06 BFC Serbia Agriculture Finance Bulletin

03/2016

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6 Serbia Agriculture Finance Bulletin Ministry of Agriculture Announces New Subsidies European PROGRES to Provide Start-Up Grants to Young Entrepreneurs Fruit Exports Total 454,444 Tons Worth RSD 583.4 Million in 2015 Serbian Non-GMO Soybean to Receive Certification of Origin

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Agriculture Finance Bulletin Edition #6, March 2016

Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4) 5)

Ministry of Agriculture Announces New Subsidies ......................................................................... 2 Farms, Agribusinesses and Cooperatives to Receive Preferential Credit........................................ 2 Serbia and Hungary to Launch Joint Agro-Industry Projects ........................................................... 2 Penalties Announced in Bid to Combat Local Government Mismanagement of Farmland............ 2 Eight Technical Assistance Programs to be Launched ..................................................................... 3

Foreign Aid ................................................................................................................. 3 6) 7) 8) 9) 10) 11) 12)

European PROGRES to Provide Start-Up Grants to Young Entrepreneurs ...................................... 3 FAO and EBRD Organize Food Safety Crisis Communication Seminar ............................................ 4 FAO Assists with the Implementation of Certification of Origin Branding ...................................... 4 FAO Delegation Visits Serbia to Review Flood Relief Program........................................................ 4 Ireland to Share its Agricultural Know-how .................................................................................... 4 Serbian and Ukrainian Producers Discuss Cooperation at Eastern Europe Dairy Congress............ 5 Rural Development Program Launched in Backa ............................................................................ 5

Private Sector.............................................................................................................. 5 13) 14) 15) 16) 17) 18) 19) 20) 21)

Decline in Agro-Insurance Demand Despite Flooding and Subsidies .............................................. 5 Spring Sowing Estimated at 1.6 Million Hectares............................................................................ 5 Fruit Exports Total 454,444 Tons Worth RSD 583.4 Million in 2015 ............................................... 6 Serbian Non-GMO Soybean to Receive Certification of Origin ....................................................... 6 Pig Breeders Seek Profits in Outdoor-Rearing................................................................................. 6 Beehive Distribution Optimization Software Released ................................................................... 7 Victoria Group: Focus Should be on Apple, Raspberry and Organic Production ............................ 7 Protected Futog Cabbage sees Increase in Production ................................................................... 7 Toennies Lebensmittel to Invest EUR 300 Million in Serbia ............................................................ 8

Note: The Agriculture Finance Bulletin presents a monthly roundup of headlines and news stories related to investments and financing flows to Serbia’s agricultural sector.

This bulletin is prepared by Business & Finance Consulting—a Swiss-based development finance consulting company.

Currently, BFC is implementing “Development of Financial System in Rural Areas in Serbia” programme for KfW.

BFC Max-Högger-Strasse 6 CH-8048 Zurich, Switzerland

Phone: +41 44 784 22 22 Fax: +41 44 784 23 23

info@bfconsulting.com www.bfconsulting.com

BFC. Agriculture Finance Bulletin.

State Initiatives 1)

Ministry of Agriculture Announces New Subsidies

March 31st, 2016, http://www.stips.minpolj.gov.rs/sadrzajv/podsticaji-i-investicije-u-poljoprivredu

Fruit production and seedling procurement will receive subsidies of up to RSD 2 million, according to Minister of Agriculture Snezana Bogosavljevic Boskovic.

Purchases of machinery, seeders, planters, irrigation equipment, greenhouses and anti-hail nets will also receive subsidies of up to RSD 5 million, said the Minister. Investment in organic and protected designation of origin farming will receive co-financing of 50%-65%, while co-financing will be provided also for well excavation and irrigation systems, said Boskovic.

2)

Farms, Agribusinesses and Cooperatives to Receive Preferential Credit

March 24th, 2016, http://www.tanjug.rs/full-view.aspx?izb=237325

Minister of Agriculture Snezana Bogosavljevic Boskovic announced preferential agricultural loans for the purchase of animal feed, animal insurance, and equipment and machinery. The loans will be disbursed in Serbian dinar, with a fixed 3% interest rate, 3 year maturity, and 1 year grace period. Family farms, agribusinesses and cooperatives with at least five members are eligible to apply, said the Minister. Loans will total up to RSD 5 million for individual farms and agribusinesses, and up to RSD 15 million for cooperatives, said the Minister.

