sector shows extraordinary resilience despite turbulent changes within the processing sector in terms of ownership, status and trade issues, and structural changes of farms. During the period from 2000 and beyond, the total number of cows has continued to decrease, reaching 425,000. This decline is compensated by an increase in yield and productivity, helping to stabilize total production at around 1.5 billion liters per year. In total, 116,292 farms operated production of cow's milk in 2018, primarily relying on family farms of up to 10 cows, which represent 59% of the total milk production. Almost half of total milk quantity is produced in the region of Šumadija and Western Serbia, while Vojvodina with almost one third of production is the next production region, followed by Southern and Eastern Serbia representing approximately 18% of the market share. Cow's milk represents the most significant share with 96.7%, while goat and sheep milk are marginal with proportions of 2.2% and 1.1%, respectively. Although small in proportion, there are positive trends in sheep and goat milk production, with over an 60% increase in goat milk yields and more than double for sheep milk yields (from 52 to 115 liters). The shift towards intensification of sheep production, the introduction of new breed compositions and controlled nutrition and breeding have contributed to increasing both the quantity and yield. The dairy industry is equally pushed to improve competitiveness and introduce EU business standards. Out of about 230 dairies registered in the Register of the Veterinary Directorate, less than half are active, while about 1,700 milk processing facilities operate on the farm (production of cream and / or white cheese intended for the domestic market). The dairies in the Republic of Serbia have better price points compared to dairies from the region, with significant efforts invested to become price competitive. This is confirmed by the ratio of unit prices between exports and imports - Serbia exports more expensive dairy products and imports cheaper products.
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Investments in the dairy sector over the past few decades have led to technological development of processing capacities, innovation in structure and packaging of dairy products, supported significant growth in vertical integration of dairies and farms, all of which contributed to improving the competitiveness of dairy supply chains in Serbia. Along with interventions to increase productivity and introduce new safety and quality standards, launching production of specialized and premium dairy products and local artisanal products, can serve as positive drivers for organizing value chains of selected actors through cooperatives and/or partner linking. The market for these products continues to grow, with a special focus on goat and sheep milk products.
Competitiveness of wine sector The production of high-quality wines with protected geographical origin has attracted major investments over the recent years to the sector. Positive Map 3: Number of vinaries per growing zones production and trade trends have increased competitiveness, helping to position wine in the 8th place among Serbian agricultural products, according to the Competitiveness Index. These advances in competitiveness are based on quality improvements and the value proposition of domestic wine. This is primarily a result of the change in grape production technology, with new vineyards with higher planting density and lower yields per plant; introduction of modern equipment and technological processes in wine production; a gradual rise in the demand for wines from local and regional varieties; and business decisions taken by winemakers to produce smaller quantities of high quality wine. The grape production sector is very specific, as it is characterized by a large number of producers with small vineyards. According to data of the Vineyard Register (data from 2019), the average vineyard area covers 1.5 hectares. Out of the total of 4,298 grape producers officially registered, 55% have areas between 0.1 and 0.5 ha, 6.8% between 2 and 10 ha, while only 54 growers have between 10 and 100 ha of vineyard area. Relatively small average areas increase production costs and reduce price Source: РЗС, data processing: CEVVIN competitiveness, but allows small family farms to produce better quality grapes, and consequently higher quality wine. According to data from the Wine Registry (2019 data), a total of 355 wine producers are registered in Serbia. Out of the total, 311 have a total maximum allowable annual grape processing capacity (123,195 tons), while 313 wineries have the maximum allowable annual wine production capacity (715,808 hl) According to data obtained from the Census of Agriculture 2012, 77.3% of vineyards in Serbia are located in the Šumadija and Western Serbia and South and East Serbia regions, and 22.7% in the wine-growing region
p. 31/75 of Vojvodina. Most vineyards are located within the Tri Morave wine-growing region, and at the municipal level, most vineyards are located in the Municipality of Trstenik. Based on zoning of winegrowing areas, three regions contain a total of 22 winegrowing zones, with 77 vineyard areas and several vineyard oases. The large number of wine-growing areas indicates the richness and diversity of climatic conditions for the production of grapes and wine in Serbia. During the 2015-2018 period, Serbia exported the largest volumes of wine to the Russian Federation (44,360 hl on average per year, with an average value of 4,800,800 EUR). Higher quantities of wine are also exported to the CEFTA market, primarily to Bosnia and Herzegovina (35,633 hl on average per year, with an average value of 4,228,870 EUR) and Montenegro (15,985 hl on average per year, with an average value of 2,823,777 EUR). However, the largest quantities of high-quality wines remain on the domestic market, where there still exists a shortage of local wines. The wines of domestic wineries are mainly distributed to the Serbian market, as well as to regional countries. This distribution is carried out through an independent distribution network, while wines produced by larger producers are placed through large retail chains and distributors.
Competitiveness of fishery sector In the last two decades, out of the total turnover (sale and purchase) of agricultural, forestry and fishery products, the fish trade contributed around 0.5%. In terms of total fish consumption, less than 30% comes from domestic resources (aquaculture and open water fisheries), while more than 70% is imported. Despite low turnover and total fish consumption, the potential of the fishery sector in the Republic of Serbia is extremely high. In terms of competitiveness, Serbia is not presently competitive in fish production, but there is great potential for investments in the sector - primarily due to the country’s natural resources. In order to increase competitiveness, investments in modern production technologies and processing capacity are needed. In Serbia, the fishery (primary production) sector is represented in the form of fish production in ponds (aquaculture) and open waters (commercial fisheries). In 2019, the total number of registered ponds at the MAFWM Veterinary Directorate was 157, out of which 85 include carp ponds, 68 trout ponds and 4 registered for stork breeding. The number of commercial producers registered with the SORS in 2018 was 378, out of which, 295 registered as full-time producers. According to data based on the same source, the total quantity of fish produced and caught during the last decade ranged between 7,278 tons (in 2017) and 13,002 tons (2010) of consumable fish products. In Serbia, aquaculture facilities and ponds are mostly located in the province of Vojvodina (carp ponds) and based in mountainous regions. Fish production is done in semi-intensive and intensive systems. Semi-intensive systems are present in carp ponds, while intensive production is carried out in trout ponds, cage systems, small area carp ponds and recirculating aquaculture systems. In 2019, the number of carp ponds registered at the Veterinary Directorate was 85. According to the official data of the SORS, the area under carp ponds in 2018 was 6,492 ha. The potential for the development of carp fisheries is very high, given that there are over 100,000 hectares of barren land in the Banat area only, located near watercourses (rivers and canals) where carp ponds generally reside. The number of trout ponds registered in 2019 was 68. While in 2018, the total area under trout ponds was approximately 8 ha.
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Position analysis To compare countries against total area harvest, production level, export value and volume is made difficult due to differing land resources. The position analysis allows comparison among products so as to reach certain conclusions regarding whether a country has a better or worse position in relation to its land resources - it makes a difference if a country is ranked in the fifth or thirty-fifth position, if land resources are taken into account. Using the position analysis to measure whether a country’s position is better or worse in terms of production or export of a product relative to its land resources, it is possible to make conclusions about the value of production and exports. Additionally, a position analysis shows whether a product is competitive in terms of price or quality. For example, if a country takes 15th place on the global list for land resources, 10th for area harvested, 8th for production, 35th in export quantity and 20th for export value, it can be concluded that the country has the following characteristics: large production, local-market orientation, higher yields relative to other countries, and that it is competitive in terms of quality. Additionally, a position trend over the years can be observed to see whether production and export grow faster and/or slower compared to the competition. By grouping countries in regions, whole regions can be rated; by product grouping, we can examine their position to draw conclusions regarding product groups, such as fruits, vegetables, cereals, etc. In addition to the position survey of products in Serbia, a position survey was conducted for all countries in other products not included in the study, and these results are used for the survey and to infer certain conclusions. According to the land resources, Serbia ranks 19th in Europe and 39th in the world. All better positioned products show that Serbia has certain competitive advantages, if exports are better positioned than production. Globally, this is the case with the following articles: apples, cherry, sour cherry, peach, cucumber, corn, sugar, sunflower, and barley. And in Europe, this includes apple, pear, cherry, raspberry, sour cherry, cucumber, onion, and sunflower. While sour cherry, cucumber and sunflower have special positions globally, in Europe special positions are seen for apple, cherry and sour cherry. For products where production, but not exports, is greater than the land resources compared to other countries in the world, include: pear, plum, strawberry, raspberry, apricot, quince, blueberry, pepper, soybean; while in Europe these include plum, nut, grapes, strawberry, raspberry, tomato, peas, pepper, watermelon, garlic, corn, sugar and soybean. Products, whose production position is lower than the position of land resources, but not exported to world countries include potato, tomato, onion, wheat, barley, rapeseed, while in Europe these include wheat and rapeseed. When comparing to groups of products, the best place is taken by fruits, as expected, especially in terms of production volume, and wheat follows with export volumes, but with lower production levels. Generally, vegetables are behind in terms of land resources, especially compared to other countries around the world.