While the initiative should increase productivity and competiveness across the board, it will also facilitate the purchase of feed that meets quality regulations, said Boskovic.

3)

Serbia and Hungary to Launch Joint Agro-Industry Projects

March 18th, 2016, http://www.tanjug.rs/full-view_en.aspx?izb=236485

Serbia and Hungary announced joint food and agriculture ventures in a bid to gain access to major global markets, including Russia, Western Europe, China and the rest of Asia, according to the Serbian Ministry of Agriculture. The agreement was reached during the 8th Serbia-Hungary Joint Commission on Economic Cooperation and signed by Serbian Minister of Agriculture Snezana Bogosavljevic Boskovic and Hungarian Minister of Foreign Affairs Peter Szijjarto.

In 2015, Serbian exports to Hungary increased 11% year-on-year, according to Boskovic.

4)

Penalties Announced in Bid to Combat Local Government Mismanagement of Farmland

March 17th, 2016, http://www.tanjug.rs/full-view.aspx?izb=236159

Clear penalties have been put in place to combat local government corruption and failure to manage state-owned agricultural land according to current laws and regulations, announced the Ministry of Agriculture. The penalties are an interim solution in anticipation of a comprehensive law that should put an end to provincial government abuses, said a Ministry statement. The law will come into force

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between 2016 and 2017. The Ministry called on local governments to comply with existing regulations, allowing farmers to bid for state-owned land by the cut-off date of March 31.

5)

Eight Technical Assistance Programs to be Launched

March 1st, 2016, http://www.mpzzs.gov.rs/poljoprivrednicima-na-raspolaganju-besplatni-projekti-za-unapredjenjeproizvodnje/ http://www.rts.rs/page/stories/sr/story/13/Ekonomija/2229454/Predstavljeni+nau%C4%8Dni+projekti+za+unapre%C4%91enje +poljoprivrede.html

Farmers will receive technical assistance in almost all areas of agriculture free of charge, said Minister of Agriculture Snezana Bogosaviljevic Boskovic. This year, the following 8 projects will be launched: crop residue to thermal energy transformation, supported by the Novi Sad Faculty of Agriculture; intensive fruit farming, supported by the Cacak Faculty and Fruit Research Institute Cacak; organic farming in Western Serbia, supported by the Belgrade Faculty of Agriculture; mobile robotic solar electric generators and renewable energy, supported by the Belgrade Institute for Agricultural Economics and the Belgrade Mihajlo Pupin Institute; diversification of agricultural production in Timok, supported by the Belgrade Faculty of Agriculture; contemporary crop and vegetable production models, supported by the Cacak Faculty; and innovation in education and organic farming, supported by the Novi Sad Agriculture Faculty.

The projects will be funded through loans, state funds and, eventually, through the European Union’s (EU) Instrument for Pre-accession Assistance for Rural Development (IPARD). The initiative will strengthen the bonds between farmers and Serbia’s agriculture colleges, research institutes and agricultural professional services, said Boskovic. The agriculture budget currently earmarks RSD 10 million for research.

Foreign Aid 6)

European PROGRES to Provide Start-Up Grants to Young Entrepreneurs

March 30th, 2016, http://www.stips.minpolj.gov.rs/sadrzajv/bespovratna-sredstava-eu-i-%C5%A1vajcarske-za-mladepreduzetnike

The European PROGRES program is to provide start-up grants totaling EUR 180,000 to young people from 34 municipalities in South East and South West Serbia, announced the program’s two major donors, the European Union (EU) and the Swiss government. The grants, ranging between EUR 2,50010,000, will support 20 start-ups in the food industry, manufacturing, or information technology.

Applicants must be unemployed persons between the ages of 18 and 30 years with permanent residency and registered with the National Employment Service for at least 3 consecutive months.

During the first phase of the competition – open until May 11 – applicants’ business plans will be evaluated. The second phase requires short-listed candidates to participate in a business training program. Only those who achieve the objectives of the training program will be eligible for grants, according to European PROGRES’s Ana Nedeljkovic. Instead of assigning monetary grants, the program will contribute to approved purchases necessary to the business, such as machinery, software, equipment and other durable goods. The project will be implemented by the United Nations Office for Project Services (UNOPS).

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7)

FAO and EBRD Organize Food Safety Crisis Communication Seminar

March 22nd, 2016, http://www.agronews.rs/krizne-komunikacije-u-oblasti-bezbednosti-hrane/

A training seminar on food safety crisis communicatoin was held at the Serbian Chamber of Commerce.

The seminar comes as part of a project to promote dialogue between the public and private sectors in the meat and dairy industries implemented by the Food and Agriculture Organization (FAO) and the European Bank for Reconstruction and Development (EBRD).

According to Assistant Professor at the Belgrade Faculty of Organizational Sciences Tamara Vlastelica Bakic, the main principles of effective food safety crisis communication are timeliness, accuracy, reliability, relevance, consistency, transparency and independence. These principles should be accompanied by preventive measures and coordinated cooperation between the private sector and relevant authorities, said Bakic. The Ministry of Agriculture and representatives of Serbia’s meat and dairy industries recently signed a protocol establishing emergency food safety procedures.

8)

FAO Assists with the Implementation of Certification of Origin Branding

March 18th, 2016, http://rs.n1info.com/a144317/Biznis/I-FAO-angazovan-na-brendiranju-srpske-hrane.html

The Food and Agriculture Organization (FAO) is cooperating with the Ministry of Agriculture to implement certification of origin labelling for Serbian meat products, according to FAO project manager Emanuel Hidijer. Serbia cannot match the low production costs and prices of benchmark foreign producers; certifications of origin give a powerful competitive advantage, guaranteeing quality and commanding higher prices, while also promoting the country and region in themselves, said Hidijer.

Serbia has many quality traditional products that would benefit from the scheme, he added. The FAO and EBRD are currently assisting the government with the development of the necessary regulatory framework. While, in general, banks are uninterested in lending to small farmers, according to Hidijer, producers of high quality traditional products could provide their produce as collateral.

9)

FAO Delegation Visits Serbia to Review Flood Relief Program

March 16th, 2016, http://www.agronews.rs/fao-stize-u-srbiju-proverava-oporavak-od-poplava/

A Food and Agriculture Organization (FAO) delegation will visit Serbia to review the progress of their agricultural flood relief program. In 2014, floods caused serious loss of crops and livestock in Serbia. The delegation will talk with beneficiaries, as well as local and national government officials, project partners and other UN agencies.

The envoys will visit also Sabac – where 2,000 flood affected families received seeds, fertilizers, fruit trees and greenhouses – and Bogatic, through which seed and fertilizer is distributed. The FAO has no official representation in Serbia.

10) Ireland to Share its Agricultural Know-how March 8th, 2016, http://www.mpzzs.gov.rs/irska-ekspertiza-za-unapredjenje-poljoprivrede-u-srbiji/

Irish government agency Sustainable Food Systems Ireland (SFSI) is to share its agricultural expertise with Serbia. An SFSI delegation – including Director David Butler – was welcomed by Serbian Minister of Agriculture Snezana Bogosavljevic Boskovic. The SFSI delegation was presented with a comprehensive report on Serbian agriculture, including agricultural policy, food safety, fisheries, and phytosanitary and veterinary status. Following the meeting, the SFSI representatives visited the Institute of Field and Vegetable Crops in Novi Sad, as well as regional producers already cooperating with Irish counterparts.

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11) Serbian and Ukrainian Producers Discuss Cooperation at Eastern Europe Dairy Congress March 4th, 2016, http://www.agronews.rs/delegacija-srbije-na-istocno-evropskom-kongresu-mlekarstva/

A Serbian delegation participated in the 9th Eastern Europe Dairy Congress, which brings together more than 2,000 producers, processors and traders from 20 countries. The event – sponsored by the Food and Agriculture Organization (FAO) and the European Bank for Reconstruction and Development (EBRD) – aims to build a common strategy amongst Eastern European producers. The Serbian delegation was sent as part of an FAO and EBRD program encouraging political dialogue between public and private stakeholders in the meat and dairy industries in Serbia.

Serbian and Ukrainian producers discussed cooperation in the organic dairy sector, including animal husbandry, as well as brand strategy and labeling.

12) Rural Development Program Launched in Backa March 2nd, 2016, http://www.agronews.rs/titel-dobija-strategiju-ruralnog-razvoja/

The first meeting of the Local Initiatives for Rural Development in Backa program working group was held in Titel, according to European Movement Serbia. The program will be implemented by the European Movement Novi Sad (EMNS) and the Backa Regional Development Agency in cooperation with the Municipality of Titel. The project is funded by the Serbian government and the Swiss Agency for Development and Cooperation.