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Graph 24: Rank analysis compared to the World
91 81 71 61 Grape Walnut Garlic 51 WatermelonPotato Export Hazelnut 41 Cabbage Tomato Onion Oats 31 Pepper Rye Barley TriticaleSoybeansApricot Wheat 21 Pear Rapeseed StrawberryCherry Maize 11 Plum QuinceSugarSunflower beetPeachCucumberApple 1 RaspberrySour cherry 1 11 21 31 41 51 61 71 81 91 Area harvested
Source: UN Comtarde, FAO, data processing: SEEDEV
Table 1: Ranking towards World Table 2: Ranking towards Europe
Production Export Production Export
FRUIT FRUIT APPLE 36 12 APPLE 15 6 PEAR 21 36 PEAR 12 12 PLUM 2 14 PLUM 1 8 WALNUT 27 57 WALNUT 14 34 GRAPES 38 64 GRAPES 18 33 STRAWBERRY 11 17 STRAWBERRY 7 10 RASPBERRY 2 4 RASPBERRY 2 2 CHERRY 22 16 CHERRY 14 9 SOUR CHERRY 5 3 SOUR CHERRY 5 2 APRICOTS 22 23 APRICOTS 9 11 PEACH 28 13 PEACH 6 7 QUINCE 9 12 QUINCE 3 9 HAZELNUT 14 43 HAZELNUT 9 33 BLUEBERRY 9 21 BLUEBERRY 5 10
VEGETABLES VEGETABLES POTATO 51 48 POTATO 17 31 TOMATO 50 40 TOMATO 12 19 PEAS 25 53 PEAS 10 27 ONION 73 40 ONION 18 16 PEPPER 26 29 PEPPER 4 13 BEANS 60 136 BEANS 7 42
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MELON 88 MELON 35 WATERMELON 43 49 WATERMELON 11 23 CUCUMBER 34 13 CUCUMBER 10 9 CARROT 62 24 CARROT 21 14
OTHER CROPS OTHER CROPS WHEAT 40 22 WHEAT 19 17 BARLEY 48 30 BARLEY 27 26 MAIZE 32 16 MAIZE 5 10 OAT 35 36 OAT 25 27 RAPESEED 40 19 RAPESEED 25 16 SUGAR BEET 18 14 SUGAR BEET 12 13 SUNFLOWER 19 13 SUNFLOWER 11 10 SOYBEAN 18 23 SOYBEAN 4 14 RYE 34 30 RYE 26 25
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FOOD PROCESSING INDUSTRY IN SERBIA Structure of the food processing industry Frozen fruit and vegetables account for the largest share of exported products (32%) from Serbia. Out of this, 65% is frozen raspberry, with an export value of 253 million USD in 2013-2018 period. Frozen raspberry is followed by frozen stone fruits, particularly sour cherry and plum. Since 2016, there has been a decrease in demand for frozen raspberries, which Graph 25: Companies shares (number) by processing type led to a change in producers’ strategies. Namely, producers diversified their 2% offering with other types of fruit and Oil mils 5% vegetables, while some producers 15% 0% Confectionere factory 9% opted for adding value through 0% Mills improved packaging and/or additional Strach factory processing (drying, lyophilization, etc.). 7% A decreasing demand for dry plum is Sugar refinery 20% Fodder factory evident, and it’s been losing its position 8% since 2014 in all export markets. Milk factory Between the 2013-2018 period, Serbia Juices 2% exported on average about 150 million Fruit and Vegetables 32% USD of vegetables, with 37% fresh and Meat 63% processed. When it comes to Others canned and dried vegetables, potato Source: UN Comtarde, FAO, data processing: SEEDEV chips have the highest value and price, with an average export of 15.7 million USD, 4 thousand tons and a price of 3.8 USD per kg. In terms of frozen vegetable exports, frozen legumes - beans and peas – and frozen peppers register the highest export values. As with canning, when it comes to frozen vegetables, large-scale industrial plants have a dominant market share. The exception is frozen pepper, as it is mostly exported by wholesalers who own or rent cold storages, where cutting and freezing of pepper is carried out and then exported to regional and EU countries.
Graph 26: Export structure of processed products in 2017
Source: UN Comtarde
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Competitive F&V processed products The Revealed Competitive Advantage (RCA) index, the so-called Balassa Specialized Index, was used for calculating the relative advantage of disadvantage of a certain country in a certain class of goods as evidenced by trade flows. The value of the index, in theory, ranges from 0 to infinity. Values higher than 1 show a country’s comparative advantages. Higher values of this index indicate the success of a country’s trade performance in a particular sector. According to the RCA index, Serbia has significant comparative advantages in the export of frozen raspberry, frozen green beans, peas, canned sour cherries, frozen sweet corn, dried plums, as well as significant commercial advantages in the production of canned peas, frozen strawberry, mixtures of dried vegetables, mixed frozen vegetables, mixed vegetables jams, jellies, marmalades, and fruits and vegetables preserved with vinegar.
Graph 27: Revealed Competitive Advantage (RCA) index for the major fruit and vegetable processed products relative to the World in 2018.
Dried mushrooms Cucumbers and gherkins Frozen potatoes Tomatoes prepared or preserved, whole or in pieces (konzervirani… Strawberries Dried onions Mushrooms and truffles prepared or preserved Sweet corn canned, not frozen Fruits and vegetables prepared in vinegar or acetic acid Frozen mixture of vegetables Potatoes canned, not frozen Peas canned, not frozen Frozen sweet corn Frozen peas Frozen Raspberries 117.96 -2 0 2 4 6 8 10 12 14 Source: UN Comtarde, data processing: SEEDEV
Unlike fruit and vegetables and soybean products, that are mostly exported to the EU market, other products, primarily cereals and oilseeds products, are mostly exported to CEFTA countries. Serbia's share of processed products import is 17% in CEFTA, while its 34% in the EU15 and 0.73% in the NMS. Regarding EU countries, it is mostly exported to the German market, with an average value of 167 million USD in 2017. As for CEFTA countries, the largest value is exported to Bosnia and Herzegovina - 167 million USD. Meat and dairy products are exported to the EAEU market. In terms of milk and dairy products, the value of dairy products net trade is positive, but exhibits a declining trend due to continuous increases in import volumes, and relatively stable export volumes. The value of dairy export and import has increased sharply in 2018 due to actions taken by dairies to integrate facilities in regional countries, balance raw materials, and manage supply and demand. The most important exported dairy products include cheese and sour-milk products, while exports of milk and sour cream are declining. In Serbia, at the beginning of 2017, over 3500 were registered and approved for the production and marketing of food products made from animal origin. Based on the registered number of slaughter, cutting and meat processing establishments at the beginning of December 2019, there were 361 red meat establishments and 78 white meat establishments (poultry), including: 235 combined establishments (slaughtering, cutting, processing - cattle, pigs , sheep, horses), 35 combined facilities (slaughter, cutting,
p. 37/75 processing - poultry), 105 slaughter facilities (cattle, pigs, sheep, horses), 21 slaughter facilities (poultry), 21 slaughter and meat cutting facilities (cattle , pigs, sheep, horses), 22 slaughtering and cutting facilities (poultry). Meat product exports from Serbia are increasing, primarily as a result of a return to the CEFTA market, and gradual growth in the EAEU market. This indirectly impacts the price as it increases domestic demand for meat.
Graph 28: Export of processed meat products
Source: ITC TradeMap
Structure and performance of agricultural processors There are 5,000 registered companies in Serbia’s agricultural processing sector, out of which, 32% operate in the fruit and vegetable sector, and 20% in the meat sector. Even though the meat sector is significant both in terms of the sheer number of employees and in terms of income, the largest share of exports is taken by the F&V processing sector, while the share of meat products in exports is quite small. The fruit and vegetable sector had the highest growth during the 2012 – 2017 period, while the sugar sector exhibited the largest decline. The crisis in the sugar sector is linked to abolition of production quotas in the EU market, which led to a decrease in the production and the level of exports from Serbia. The cereals and industrial crops sector has advanced processing operations to include various types. Mills and starch plants are typical representatives of cereal processing plants, along with oil factories and industrial sugars factories. However, there are also different types, such as those processing cereals and oilseeds into fodder, with confectioners using various inputs for products. In Serbia, there are 5,744 registered processing facilities for the production of bread, fresh pastries and cakes, out of which, the largest number include small local bakeries; however, there are also entities with a turnover of over 5 billion RSD. Also, registered are 349 processing facilities for production of pasta, noodles and other flour products, where the largest producers have turnovers of 1 billion dinars. Oil factories account for the largest total turnover (57.7 billion RSD), twice as large as sugar refineries (26.6 billion RSD). Oil factories are followed by fodder processors (44.6 billion RSD) and mills (44,2 billion dinars). Based on the SBRA database, the largest number includes registered mills with active status (398), followed by confectioners (275) and livestock producers (250). The highest average operating income is generated by starch and sugar refineries, primarily due to a lack of small producers. In the fruit and vegetable sector, the largest share in total income is held by the largest companies, with operating revenues between 1 and 5 billion RSD (36% of total revenues of companies examined). At the
p. 38/75 same time, the same group of large companies has the largest share in exports (45%) and in imports (54%). The total value of imports from these companies amounts to 354 million dinars, while exports are 1.6 billion dinars. As for the structure of employees, the largest share come from the group of companies with revenues from 1 to 5 billion dinars (30%), and the company group with revenues from 100 to 500 million dinars (35%). The fruit and vegetable sector (similar to the mills sector) is different from companies in other sectors: there are no companies with revenues over 5 billion RSD, and those in other sectors have over 50% share of total revenues in the sector, and over 50% of the number of employees. Diversified processing models, as well as purchasing competition, represent the cornerstones of the sector’s competitiveness. In terms of position and economic strength, the dairy industry is an important segment of the processing industry in the Republic of Serbia. In recent years, there have been many changes in the structure of the dairy sector: ownership transformation and grouping, reduction of the raw material base and changes in production programs, offerings presented to consumers, and introduction of new products and packaging. The largest companies are integrated in regional markets and leverage joint production and distribution systems with their sister companies based in these markets. The concentration of processing is extremely high, and opposite to the broad raw material base. Only 6 dairies have a daily processing capacity of over 200 thousand liters of milk, while the largest national milk processing company – IMLEK – processes over 600 thousand liters per day. The next category of processing - from 100 to 200 thousand liters - includes 11 dairies classified as industrial facilities. In total, 230 milk processing facilities are registered in the Veterinary Administration Register, of which 147 operated in 2017 and 2018. The number of active dairies is decreasing, in line with expectations that, particularly small processing entities, will be challenged to follow the milk standards. Currently, only 17 dairies account for 80% of total value, with over 90% of exports and 66% of workers. On the other hand, only two companies dominate the sector, with almost half of the sector’s revenues and two-thirds of total export. Among small dairies, 111 have revenues just above the threshold need to qualify for the VAT system, with an average of only two employees and negative operating margins. Out of the 370 companies in the meat processing sector registered in the SBRA database, in comparing the results of large and medium-sized businesses with small-and micro-legal entities and entrepreneurs, it can be concluded that the 23 largest companies represent 76% of the total revenues in the meat processing sector, 58% of the total workers and 95% of meat and meat product exports of the Republic of Serbia. At the beginning of December 2019, the Register of the Veterinary Administration of approved slaughtering, cutting and meat processing establishments registered 361 red meat establishments (cattle, pigs, sheep, horses) and 78 white meat establishments (poultry) registered.