Local-action groups responsible for developing strategies tailored to 7 different municipalities in Backa will be established. The groups – partnerships between the public, private and civil sectors – will be financed through the EUR 17 million earmarked for local rural development strategies in the European Union’s (EU) Instrument for Pre-accession Assistance for Rural Development (IPARD) II fund.

Private Sector 13) Decline in Agro-Insurance Demand Despite Flooding and Subsidies March 28th, 2016, http://novaekonomija.rs/vesti-iz-zemlje/poljoprivrednici-ni-posle-poplava-nisu-shvatili-zna%C4%8Dajosiguranja

Despite the devastating floods of 2014, this year’s minor floods in Moravicki and state premium subsidization reaching 45%, interest in agricultural insurance is actually declining, according to Dunav Insurance’s Head of Corporate Clients Predrag Stranjanac. Lump insurance costs for agricultural holdings – including buildings, household items, animals, stock, equipment, and tools – are about RSD 10,000 per year, with the average farm valued at RSD 5 million, said Stranjanac. Adding flood damage to the policy increases costs by an average RSD 2,891 per year.

14) Spring Sowing Estimated at 1.6 Million Hectares March 24th, 2016, http://www.novosti.rs/vesti/naslovna/ekonomija/aktuelno.239.html:597155-U-prolecnoj-setvi-bicezasejano-oko-16-miliona-hektara

This spring, an estimated 1.6 million hectares of crop will be sown, including 1.05 hectares of corn, 200,000 hectares of sunflower and soybean, 165,000 hectares of spring cereals, and 55,000-60,000 Page 5

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hectares of sugar beet, according to the Secretary of the Serbian Chamber of Commerce’s (PKS) Agriculture Committee Nenad Budimovic. Despite heavy rain and low temperatures, sowing has been in line with ten year averages, with produce expected to meet domestic demand and also provide surpluses, said the Secretary.

In autumn last year, 737,127 hectares were sown, of which 580,292 hectares of wheat, a 0.8% and 0.7% increase year-on-year, respectively. Regionally, Vojvodina saw a decrease of 1.8% in area sown, while the Belgrade region, Southern and Eastern Serbia, and Sumadija and Western Serbia, saw increases of 4.2%, 1.5% and 5.2%, respectively, according to Budimovic. At 7.2%, rye saw the largest increase in area sown, with barley at 6.4%, wheat at 0.7%, while oats saw a 12.7% decrease year-on-year. Despite being sown on 2.4% less land, total wheat production in 2015 was 1.7% higher than in 2014, said the Secretary.

15) Fruit Exports Total 454,444 Tons Worth RSD 583.4 Million in 2015 March 24th, 2016, http://www.stips.minpolj.gov.rs/sadrzajv/izvoz-vo%C4%87-srbiji-u-2015-doneo-583-miliona-dolara http://www.agronews.rs/srbija-u-2015-bila-najveci-proizvodac-maline-na-planeti/

In 2015, Serbia exported 454,444 tons of fruit worth RSD 583.4 million, compared to 391,930 tons worth RSD 552.4 million in 2014, representing 16% increase in volume, according to the Serbian Chamber of Commerce (PKS).

Raspberries were the greatest earner with exports totaling 100,233 tons worth RSD 280.61 million, Serbia being world’s largest raspberry producer in 2015. The leading buyers were Germany, France, Belgium, Sweden and Austria. Next up came apples with 178,414 tons worth RSD 102.09 million, followed by sour cherries at 26,539 tons worth RSD 31.42 million, other berries at 8,889 tons worth RSD 16.25 million, and finally cherries at 4,602 tons worth RSD 7.34 million.

16) Serbian Non-GMO Soybean to Receive Certification of Origin March 23rd, 2016, http://www.rtv.rs/sr_lat/ekonomija/aktuelno/zastita-porekla-za-bolji-izvoz-soje_701713.html

By early April, Serbian soybeans from the Danube region will receive the certification of origin “Dunav Soja”, identifying them as non-GMO (genetically modified organisms). Funded by the German Society for International Cooperation (GIZ), the introduction of origin labelling will allow Serbian soybean to develop its reputation as quality non-GMO produce in Europe and internationally – where demand for non-GMO is increasing – eventually leading to a higher asking price, according to Ministry of Agriculture State Secretary Danilo Golubovic. Serbia produces about 400,000 tons of soybean annually.