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Graph 29: Number of food-processing companies according to different indicators
140 14,000 140
120 12,000 120
Billions RSD Billions 100 10,000 100
80 8,000 80
60 6,000 60
40 4,000 40
20 2,000 20
0 0 0 Total bussiness income Total number of employee Average number of employee
1,000 1,600 6
900 1,400 5 800
1,200 Billions RSD Billions Millions RSD Millions 700 1,000 4 600 800 500 3 600 400 2 300 400
200 200 1 100 0 0 Number of companies with 0 active status in APR Total capital Average bussiness income
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Graph 30: Share in total income of food processing Graph 31: Share of emloyee number in food processing companies by size companies by company size
100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0%
> 5 billion 1-5 billion 0.5-1 billion > 5 billion 1-5 billion 0.5-1 billion 0.1-0.5 billion < 0.1 billion 0.1-0.5 billion < 0.1 billion
Source: SBRA, data processing: SEEDEV Source: SBRA, data processing: SEEDEV
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Map 4: Regional distribution of food processing companies
Dominant by the companies processing crop products
Dominant by companies Dominant by processing fruit companies and vegetables processing dairy products
Source: SBRA, data processing: SEEDEV
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Regional distribution In terms of regional distribution of sectors in Serbia, cereal and oilseed processing plants are concentrated mainly in the Vojvodina region, fruit and vegetable processing is concentrated in Šumadija and Western Serbia, while dairy and meat production are present across all regions of the country. In terms of geographical distribution, the plantations of cereals and industrial crops sector is located in the City of Belgrade, with approximately 18%. The largest concentration of the confectionery industry is also based in the City of Belgrade - about 33%. The largest territorial distribution is present in the mill and confectionery sector. The confectionery industry is evenly spread out throughout the country, with the exception of Belgrade and Novi Sad, where almost half of the factories active in 2017/2018 are located. In 2018, 88 companies with active status were registered with SBRA. Mills are evenly distributed throughout the state, with wheat flour as its main product. There is a small number of mills, generally of lower capacity, producing flour from other cereals (buckwheat, rye, spelt, corn). These smaller mills are more prevalent in the regions of Šumadija and Western Serbia and in Southern and Eastern Serbia. Oil factories, sugar plants and starch factories are concentrated in the Vojvodina region. Fruit and vegetable processing plants are present across all regions in Serbia, but the largest number of cold storages and processing facilities are based in the Šumadija and Western Serbia. They rely on micro- regions with high concentrations of berry and stone fruits producers. Dairy and meat processors are also present across all regions of the country.
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Map 5: Geographical distribution of processing plants
Source: SBRA, data processing: SEEDEV
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FRUIT AND VEGETABLES: REGIONAL ACPECTS Over the last 10 years, fruit production in Serbia has averaged around 1.4 million tons annually, however average production during the 2013 - 2017 period was 1.6 million due to uncharacteristically high production in 2013. Both 2010 and 2012 were crisis ridden years in terms of declining production due to weather conditions, while 2013 was marked by large growth - primarily due to the growth of apple and plum production. High levels of plum production still have a significant influence on the total fruit production in Serbia, since plum production, in addition to apples, dominate the production structure. In 2018, there were 185,880 hectares under fruit cultivation in Serbia. In 2018, the total value of fruit production was 68,815.90 million RSD (in current year producer prices), placing the fruit sector the third in total agricultural production behind cereals and industrial plant production. In Serbia, vegetables are produced on about 120 thousand hectares (ten-year average), comprising 3.5% of the total arable land. The total average production of vegetables in the last 10 years stood at 1.7 million tons, with an average annual rate of decline of 4%. The average value of vegetable production is 43.7 billion RSD, and in 2018 it was 39.3 billion RSD.
Graph 32: Share of regional fruit production in total Graph 33: Share of regional vegetable production in total fruit production in Serbia vegetable production in Serbia
Belgrade Region Belgrade Region 9% 6% 27% 24% Region of Region of 21% Vojvodina Vojvodina 33%
Sumadija region Sumadija region and Western and Western Serbia Serbia 37% 43% Region of Region of Southern and Southern and Eastern Serbia Eastern Serbia
Source: SORS Source: SORS
The production size and total area of certain agriculture productions are not reliable indicators of the success of the sector in the past. More important for the sectors are the structural changes that occurred related to intensification of production, specialization of producers, diversification of production and so on. For example, the Šumadija region and Western Serbia produce the most fruit, but the irrigated orchards indicator clearly shows that the most intensive production takes place in the Vojvodina region. Table 3: Orchard areas and irrigated orchard areas per region
Šumadija and Western Southern and Eastern Vojvodina region Belgrade region Serbia region Serbia region out of 19.160 ha of out of 12.851 ha of out of 100.004 ha of out of 50.908 ha of orchard areas, 9.179 orchard areas, only 804 orchard areas, 15.701 orchard areas, 6.268 ha/47.91% is being ha/6.26% is being ha/15.70% is being irrigated ha/12.31% is being irrigated irrigated irrigated Source: SORS
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Each region or micro-region with highly concentrated production of certain products contributes to forming the image of that region. However, in addition to key production centers in Serbia, there are thousands of innovative initiatives and successful businesses operating in agriculture and processing that fall outside of the general perception of typical region-specific production. These private initiatives are growth drivers for some new regional specificity and contribute to regional growth. It is important to note, there are competitive producers present across all regions, even though they are not cited as examples in this study. Progress and change in a sector are not created by the region, but rather by investors – whether they are producers, processors or simply owners of new ideas and technologies. Modern fruit and vegetable production evolves in line with market needs and requirements, is based on know-how and skills, and utilizes sophisticated technologies and innovation. Resources are important but are not crucial. In Serbia, investors (producers or companies) make successful investments that go against the stereotype that specific characteristics of regions are crucial for profitable production. For example, blueberries, hazelnuts, raspberries in the fresh segment are grown successfully in Vojvodina, the Belgrade region and across other regions in Serbia. If resources were crucial, countries such as the Netherlands and Israel would not have strong agricultural sectors, but it is well known that both countries are leaders and success models for other countries.
Vojvodina region
REGION WITH THE HIGHEST INVESTMENTS IN THE FRUIT SECTOR IN THE LAST 10 YEARS The fruit sector has been significantly modernized in the Vojvodina region over the last 10 years. This is a result of several factors, including: investments coming outside the agricultural sector; efforts invested by fruit growers to become more competitive; producers from other agricultural sectors entering the fruit sector to diversify production and risk; and, investments supported by the Government of Vojvodina and the Government of the Republic of Serbia.
REGION WITH THE HIGH NUMBER OF FRUIT PLANTATIONS The Vojvodina region has the largest number of intensive fruit orchards (77%), contrary to the Šumadija region and Western Serbia where orchards with the largest surface areas are based, however only 47.21% are under intensive orchards. Table 4: Fruit production in 2018, growth trend in 2014 – 2018 period in Vojvodina region. Production share in total production in 2018 in Serbia Share in total Share in total Share in total Production Production Trend production of Trend productionTrend of productionTrend of 2018 (tons) 2018 (tons) Serbia (%) Serbia (%) Serbia (%)
Apple 178,266 38.72 Raspberry 8,680 6.83
Pear 9,535 17.60 Blackberry 785 2.24
Plum 32,816 7.63 Nuts 1,987 21.43
Peach 11,800 2.,48 Hazelnuts 2,284 42.08
Nectarine 4,246 18.14
Cherry 1,417 7.40
Sour cherry 15,527 12.13 Apricot 6,121 24.09
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REGION WITH A FEW BUT GOOD FRUIT AND VEGETABLE PRODUCERS AND GREAT LAND RESOURCES In economic terms, the most well off agricultural holdings are located in the Vojvodina region, where the average economic power of an agricultural holding (16,273 EUR) is almost twice as large as the Serbian average and three times larger than the average value of agricultural holdings in Southern and Eastern Serbia regions. Examining the agricultural holdings in Vojvodina, specialized holdings for growing grapevine and orchards (perennial plantations) are represented in the lowest percentage (3.9%), while percentage of those specialized in growing vegetables is only 1.9%. Distribution of Utilized Agricultural Area (UAA) by region indicates that almost half (45.3%) are located in the Vojvodina region. Human and resource potentials have led to investments and production growth in the stone fruit and berry sectors. In the last 5 years, a significant number of sour cherry plantations larger than 100 ha (Subotica, Titel, Bačka Topola, Zrenjanin, etc.), and several hundred intensive sweet cherry, peach and apricot plantation have been established. Map 6: Number of specialized agricultural holdings (AH) having permanent plantings of fruit and/or grapevine
Source: SORS, data processing: SEEDEV
APPLE AS A MYTH BUSTER Since the 1970s, intensive apple production, with high density fruit plantations and irrigation systems, has been present in the Vojvodina region. In addition to the state sector which introduced new technologies, the private sector on small estates (not exceeding 10 ha, the maximum size of private landholdings at the time) leveraged innovations made at state farms and knowledge provided by the Novi Sad University. Today, Vojvodina produces almost 200,000 tons of apples, and is a leader in terms of fruit varieties and species, which helps deconstruct myths associated with regionalization and resources. In the last ten years, companies have established modern apple plantations (with new varieties, irrigation, fertirrigation, anti-hail nets, micro sprinklers, etc.) on more than 2,000 hectares with expectations to profit from exports to the EAEU market. These companies based their business models on integrating production, storage and
p. 47/75 sale. A significant part of the investments went to ULO cold storages, with these companies possessing the highest share of total ULO cold storage capacity in Serbia, with more than 100,000 tons. In addition to this leading group of producers, there are also advanced commercial family holdings, with orchards occupying 10 to 50 ha. Groups of producers attempted to integrate supply and sales by forming cooperatives, but this model has not proven functional. Even so, there is a potential for production, joint storage and knowledge exchange which can be initiated by new investments and innovations.
Map 7: Distribution and capacity structure of cold storages The total storage capacity of apples in ULO in Serbia per region cold storages is over 100,000 tons (107,830 t). ULO cold storages are concentrated in the South Backa and Srem districts, where the highest concentration of investments in intensive apple plantations is present. In addition to ULO capacity, there are over 100,000 tons of storage capacity in Serbia, with "plus" or "fridge" cooling options. The concentration of cold stores in particular regions supports the role of aggregators in stimulating production. It is difficult to prove whether primary production or cold chain storages are more important for the development of the sector, but production itself is impossible (or is at high risk) without an actor to integrate the supply. The concentration of cold storages in specific regions proves the importance of aggregators, above al,l in the berry and stone fruit sectors, with sales focused on the frozen fruit segment. The diversification of exporting companies to Source: МAFWM, maps: CEVVIN purchasing companies is also important in terms of the development of the sector, as well as to reduce risk – both to the company and supply chain members.
HAZELNUT AS THE MODEL OF DEVELOPMENT AND COOPERATION In Vojvodina, in 2018, 2,284 tons of hazelnut was produced, representing 42% share of total production in Serbia. The region become a model showing how investments made by large global companies can change the region’s production structure and, at the same time, diversify production across a large number of farmers. The cooperation model (based on a contract model and contract farming) is very common in other sectors in Vojvodina (oil plants, cereals). Similarly, Agriser managed to introduce this model to the fruit sector. In this way it helped achieve control of quality, which is crucial in the fruit sector, and had a significant impact on rural development as it contracts a large number of small producers, and unified offerings and sales.
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BLUEBERRY AS A MODEL OF NEW TECHNOLOGY Due to the strong growth of the blueberry sector globally, a large investment into a 260 ha blueberry plantation was made in the Vojvodina region. The soil quality was not a limiting factor, as it was replaced by substrate, and irrigation systems were a challenge, but the varieties and types were selected to adjusted to climate. The investment and business models are based on contract farming and cooperation with a leading global berry producer and purchaser.
PRODUCTION OF FRUIT PLANTING MATERIAL AS A POTENTIAL In terms of modern production of fruit planting material, it is of critical importance to isolate nurseries in remote places away from potential sources of infection. This type of field conditions are abundant with the vast land resources and general production structure in the Vojvodina region, which is dominated by cereals and oilseeds that do not host pathogens and pests. Another advantage for investments in this production is the established and functional certification system for planting materials, ensuring plant health and variety type. In the Vojvodina region, several foreign investors have recognized these competitive advantages and invested into nurseries and planting material production.
A HOME OF GOOD VEGETABLE PRODUCERS Vojvodina is characterized by a large number of professional vegetable growers applying new technologies and product innovations, investing in storage capacity and new machines and equipment that add value to products either through packaging, extending product life, and maintaining high quality. Vojvodina is the region with the most intensive production compared to the rest of Serbia, where producers regularly achieve 70 tons of carrots per hectare, 60 t of potatoes, 100 t of gherkins, 70 t of onions and 60 t of peppers. The maps below show the ratio of total utilized agricultural land within the administrative area of Vojvodina region. When observed at the Republic level, the Vojvodina region has the largest share in the group of agricultural holdings, with over 100 ha under open fields (81%). At the same time, in the groups with 50-100 ha areas, the share is over half (56%), while half of the total area of vegetable production with agricultural holdings of 20-50 ha in open fields are located in Vojvodina region.
Map 8: Surface areas under vegetables, flowers and Map 9: Surface areas under vegetables, flowers and ornamental plants in agricultural holdings specialized in ornamental plants in agricultural holdings specialized in open-field production, presented by sub-regions and greenhouse production, presented by sub-regions and the size of agricultural land used in open-field the size of agricultural land used in greenhouses and glasshouses
Source: SORS, maps: CEVVIN
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Table 5: Production of vegetables in 2018, growth trend in 2014 – 2018 period in Vojvodina region and production share in total production of Serbia in 2018 (green color: leading production region, yellow: second in share size) Production 2018 (tons) Trend % in production of Serbia Potato 95,704 19.61
Onion 16,108 58.3
Carrot 15,468 69.66
Garlic 1,524 42.14
Tomato 49,728 37.7 Pepper 21,137 15.64
Cucumber 7,624 17.92
Peas 17,991 61.48
Beans 1,169 10.49
Cabbage and kale 40,560 19.37
GOOD PRODUCERS EMBRACE INNOVATION Initiators of development in the vegetable sector include specialized producers with different types of production, with innovative producers noticed in the carrot sector. These include a small number of highly professional producers who analyzed the market and invested significant funds to modernize production to add value to products. On the other hand, in the production of cornichon cucumbers, the increase in the minimum wage in Germany made production there unprofitable as gherkins are price specific and selective with buying criteria. As such, production was relocated to the Western Balkans region, including Serbia, where producers organized themselves promptly both in terms of production on large surface areas and in applying espalier techniques enabling large numbers of producers to grow on small surface areas.
CARROT PRODUCTION AS THE MODEL FOR SUCCESS The high competitiveness of the carrot sector, with the highest export growth of all agricultural crops, was achieved predominantly owing to contribution from producers who invested into high-quality storage capacity. In this sector, several largest producers (3-4) dominant production. Additionally, there is a significant number of medium-sized producers with production covering several dozen hectares without the ability to invest in cold storage capacity. The center of production is located in the village of Begeč (municipality of Novi Sad), where the largest percentage of production in the Vojvodina region takes places. Production by the largest producers is almost entirely mechanized. During last few years significant investments were made into packaging machines, hydrocoolers and other equipment for adding value to products by extending product shelf life, sorting and improving packaging. In the first half of the year, lack of storage capacity in the onion and potato market was noticeable. Vojvodina accounts for 58% of the total onion production, which is dominated by medium and large producers with high yields and mechanized production (from planting to harvesting). In terms of onion production, large producers are located in the Municipality of Žabalj, the village of Gospodjinci; the Municipality of Bačka Palanka, in Pivnice village; and Bački Petrovac, in the village of Despotovo. Potato is a dominant vegetable crop in the total structure of vegetable production, both in Serbia and Vojvodina. The main growth drivers are domestic consumption and processing. In the first half of the year, demand on the domestic market was satisfied to a great extent by imports either due to shortage of domestic potato or poor quality as a result of inadequate storage (it is estimated that about 80 thousand tons of potato is wasted in Serbia per year due to inadequate storage). Production is concentrated in several
p. 50/75 locations in Vojvodina, particularly the Municipality of Bačka Palanka in Pivnice village, and Bački Petrovac, in the village of Despotovo, where production covers 250-300 ha. Significant potato production can also be found in Gospodjinci village in the Municipality of Žabalj.
Graph 34: Serbia - Intra-annual potato trade Graph 35: Export and import distribution of annual distribution 2008-2019 period quantities of onion and price distribution on wholesale markets in 2013-2018 period
3 2 60 1.8 2.5 50 1.6 1.4
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0.8 RSD 20 1 0.6 0.4 10 0.5 0.2 0 0
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Source: ITC TradeMap, MAFWM
PRODUCTION OF PERISHABLE VEGETABLES IS BASED ON MEDIUM-SIZED AGRICULTURAL HOLDINGS Pepper production in Vojvodina is to a great extent export oriented, either as fresh, frozen or ground. Production is mostly concentrated in Ruski Krstur (Municipality of Kula), where dominant producers grow on surface areas ranging from several hectares to several dozen hectares. Pepper is classified according to quality, with high-quality categories dominating. There are several large producers in the Municipality of Žabalj (village of Gospođinci) that produce on surface areas exceeding 50 hectares, with high yields and quality. Marketing is conducted primarily through intermediaries (traders) who help unify the offering. The increase of the minimum wage in Germany and relocation of gherkins production to the countries of the Western Balkans helped to a great extent. Production on land (foil), which used to be dominant in Vojvodina, nowadays is increasingly being abandoned due to less share of first-class products, lower profitability and increasingly frequent labor shortages. Producers switch to espaliering on small surface areas (15 to 20 are), where producers are mainly organized through export-oriented cooperatives whose numbers are increasing.
CONCENTRATION OF VEGETABLE PROCESSING Export growth of frozen vegetables has been constant over the last 10 years, led predominantly by growth in demand in regional countries. An increase in consumption, in both frozen vegetables and fruit, is a general worldwide trend, as conservation of organoleptic properties and nutritional value is the highest during freezing compared to other processing methods. At the moment, 13 cold storages are registered for vegetable freezing, all based in the Vojvodina region, and another 40 cold storages where mixed agricultural products are frozen in addition to vegetables.
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Šumadija and Western Serbia region
A REGION THAT CONTRIBUTES THE MOST TO FRUIT COMPETITIVENESS IN SERBIA The Šumadija region and Western Serbia produce 43% of Serbian fruit. This region is also the largest producer of raspberries - 82%, blackberries - 81% and plums 62% in Serbia. Production of pears and nuts is also significant due to high demand for these articles and the high potential for production improvements.
Tavnik, a village with the largest quince quantities in Serbia One quarter of total quince production (around 400 ha) is located in Tavnik, a village near Kraljevo. Demand for quince is constantly high and there is a potential to intensify quince production, as well as other products made from this fruit. Investments are required for new plantations on the slopes of Kotlenik Mountain and to improve existing production and processing.
RASPBERRY PRODUCTION AS A 50-YEARS LONG INNOVATION, AS WELL AS POTENTIAL TO CREATE AND INTRODUCE A NEW PRODUCTION At the beginning of the 1970s, Arilje became the center of innovation with new varieties, new production technology and entrepreneurs, helping to create Serbia’s main export product – frozen raspberry. The success of frozen raspberry exports over the past 50 years is a result of entrepreneurial spirit and innovation adjusted to meet the needs of the market. It is not the result of tradition, climate, and resources. Applying the so called Arilje growing method, led to establishment of new raspberry fields, technological improvements and higher yields, and towards the construction of new cold storages facilities in other parts of the region, including Ivanjica, Lučani, Brus, etc. In 2018, the region produced more than 100,000 tons of raspberry.
Arilje raspberry – a certified quality Until recently, producers focused exclusively on the purchase price. These days producers are organizing themselves into the Arilje Raspberry Association, and taking the first steps to manage quality through protection of origin. Although the first quantities of approximately 1000 tons of certified raspberry are insufficient for the broader market, about 150 producers, several cold storages and the cooperative initiated the process to protect appellation of origin at the level of the European Union. As a result, raspberry, in addition to the frozen segment, is marketed in the form of juices, lyophilized fruit, and jams, in order to raise the value of the final product. In addition to small producers and the cooperative, leading companies in the production of juices, such as NECTAR company, are also taking part in this process.
PLUM – A TRADITIONAL PRODUCTION THAT SHOULD BE MODERNIZED ACCORDING TO MARKET DEMANDS In Serbia, over the recent years, plum have been accepted as an agricultural crop, with production intensified through higher planting density, pruning, fertilization, and protection against diseases and pests. Production in the region is concentrated around several centers – Valjevo 3,820 ha, Osečina 2,111 ha, Kragujevac 2,169 ha, and Topola 2,016 ha. The drive for development included favorable exports trends of frozen plums to the EU market, and a lack of other options for numerous agricultural family holdings who grow plum for a source of income. In addition, improvements to growing technology, varieties with better product value, and growing connections with market supply chains for frozen products, helps reduces risk.
Šumadija Plum Project The Šumadija Plum Project, financed by the Swiss Agency for Development and Cooperation and the Regional Development Agency of Šumadija and Pomoravlje, implemented during 2017/2018, helped build and improve existing plum and plum brandy market chains. Through the Project, expert technical support in brandy production technology and sales and marketing was provided to plum producers (6 associations)
p. 52/75 to establish the Šumadija Brandy Association. The project also supported distilleries (tasting rooms, equipment, etc.), and supported opening of two showrooms in Kragujevac and Belgrade. Through the Project, 8 distilleries from Šumadija were supported, 15 agro-meteorological stations were procured and installed, networking support was provided with the Business Information System at national level. In addition, a study for the protection of geographical indication was created, new labels were designed and the the Šumadija Plum Brandy Association brand was created. Also as part of the project, a tourist brandy tour (Šumadija Rakia Tour) was created and heavily marketed. Table 6: Production of fruit in 2018, growth trend in 2014 – 2018 period in Šumadija and West Serbia region and production share in total production of Serbia in 2018 (green color: leading production region, yellow: second in share size) Production 2018 (тона) Тrend % in production of Serbia Apple 144,784 31.45
Pear 24,598 45.63
Quince 3,477 28.23
Plum 267,665 62.22
Peach 5,223 10.39
Nectarine 4,257 18.19
Cherry 6,406 22.45
Sour cherry 24,408 19.07
Apricot 5,030 19.79
Raspberry 104,894 82.59
Blackberry 28,696 81.84
Nuts 4,005 43.19
Hazelnuts 1, 213 22.35
CONCENTRATION OF PROCESSING CAPACITIES Fruit processing capacity for freezing berry and stone fruits is concentrated in this Region. In the Zlatibor District, there are 237 cold storages with capacities of more than 108,000 tons. In the Mačva District there are 29 cold storages with a capacity of 49,000 tons, and in the Moravica District there are 62 cold storages with capacity of more than 44,000 tons. In the entire region, there are 394 cold storages with a capacity of more than 278,000 tons or 58.5% of the total capacity in Serbia. The potential for further growth is evident as exports of frozen raspberry in the period from 2014 to 2018 amounted to 253 million dollars, with a positive export growth and demand trends on the EU market and across other regions.
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Map 10: Distribution of deep-freezing cold storages Map 11: F&V processing facilities - Business revenues
Source: MAFWM, maps: CEVVIN
CONCENTRATION OF SPECIALIZED AGRICULTURAL HOLDINGS Family agricultural holdings are a dominant category of holdings in terms of fruit growing in Serbia. In terms of total number of agricultural holdings specialized in grapevine growing, the highest percentage in Serbia - as high as 56.4% - is located in the Šumadija region and Western Serbia. Out of the total number of these holdings, 58.08% is in the Šumadija region and Western Serbia, with fruit growing operations covering 99,386 ha. The average surface area covered by orchards in this region is 0.63 ha per holding. Table 7: Number of specialized AH for crop production, vegetable production and fruit production by used agricultural land in Serbia Size of UAL Total < 0.5 0.5 – 1 1<=hа< 2<=hа< 5<=hа< 10<=hа 20<=hа 30<=hа 50<=hа hа>=1 hа hа 2 5 10 <20 <30 <50 <100 00
Total 63,441 160 521 1,352 6,733 13,054 14,941 9,013 8,389 6,670 2,608 AH specialized for crop 23,591 4 35 171 1,553 3,603 5,138 3,782 4,195 3,631 1,479 production AH specialized for vegetable, flower and 2,233 75 82 160 491 578 369 198 175 104 1 other horticultures AH specialized for perennial plantings 37,617 81 404 1,021 4,689 8,873 9,434 5,033 4,019 2,935 1,128 (grapevine and vegetables)
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Map 12: Surface areas under vegetables, flowers and Map 13: Surface areas under vegetables, flowers and ornamental plants in agricultural holdings specialized in ornamental plants in agricultural holdings specialized in open-field production, presented by sub-regions and greenhouse production, presented by by sub-regions the size of agricultural land used in open-field and the size of agricultural land used in greenhouses and glasshouses
Source: SORS, maps: CEVVIN Source: SORS, maps: CEVVIN
POTENTIAL TO INVEST IN VEGETABLES PRODUCTION Commercial potato production can be noticed across the entire territory of Serbia, however production is particularly concentrated in the Šumadija region and Western Serbia, with a 47% of the surface area based in Moravica, Raška, Zlatibor and Kolubara Districts, with production participation of 49%. Significant potato-production territories include Čačak, Ivanjica and Guča, where production is rather fragmented, and primarily without irrigation systems and low yields. There is a potential for investments in production of certified seed and appropriate storages facilities with controlled temperature and air flow, which is one of the biggest problems in potato marketing. Professional potato producers still store products in improvised storages and tend to sell immediately following harvest. Once important production centers for tomato production, Trstenik and Kruševac, both have seen a decrease in production levels, primarily due to labor shortages and lack of new investment in production plants. Industrial tomato production in open fields is the dominant production type. In Serbia, the Šumadija region and Western Serbia contribute to 44% of the cucumber production, and the Southern and Eastern Serbia regions with 35%. Gherkin production is concentrated in several municipalities in the same region. The largest number of producers are located in the vicinity of Kruševac (village of Konjuh), Trstenik, Arandjelovac and Svilajnac. Expansion of gherkin production in Serbia commenced in 2014/15, following the increase in labor costs in Germany. The main driver for production growth was high demand on the European Union market. Production on large surface areas proved to be unprofitable to medium-sized producers, due to high costs of intermediate goods, labor costs, small share of the first-class products, and low purchase price in some years. The largest producers retained production on larger surface areas, but the last few years they have reduced surface areas under production. Serbia’s high level of competitiveness in pepper production is a consequence of favorable production trends based on yield increases and export growth, with an accelerating trend in recent years. Production in plastic greenhouses and tunnels, with yields of 150-200 t/ha, has increased during the past several years. Two regions account for 81% share of total production dominant - Šumadija and Western Serbia with 43% share, and the Southern and Eastern Serbia regions with 38% share. Production in plastic greenhouses and
p. 55/75 tunnels is growing in the Municipalities of Trstenik and Kruševac, primarily as a result of growth in market demand. Table 8: Vegetables production in 2018, growth trend in 2014 – 2018 period in Šumadija and Western Serbia region. Production share in total production of Serbia in 2018 Production 2018 (tons) Тrend % in Serbian production Potato 239,391 49.06
Onion 112,911 20.10
Carrot 7,224 22.40
Garlic 1,616 44.70
Tomato 37,342 28.31
Pepper 57,647 42.67
Cucumber 18,782 4.,15
Peas 5,023 17.16
Beans 3,988 35.79
Cabbage and kale 112.911 44.99
CENTER OF FRUIT PLANTING MATERIAL PRODUCTION In Šumadija and Western Serbia region, a micro-region within the Municipalities of Trstenik and Kruševac, are based outstanding producers of fruit planting material. In the last few years, the export of planting material from Serbia has grown to 15 million USD in 2018. This trend follows the growing worldwide trend for fruit planting material, with exports doubling over the last 5 years. The potential of the region is significant, not only for the production of fruit seedlings, but also for vines, roses, ornamental evergreen and deciduous trees and bushes, primarily due to the unique skills of local grafters and entrepreneurs entering the garden nursery business.
Southern and Eastern Serbia region
A REGION THAT CONTRIBUTES THE MOST TO SOUR CHERRY COMPETITIVENESS Sour cherry is one of the most competitive agricultural products in Serbia. The largest share of the total surface area under sour cherries in the Republic of Serbia (more than 60%) and 62% of production of sour cherry (79,277 tons in 2018), is located in the Southern and Eastern Serbia regions. There are several production micro-regions around Prokuplje (2,995 ha), Merošina (1,441 ha), Knjaževac (2,111 ha) and Leskovac (1805 ha). Across the region, production is based on clones of the Oblačinska sour cherry variety, which is recognized industry-wide as an extraordinary raw material for processing.
Оblačinka of Oblačina – a variety of special quality and characteristics To promote the high quality and local identity, producers organized into a cooperative to protect the appellation of origin of the Oblačinka variety. The cooperative prepared a study on the Oblačinka from Oblačina sour cherry variety to protect its exceptional quality and properties, including high percentage of dry matter, and its specific color and flavor. The territory of protection spreads across six municipalities: Merošina, Prokuplje, Blace, Doljevac, Žitoradja and Niš. In addition to fresh sour cherry, dried and frozen sour cherry should receive protection, which is expected to lead to higher exports of this variety. Certified production of the Oblačinka from Oblačina sour cherry is part of an initiative not only by the local cooperative from Merošina, but also by market leading companies such as Nectar, which has marketed its juice products on regional and global market for many years. By protecting the Oblačinka variety, small and medium-sized producers were brought together by a common interest to better position the branding, promotion of origin and quality of the Oblačinka variety produced in this Region.
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Table 9: Production of fruits in 2018, growth trend in 2014 – 2018 period in Southern and Eastern Serbia region and production share in total production of Serbia in 2018 (green color: leading production region, yellow: second in share size) Production 2018 (тона) Тrend % in Serbian production Apple 110,964 24.10
Pear 15,808 29.32
Quince 3,586 29.11
Plum 103,890 24.14
Peach 16,292 32.42
Nectarine 6,065 25.91 Cherry 3,901 20.36
Sour cherry 79,277 61.92
Apricot 3,070 12.07
Raspberry 8,386 6.60 Blackberry 4,905 13.98
Nuts 2,246 24.22
Hazelnuts 1,166 21.48 CONCENTRATION OF PLUM PRODUCTION Plum is the most represented fruit species in the Southern and Eastern Serbia region, which covers 19,393 hectares or 38.09% of the surface area occupied by orchards in this region. In second place is sour cherry - 13,261 ha or 26.05% of surface area occupied by orchards. Concentration of production is located in the municipalities of Prokuplje (2,435 ha) and Blace (2,300 ha). The Stanley variety is dominant and covers approximately 70-80% of the total surface area.
SOUTHERN AND EASTERN SERBIA REGIONS NEED NEW DRIVERS FOR VEGETABLE PRODUCTION GROWTH Tomato producers in the vicinity of Leskovac have significantly improved production by investing into production under protected areas, use of high-quality inputs, and new growing technologies. The high quality of products facilitated growth in Serbian exports during the season. The producer structure is dominated by a large number of small and medium-sized producers. There are also large producers and cooperatives with production under modern plastic and glass greenhouses. Tomato is produced almost exclusively under protected areas, with producers concentrated in the surrounding areas of Leskovac, Lebane, Vlasotince. Producers operate on areas of several dozen acres and to up to 1 acre under greenhouses. The planting materials are predominantly imported from Greece. Some villages in the area specialize exclusively in tomato production. According to official data, the share of South and Eastern Serbia in the total production of tomatoes is 20%, with a significantly higher share (35-40%) in recent years. Tomatoes are marketed mainly through leading wholesalers (Darkom, MDD) that export products primarily to regional markets, including Montenegro, Bosnia and Herzegovina, Slovenia, Greece. Table 10: Production of fruits in 2018, growth trend in 2014 – 2018 period in Southern and Eastern Serbia region and production share in total production of Serbia in 2018 (green color: leading production region, yellow: second in share size) Production 2018 (tons) Тrend % in Serbian production Potato 135,628 27,79
Onion 5,466 19,54
Carrot 760 3,42
Garlic 321 8,87
Tomato 26,273 19,92
Pepper 51,839 38,37
Cucumber 14,545 34,19
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Peas 3,081 10,52
Beans 5,496 49,33
Cabbage and kale 62,456 29,83
In the Southern and Eastern Serbia Region, pepper production is concentrated predominantly in the vicinity of Leskovac, Pirot and Niš. Domestic low-yielding varieties or own seeds are used to a large extent in this region. A high percentage of pepper from the region is processed into ajvar. In recent years, the demand for ajvar has significantly increased, with new funds invested into processing capacity in the Municipality of Blace, where, according to some estimates, approximately 800 tons of pepper was processed into ajvar over the past year. Outdoor production is represented by a large percentage, whereas production under protected areas mainly consists of production in tunnels with yields of 150-250 t/ha.
Map 14: Surface areas under vegetables, flowers and Map 15: Surface areas under vegetables, flowers and ornamental plants in agricultural holdings specialized in ornamental plants in agricultural holdings specialized in open-field production, presented by sub-regions and greenhouse production, presented by by sub-regions the size of agricultural land used in open-field and the size of agricultural land used in greenhouses and glasshouses
Source: SORS, maps: CEVVIN Source: SORS, maps: CEVVIN
Belgrade region The Belgrade region is the smallest fruit and vegetable producer region in Serbia, but has a potential of efficient logistics and demand from a large city market. In this region, there are two centers of excellence, with a long history of fruit growing – Smederevo and Grocka. In addition, this region also provides other examples of investments in fruit and vegetable production, proving the potential of extraordinary producers with new initiatives and investments can shape a region.
CONCENTRATION OF SWEET CHERRY, APRICOT AND PEACH PRODUCTION In the Belgrade region, surface area under cherry increased from 1,184 ha (2013) to 1,421 ha (2018). In 2018, cherry production amounted to 7.429 t. The center of production of the region, as well as of Serbia, is the village of Ritopek, based in the Municipality of Grocka, where a large logistical distribution center is located, and companies have well-developed cooperative models in place with local producers.
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Between the 2013-2018 period, surface area under apricot increased across all regions. The Belgrade region accounts for 40% of total surface area and 44% of total apricot production. During 2018, apricot production amounted to 11,193 tons. In the Belgrade region, the total surface area under peaches has tended to decrease, with a 32.12% share of the total surface area in 2018. Even so, this region possesses two locations with the greatest peach production in Serbia (Grocka 1,438 ha and Smederevo 1,365 ha). In addition, in 2018, 16,935 t of peach (or 33.70%) and 8 839 t of nectarine (37.76%) were produced in the region. Table 11: Production of fruits in 2018, growth trend in 2014 – 2018 period in Belgrade region and production share in total production of Serbia in 2018 (green color: leading production region, yellow: second in share size) Production 2018 (tons) Тrend % in Serbian production Apple 26,390 5.7
Pear 3,965 7.35
Quince 1,336 10.84
Plum 25,829 6.00
Peach 16,935 33.30
Nectarine 8,839 37.73 Cherry 7,429 38.78
Sour cherry 8,811 6.88
Apricot 11,193 44.04
Raspberry 5,051 3.97
Blackberry 676 1.92
Nuts 1,034 11.24
Hazelnuts 764 14.08
PACKAGING CENTRES AS AGGREGATORS In the Belgrade region, in the fruit production center in the Municipality of Grocka (villages of Brestovik, Pudarci), entrepreneurs linked their own production with the production of subcontractors, based on implementation of quality standards and a focus on an integrated sales approach. The quality of fresh fruit is largely dependent on post-harvest treatment and handling, packaging and logistics. Several packaging centers located close to the largest markets in Serbia, with easy access to transportation routes, have become new aggregators for the fresh and high-quality fruit market. Table 12: Vegetable production in 2018, growth trends in 2014 - 2018 in the Belgrade Region and production share in Serbia's production in 2018 Production 2018 (tons) Trend % in Serbian production Potato 17,186 3.52
Onion 773 2.76
Carrot 1,001 4.5
Garlic 154 4.2
Tomato 18,526 14.04
Pepper 4,449 3.29
Cucumber 1,588 3.73
Peas 3,166 10.81
Beans 487 4.37
Cabbage and kale 12,148 5.80
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WHOLESALE MARKET – A POTENTIAL STILL UNUSED There are a number of different sale points in the Belgrade region - from green and wholesale markets to a large number of retail chains and supermarkets, as well as a large number of small independent local stores. The City of Belgrade alone has 32 markets in the city’s market system, 2 of which are exclusively commodity markets and 30 mixed markets, with a dominant share of fruit and vegetables. In addition to these markets, it is estimated that there are a number of so-called ‘’municipal’’ markets in the Belgrade region, with a large number of private local stores, and approximately 100 green markets. The largest and most developed wholesale market in Serbia is the City of Belgrade’s wholesale market. It is located near the Belgrade-Zagreb highway, and has a potential to become an important channel for the sale of fresh fruit and vegetables in Serbia. The wholesale market has a sales floor of 5,000 m2, with over 800 sale points, as well as a modern hall for fruit and vegetables of 10,500 m2, with 40 exhibition and sales units. However, the wholesale market in Belgrade is increasingly losing importance, as less than 3% of Belgrade's total fruit and vegetables passes through this market. The fruit and vegetable hall, completed a few years ago (inaugurated in January 2018), is still not fully operational. The turnover and importance of this point of sale is losing its importance, but it still serves as the place where the retail price of fresh fruit and vegetables is formed on the market.
Map 16: Surface areas under vegetables, flowers and Map 17: Surface areas under vegetables, flowers and ornamental plants in agricultural holdings specialized in ornamental plants in agricultural holdings specialized in open-field production, presented by sub-regions and greenhouse production, presented by sub-regions and the size of agricultural land used in open-field the size of agricultural land used in greenhouses and glasshouses.
Source: SORS, maps: CEVVIN Source: SORS, maps: CEVVIN
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SUPPORT POLICY Support policy in Serbia
CHARACTЕRISTICS Market chain participants carefully observe the actions taken by the Government of Serbia in terms of agricultural policy, including what signals it sends, what it selects to protect and which sectors receive state subsidies. Even though farmers have had mixed experiences with signals sent by the Government previously, and despite the fact that they now rely more on themselves and less on the state, there is still a strong attitude among farmers that the State must support the agricultural sector. In this area, Serbia is no different from other countries, except that it differs in its potential, type of support and the objectives it sets to achieve. The State needs to create an enabling business environment for farmers and growers. For example, an environment where Serbian producers can export all products to the EU market, China, Turkey and other important markets; ensure consumers are assured products they buy are safe and healthy; promote products to help the disadvantaged and those living in less-favored areas for agricultural production to become more competitive on the market; ensure sufficient competition exists in the marketplace; take measures to protect natural resources, etc. The state can also encourage production through targeted subsidies. There are hundreds of different types of subsidies, and strategies and methods to implement them. The most frequently used subsidies on the Balkans and in EU countries include: price support, payments per head and land area, input subsidies, income support, credit support, payment of insurance premiums; along with market-oriented measures such as public intervention, storage subsidies, consumption increase schemes and other measures classified by the EU in CMO (Common Market Organization) measures. Additionally, rural development support measures are also widely used through new investment support for agricultural and rural development. Various environmental measures and subsidies are also increasingly implemented, not only in the EU but in other countries as well. In general, the trend is such that subsidies are increasingly disconnected from production. It is no longer common, not even in the former Soviet republics, to provide production-related subsidies in specific regions or areas. Not only due to a lack of economic logic, but because there is not a moral justification for a farmer in one village to receive a subsidy at the expense of a farmer in a another village, based on the whims of policymakers determining that one village is more suitable for production. The ability of a producer determines the competitiveness of the market. In the Republic of Serbia, incentives at the state level are defined by the following legal acts: Law on Agriculture and Rural Development (“Official Gazette of the Republic of Serbia”, No. 41/09, 10/13-state law, 101/16) and the Law on Incentives in Agriculture and Rural Development (“Official Gazette of the Republic of Serbia”, No. 10/13, 142/14, 103/15 and 101/16). The financial framework for the implementation of the Law on Incentives in Agriculture and Rural Development is the Law on the Budget of the Republic of Serbia for a calendar year, as well as the Regulation on the distribution of incentives in agriculture and rural development for a calendar year, which determines the total allocation of funds, incentive types and maximum level per incentive type. In addition to the national budget, a significant part of investment support is provided through the IPARD program, which supports agricultural holdings, cooperatives and companies in primary production and processing of agricultural products with new investments. IPARD is funded by the EU in the amount of
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EUR 175 million for the period 2014-2020. The Serbian budget provides an additional 25% to that amount (or the total end amount spent). In Serbia, the current policy support system is based on price support, and measures taken in the EU market, with subsidies primarily including payments per hectare, animal unit and investment support measures, however with significantly smaller amounts than allocated in EU countries. The basic characteristics of Serbia’s agrarian budget include: • Value of the agrarian budget in 2019 amounted to approx. USD 378 million (32% higher in comparison to 2018). • The largest part of the agrarian budget is spent on direct support measures (66%), and rural development measures (19%). • Support for direct payments per hectare within the direct support measures amounts to 5,200 RSD for a maximum of 20 hectares, and the total budget allocated for incentives in plant production in 2019 was RSD 8,333,492,000, representing 44% of the total budget allocated for direct support measures (RSD 19,020,314,000). • Out of the total budget for rural development measures amounting to RSD 4,187,500,000 in 2019, RSD 1,600,000,000 or 42.8% was allocated for investments in plant production. In addition, measures intended for all sectors should be added so that total support for plant production in rural development measures is over 50%. The amounts for these measures continue to constantly increase. • Rural development measures include: incentives for improving competitiveness, incentives for preserving and improving the environment and natural resources, incentives for income diversification and improving quality of life in rural areas, incentives for preparing and implementing local rural development strategies and incentives for improving the system of creating and transferring knowledge. The most significant part relates to incentives for improving the competitiveness of holdings through co-financing investments to improve primary production and processing in the amount of up to 50% of the investment value, or up to 65% for holdings located in areas with difficult working conditions. • About 50% of the budget allocated to rural development measures is intended for plant production support, with the largest part used for fruit and vegetables, through measures to grow perennial plantings, measures to build and equip storage facilities, and measures to procure new machinery and equipment. • The IPARD program supports investments in primary production and processing of agricultural products, which amounts to up to 70% of the investment value. So far, eight public calls have been made to support investments in physical assets of agricultural holdings, and investments in physical assets related to the processing and marketing of agricultural and fishery products.
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Demarcation between national and IPARD measures IPARD. Funds are intended for market-oriented medium-sized holdings with a potential to grow and invest in processing capacity of a specified production volume. Primary production and processing with investments up to EUR 1 million per call. National measures. Support small agricultural holdings to improve competitiveness of agricultural production or to diversify into non-agricultural activities. Primary production and processing with limited funds.
Table 13: Demarcation of IPARD and national measures by beneficiaries size NATIONAL MEASURES
Type of agricultural production Surface area (ha) Fruit production up to 0.5 ha in greenhouse
up to 2 ha of berries up to 5 ha of other fruit Vegetables production up to 0.5 ha in greenhouse Up to 3 ha of vegetables in open-field Viniculture up to 2 ha Other crops up to 2 ha Dairy cattle up to 19 Cattle breeding Up to 19 (establishment capacity) Pig breeding Up to 99 (establishment capacity) Sheep/goat breeding 149 (establishment capacity) Poultry breeding 3,999 (establishment capacity)
Provincial and municipal agrarian budgets In addition to the state budget, support measures provided through special programs at the provincial and local levels are also available to agricultural producers. It is a legal obligation to adopt them with the prior approval of the Ministry of Agriculture, Forestry and Water Management (MAFWM). In 2018, RSD 2.8 billion was realized at the provincial level, and through the support programs of 118 local programs for rural development measures (source MAFWM, Green Book). The Secretariat for Agriculture of the Province of Vojvodina allocated funds for agriculture and rural development in the amount of approximately USD 5.9 million in 2019 and USD 6.1 million in 2020, which are distributed through competitive public competitions. The measures are defined on the principles of national rural development measures, with higher co-financing rates of up to 70%. The fruit and vegetable sector is supported with investments in irrigation systems, weather protection equipment, equipment for production in protected areas, and new machinery and equipment. Support is also provided to young producers, promotion of organic production, and product certification based on quality systems. Local governments paid USD 21.1 million for a total of 118 programs in 2018. Local governments cannot pay direct support measures, such as payments per head or per hectare, but recourse for artificial insemination and incentives to rural development measures, including special incentives and credit support, can be paid out. Only a small number of local governments have a strategic approach to agricultural development,
p. 63/75 with a majority of funds used for emergency intervention (drought, flood, disease and pest recovery), and various types of credit support, including for purchase of livestock, machinery, equipment, construction of facilities, greenhouses, beekeeping equipment. Some local governments create rural development measures for the same type of support that is supported by the national budget for smaller investments, but there is a lack of support for measures that address specific needs of producers in a particular area. The support of bilateral donors through the IPA CBC funds is also significant at the local level. Better coordination and planning are needed for these types of support measures to ensure projects are more sustainable, and to prevent double funding.
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RECOMMENDATIONS Development What stimulates and leads to emergence of new production, production improvements, and regional development in certain places? How can development be maintained, improved or transferred to other regions? These are important questions for policy and business decision makers. Many factors influence development. If these factors, and their complicated relationship, are not known by policy makers, then subsidies and policy support measures cannot be expected to lead to new development. As a rule, this is seldom the case. Subsidies can either accelerate or slow down certain processes, but they cannot lead to improvements in competitiveness in subsidized products. The role of the state in these processes is significant, and often crucial – not only in planning production in regions by subsidizing production of certain sectors, types, and products, but also in creating a business environment based on competitiveness and new innovation.
Diagram 10: Phases of product development and economic concentration
Product development in a country or region occurs as a result of the activities of the private sector. The main drivers include businesses that properly- and on time- recognize demand for a particular product and develop innovation production, processing or other business operations that gives them a competitive advantage on the market. The state, in cooperation with the private sector, should build on food safety and quality infrastructure that will foster development. Generally, if this process is successful, production grows very quickly as a large number of producers follow the signal of progress. There are numerous examples of successful models for the development of specific products and regions. For example, carrot producers in the Begeč area began to evolve through innovation of carrot washers in the Danube river, which later, building on this innovative approach, led to carrots being left in the field until late winter. Today, there are dozens of successful carrot producers in Begeč, and the Begeč carrot is registered with a geographic mark of origin. In Western Serbia, raspberry production began to grow when an innovator, an agronomist, linked the American variety Willamette with new production technology (supporting poles and wires and tying shoots) in the seventies, which was a unique innovation in the world at the time. Fresh raspberries in Spain saw an increase in production and exports, reaching USD 486 million (tripling over the last 8 years), when it was discovered that the British Glen Lyon variety provides excellent results in the Huelva region (Andalucía). This largely helped satisfy the large growth in demand for fresh raspberries in Europe and the world. Similarly, apple production in southern Tyrol began to develop when a unique and integrated protection quality infrastructure was created in the 1970s, which was accepted and extended to a large number of producers. An old variety of Italian red sweet pepper has experienced great variations in Serbia, enabling the production of ajvar, pepper-based condiments and other similar products. Today, there are concentrated production centers across the country. Innovations of production of sour cherry from the village of Oblačina, based on its unique characteristics and high quality, have led Serbia to become a part of the group of the most competitive sour cherry producers in the world. In general, development always begins with an individual or a small group of individuals with a vision and ends up leading to concentrated production in a certain region, if based on a solid foundation.
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DEMAND The growth of a particular product is based on demand, whether in the local market or, even better, if on an international market. However, an increase in demand does not come automatically. It is most often spurred by conscious activities of individuals, associations of producers and/or consumers (media campaigns about quality and positive health effects, specific tastes, geographical indications, etc.), or by policy makers opening up specific markets. In general, the demand for fruit and vegetables has had constant growth, but the size of growth varies periodically and geographically. It is important to monitor market trends and raise awareness among the general public, particularly among present actors in the market chain and/or other participants considering entering a growing market. Today, the EU and many individual countries are investing millions in funding to support these initiatives. In Serbia, there is lack of awareness of the need to establish such a public service or campaign, and a lack of capacity to execute effectively through public institutions.
Graph 36: Size of import and demand trend for fruits and vegetables in Europe and World
10,000 45.0% 9,000 40.0% 8,000 35.0% 30.0% 7,000 25.0% 6,000 20.0% 5,000 15.0% 4,000 10.0% 3,000 5.0% 2,000 0.0% 1,000 -5.0%
- -10.0%
Pear
Peas
Carot
Garlic
Chery Apple
Peper
Beans
Peach
Onion
Grape
Potato
Apricot
Tomato
Walnuts
Bluberry
Cabbage
Hezelnut
Cucumbers
Freshplums
Watermalon
Fresh sour chery Freshsour
Freashraspberries
Freshstrawberries
Frozenraspberries Frozenstrawberies
Europe in mill USD World in mil USD Trend World Trend Europe
Source: UN Comtrade
INNOVATION / COMPETITIVE ADGANTAGE An innovation lies at the base of every development, whether it is big or through many small continuous improvements that result in what today is generally known as new technologies and innovation. They occur every day, but we are unaware of them. All new generations of varieties, breeds of animals, or herbicides are more efficient, higher yielding, and better. Few consider the number of scientists that invested time to analyze, test, select, and cross species to find new improvements. Innovation through patent protection is nowadays also used as a means for exclusive
p. 66/75 development, thereby preventing expansion and/or requiring large funds and investments, which in turn leads to concentrated development in a particular corporation, region, or state that holds the patent for the innovation. Innovation can be replaced by competitive advantage, whether it is natural due to a specific microclimate, soil composition, or created by conscious and/or unconscious actions taken by policy makers or individuals. Vojvodina's competitive advantage for growing planting material is its plentiful potential to isolate sprouters (which has attracted some European nurseries to invest). Skillful grafters in the village of Drenova, where there is a huge concentration of nursery production, are also a competitive advantage. As a result, in 2018, Serbia export USD 15 million of planting material. Serbia's competitive advantage in growing and processing plums is based on forty years of research at the Fruit Research Institute in Čačak; its competitive advantage in the apple sector is the ability to sell to the EAEU market; and in the pepper sector due to a large number of family holdings with good experience in growing peppers, etc. Most often, the competitive advantages are not fully exploited (or only partially) as it only serves as the basis for development, for which, in order to occur, needs demand, innovation, infrastructure and interested producers. INFRASTRUCTURE Export of planting material would not have occurred had Serbia not established a good planting material certification system, which is recognized by its trading partners as reliable and trustworthy. That is why the role of the state is important in helping the private sector develop food security and quality assurance schemes in a cost-effective manner, and one that is viewed favorably by trading partners. МULTIPLICATION Indermit S. Gill, in his seminal work titled Reshaping Economic Geography dealing with economic concentrations and development, identifies population density as one of the basic factors of development. Where there are no people, there is no development, especially no concentration of development. This is why it is important to have populated rural areas so that some leaders who recognize demand and create innovation, will be followed by others, often with more success, and continue to grow and multiply. When concentration of production in a region is reached, the objective is to either maintain, increase or expand it.
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Diagram 11: Expanding and improvement of economic concentration
Source: Authors' systematization
PROJECT CONCENTRATION As discussed previously in the study, there are concentrations of various fruit and vegetable production centers across Serbia. The concentration of producers has arisen for various reasons in different regions, but in most cases, it is a consequence of entrepreneurship and innovation, rather than a result of state intervention, even in the times of centrally-planned economies. The concentration of production is a consequence of entrepreneurs in these regions, specifically the producers, processors and/or exporters who recognized an opportunity to grow a market. As the analysis clearly shows, the concentration of production is not solely located in the most developed regions, on the contrary, some production centers are based in less developed and underdeveloped areas. GROWTH REGIONS AND OVERFLOW In some cases, concentration and growth in one region is followed by an overflow to other neighboring regions. In others, the emergence of competition among producers most frequently stays in the region where it was developed, rarely is copying and transferring technology successful in other regions. However, production competition in other regions is the strongest driver of progress and development. SPECIALIZATION AND IMPROVEMENT Under innovation and market pressure, the production of a particular products, such as raspberries, cherries, carrots, peppers, etc., has withstood competition, and continues to find new growth and business models to adapt to emerging demand and risks. This has resulted in specialization and constant improvement of existing products. In such regions, the type of support that is needed are technology centers, i.e. centers that will support producers to continuously adapt to new technologies, standards, and administrative requirements. These centers can include aggregators that constantly introduce new technologies and business models and should be supported with tax breaks and project support. In
p. 68/75 addition to technology centers, the state can also support centers of excellence and innovation that can effectively replace antiquated institutions and help link demand with innovation and new products. These centers should employ a new generation of scientists to provide new answers to market challenges in domestic and foreign markets. DIVERSIFICATION Production diversification is also a driver of growth and progress, as well as a model for limiting and reducing risk. An example of diversification in Serbia is the introduction of new fruit products – including other berry and stone fruit (raspberries) in cold storage processing, and marketing initiatives. Also, diversification of production takes place through different initiatives taken by investors and entrepreneurs form other regions. Unless changes occur in the regions where particular production is concentrated, production stagnates and more profitable options are sought, under the pressure from the emergence of production in other regions. The appearance of competition, openness, diversification and the potential of good example are the main drivers of progress and improvement in competitiveness. Any administrative obstacles to these drivers will lead to a collapse of competitiveness in these regions. The signals that the government sends by subsidizing production in certain regions leads to the same devastating results that are currently the result of direct payments in livestock, production growth stimulated by increasing subsidies, uncompetitive production based on reduced prices, and production models based on profits made solely from subsidies.
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Investment possibilities
LARGE POTENTIAL FOR INVESTMENTS IN PLANTING MATERIAL PRODUCTION Reorganize the Plant Protection Since 2015, the value of global exports of planting Directorate, strengthen human resources, materials has doubled, reaching nearly 800 million reorganize at the regional level by taking USD. In Serbia, there is a functional planting over services authorized by all material certification scheme, and transparent phytosanitary laws and create an efficient certified seedlings control and marking Phytosanitary Service that creates easy procedures. The region of Vojvodina, with its land working conditions for producers, resources and structure of agricultural processors and potential investors. production, enables isolation from native For plant material producers, enable plantations and wild relatives which are a source export to the EU by preparing technical of potential infections. Additionally, the dossiers and proving the functionality of a professional and practical knowledge of Serbian system that meets Article 42 of EU grafters and producers, makes the country very Regulative No. 2016/2031, and to improve competitive in this sector. all control procedures for planting material.
INVESTMENTS IN NEW INPUTS
The fruit and vegetable sector is undergoing Simplify registration of specific fertilizers modernization, but competitive production and pesticides if they are already officially requires modern inputs. There is specialized registered on the EU market. demand for new modern varieties and hybrids, as well as planting material and seeds, primarily berries, and fertilizers, particularly for organic production, bio stimulators, technologies and agents for biological pest control, modern machinery for pesticide application, equipment for storage and cold chain logistics, new indoor solutions – such as greenhouses, etc.
NEED FOR PROFESSIONAL AND BUSINESS KNOWLEDGE ALONG THE ENTIRE MARKET CHAIN
All sectors of agriculture, particularly the fruit and Evaluate contributions from existing vegetables production and processing sectors, scientific and professional institutions need to move from price competitiveness to towards the advancement and quality competitiveness. This requires specific modernization of fruit and vegetable knowledge and information that does not exist in production through customer surveys. the country. A particular problem is the lack of Support the creation of new centers of expertise in specific markets, strategic planning excellence in regions where production is and development of business strategies, concentrated and provide long-term identifying problems in existing businesses and financing options as well as project effectively resolving them to accelerate change. financing.
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DEVELOPMENT OF NEW FRESH FRUIT AND VEGETABLES SALES CHANNELS
Wholesale markets are losing their importance Provide initiatives to develop guidelines more and more, and turnover volumes continue and recommendations for the to constantly decrease. Reasons include adverse development of an operational model for business conditions, high levies and an outdated wholesale markets. Involving any relevant business model. This sales channel in other parts actors through working groups and of the world serves as a point of supply for retail creating models based on developed chains, green markets, and as one of many wholesale markets in the EU, but tailored collection centers from where goods are to the needs of the domestic market. exported. Serbia needs modern wholesale markets that provide producers with a platform for quick sales, retailers with sustainable incomes, and consumers with a place with accessible goods and prices closer to the level of producer prices.
ADDING VALUE TO STANDARD FROZEN PRODUCTS AND PROCESSING
It is necessary understand that fresh fruit and Accelerate the harmonization of the legal vegetables are just one of the inputs of the final framework in the adoption of laws on retail value of products. Fruit and vegetables from quality schemes, which will enable Serbia are often considered a premium raw formation of regional brands, and better material to which value is added by other actors in promotion of existing quality labels. the value chain. This needs to change through Attract new investments in F&V processing more active measures and knowledge transfer in by leveraging foreign or local investments, terms of developing new final products in line with or through cooperation between existing consumer trends, whether through packaging market actors. improvements or higher, value-added levels of processing.
TRADE PARTNERSHIPS
Investment opportunities exist in development of MAFWM opening opportunities to access new logistics strategies to access (new) markets. new markets by signing bilateral Cooperation among market players with potential agreements. to improve trade is underdeveloped – still, a lot The Government and MAFWM developing more could be achieved through better infrastructure projects aimed at increasing organization. trade based on clearly defined goals and It seems that the state does not understand its economic motives. role in development of trade (apart from MAFWM supporting activities of successful opening of the new markets), and it companies and individuals to open new necessary for the state to support competition, markets and/or reduce transportation not to suppress it. costs. Development of financial instruments to support F&V exporters. Support cooperation, merging and integration of offerings. Development of modern online sale channels to reach new consumers.
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PROMOTION
Promotion, individual or group (at the country, Moving from “ad hoc” to systematic and region, market chain or group of companies- strategic support for promotion of food levels), contributes to better positioning and produced in Serbia, which includes a increased demand of products. It can contribute promotion program for specific markets towards development of products, but it can also with well-selected and prepared products. be detrimental if not done improperly or in a non- Defining support measures aimed at professional manner. preparing products for a specific market. Working across the entire market supply chain and integrating offers as much as possible.
Support policy The aim of support policy targeted at the agricultural sector should be to accelerate and contribute to Serbia's overall economic development. This implies that what is gained by producers and consumers in the medium term should be greater than the subsidies paid out. In other words, if subsidies are paid for several years and then later abolished, a sector should have become more competitive than if subsidies had never been provided. In short, the goal should be to raise the level of competitiveness in a certain sector and among the farmers operating in the sector. However, social circumstances and political opportunities must be taken into account, especially in transitional countries such as Serbia, where other sectors are unable to provide sufficient funding to finance agriculture and rural development. That is why when determining subsidies, the objective should be to make them as cost effective as possible, but in line with social needs. Today, the support policy in Serbia does not meet these needs. There are a large number of measures that have no economic, social or environmental effect, with significant resources spent to little or no avail. Future support should be based on the following principles: • Subsidies without an economic impact should be abolished (immediately or periodically), primarily ineffective direct support measures per hectare and per cattle; • Increasing competitiveness (primarily productivity and quality) through investments in equipment and knowledge sharing by focusing on sectors that add value to products; • Separate economic and social measures; • Adapt measures to control possibilities. The support should be directed towards: • Supporting rural development and investments; • Improving the structure of holdings;
• Reducing grey areas and formalizing the sectors; • Building support institutions through functional technology and centers of excellence; • Providing social protection minimums through the creation of income support measures that are disconnected from production for the most vulnerable groups of producers; • Separate subsidies from production as much as possible – so beneficiaries decide where to invest.
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The capacity of institutions to create and implement support policies needs to develop and continually improve. Presently, Serbia today does not have an adequate system to control the use of subsidies, nor does it have the capacity to quickly and efficiently process all specified measures, both nationally and through the IPARD program. For a support policy to be effective, MAFWM needs to take efforts: • To improve policy making systems by defining priorities, beneficiaries, measures, etc.; • To improve the registry and control system as a basis for any quality support; • To increase institutional capacity to implement policies, procedures and control systems therein;
• To constantly monitor the effects of the measures taken and to adjust them to new situations, knowledge and information.
Sectorial recommendations
BERRIES Why invest? • Lively and viable sector with a competitive advantage in F&V production and processing. Production primarily relies on family-owned households. More than 300 cold storage facilities purchase berries across the country • An established and growing berry sector with a developed contract farming system • Ability to expand production portfolio and diversify to fresh and stone fruit segments Where and what to invest in? • New varieties and production technologies focused on the fresh segment • Focus on high-quality premium products • Value-added processing – drying, lyophilization, etc. Where are the markets? • The EU and EAEU markets are key destinations for fresh fruit • Growing demand for frozen products in the EU ‐ a major export market for Serbia’s frozen berries • Possibilities of new markets openings for the frozen fruit segment (Turkey and Gulf region)
STONE FRUITS Why invest? • Wide range of product varieties allowing for diverse and flexible marketing strategies • Specialized producers allowing backward integration in the value chain • Developed cold chain network • Ability to expand the production portfolio to diversify the berry sector Where and what to invest in? • New varieties and production technologies • Numerous opportunities for processing • Novel packaging and marketing options Where are the markets? • The present market for fresh fruit is the EAEU, while the EU market dominates in the export of frozen fruits • Vast opportunities to expand and diversify markets via product diversification and quality improvement
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APPLE Why invest? • Intensive and modern production technologies – out of the total 25,281 hectares, 14,055 are under intensive production • Over 100,000 tons of ULO storage capacity • Motivated producer groups and companies willing to improve production Where and what to invest in? • Focus on quality and on first- and extra- class products by further improvements in production technology • Prioritization of variety diversification, post-harvest treatments, improvement of storage and packaging • Potential for acquisition of existing productions Where are the markets? • Presently, the EAEU market is dominant • Bilateral agreements in the apple trade signed with China and India
PERISHABLE VEGETABLES (TOMATO, PEPPER, MELLON, WATERMELLON, CUCUMBER AND GHERKINS Why invest? • Large number of producers with long tradition of growing, high-yield intensive production, especially in the pepper and tomato sectors • Important local market offering possibility of export substitution • Cheaper labor than in EU15 countries Where and what to invest in? • Modern technologies and greenhouse tomato production • Packaging and labelling, and marketing initiatives • All types of processing facilities – freezing, drying, sterilization, pasteurization, etc.
Where are the markets? • Diversified export – EU, EAEU, CEFTA • Gherkins, pepper to EU, tomato to CEFTA and EU
NON-PERISHABLE VEGETABLES (POTATO, ONION, CARROT,CABBAGE, BEANS, PEAS) Why invest? • Large domestic and regional market with stable demand • Lower labor and transport costs versus the EU market • Numerous producers with significant capacity and ready for contract farming Where and what to invest in? • Storage and packaging facilities • Modern production, new varieties and technologies • Processing facilities Where are the markets? • Above all others - the local market • Export to regional markets, where there is growing demand for onion and potato (Albania), and
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carrots have diversified export with significant potential to grow • Irregular export to EAEU • Processing facilities
PREMIUM PRODUCTS Why invest? • The legacy of the country’s fruit and vegetable processing industry has evolved into a dynamic and growing sector, with quality‐oriented specialty food • Premium fresh fruit and vegetables ready‐for‐export markets ‐ great flavors created by favorable climate conditions and intensive modern production • Global acknowledgment of Serbian products – Superior Taste Award, Fancy Food Fair and trading partners – including raw honey, premium fruit jams, vegetable spreads like “ajvar”, dried prunes, and cold-pressed oil Where and what to invest in? • Improving value chains, linkages with producers and adding value to strong supply • Promotion and branding • Technology and product upgrades, economies of scale, premium modern packaging
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