17) Pig Breeders Seek Profits in Outdoor-Rearing March 13th, 2016, http://www.rts.rs/page/stories/sr/story/13/Ekonomija/2243058/Uzgoj+mangulica+na+otvorenom+%E2%80%93+iz+prirode+na +trpezu.html

Low pork prices and the heavy costs involved in intensive farming have turned some Serbian pig breeders to outdoor-reared farming methods. The Mangalitsa breed is particularly suited to this kind of farming. Mladen Marjan farms the breed using the outdoor-rearing method. The pigs feed outdoors 365 days a year, mainly on snails and acorn. While feeding costs are minimized, the meat fetches a premium of 40% on European markets. There are only about 20 such farms in Serbia. Jovan Milivojevic, an outdoor breeder, has called for the development of certification of origin labelling, the creation of Page 6

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outdoor-rearing associations, as well the allocation of more land. Certification of origin will facilitate marketing and allow farmers to command higher prices for their products, according to Milivojevic.

Breeds with pigmented skin – such as Mangalitsa and Duroc – are ideal for outdoor-rearing, while Srbijasume and Vojvodina are best suited to the farming method, according to Cedomir Radovic of the Institute for Animal Husbandry. Meanwhile, the Ministry of Agriculture announced a new law on pork grading, which allows farmers to negotiate quality related prices.

18) Beehive Distribution Optimization Software Released March 11th, 2016, http://www.rtv.rs/sr_lat/ekonomija/aktuelno/softver-povezuje-pcelare-i-poljoprivrednike_697980.html

BeeWeb, a software application that links beekeepers and farmers, has been developed by Kragujevac Dusan Jaglicic and Djordje Djokic Jaglicic. The application allows beekeepers and farmers to share data about hive location and field availability; the software’s algorithm then calculates the most efficient hive distribution, optimizing pollination, according to Dusan. BeeWeb thus increases both honey and crop yields, with sunflower yields increasing up to 30%, said Dusan. The software could cover all of Serbia’s agriculture.

BeeWeb was launched in March, is free to use in Serbia, and currently hosts about 200 beekeepers and several thousand hives. Subscribers simply register and upload their data, the algorithm then calculates optimum distribution and scheduling, with subscribers receiving results by SMS, email, or post. BeeWeb will be launched in the United States and Western Europe with paid subscription.

19) Victoria Group: Focus Should be on Apple, Raspberry and Organic Production March 10th, 2016, http://www.agronews.rs/region-kako-da-budemo-konkurentni/

Serbian farmers are facing difficulties due to the global drop in agro-product prices, according to Victoria Group Director Nikola Vujacic. Considering the subsidization levels seen in other countries, Serbia cannot compete in intensive farming, added Vujacic. Instead, the country should focus on its prime corps – such as apples and raspberries – and organic farming, said the Director. While praising the new Agricultural Land Act, Vujacic said local governments ought to grant land to any investor willing to take the lease.

Agricultural cooperatives provide the greatest opportunity for growth, according to Vujacic; however, progress is not being made on this front. Government must take measures to ensure the agriculture sector is less affected by dollar and euro exchange rate fluctuations, he added. President of the Serbian Association of Agricultural Economists Miladin Sevarlic said the major problem facing Serbian agriculture is disorganization, with small farms left to fend for themselves. Victoria Group has net export revenues of EUR 200 million and procured more than EUR 120 million of agricultural goods in Serbia, according to Vujacic.

20) Protected Futog Cabbage sees Increase in Production March 8th, 2016, http://www.agronews.rs/siri-se-futoski-kupus/

This year, 35 producers planted 30 hectares of premium Futog cabbage (futoski cupus in Serbian), compared to 32 producers and 20 hectares last year, announced President of the Association of Futog Cabbage Goran Puaca. Last year’s crop totaled 440,000 tons, with 261,000 tons of sauerkraut processed.

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A further 100,000 tons of Futog hybrid was produced. So far, Futog cabbage is the only Serbian product with a protected designation of origin, according to the President.

About 20% of the certified cabbage was sold in the European Union (EU), especially Germany, Austria, and Sweden. Futog was also exported to Australia and New Zealand, said Puaca. Futog subsidization would increase production and competitiveness, added the President. Other Serbian products would benefit from a protected designation of origin, including Ajvar (a red pepper sauce) from Leskova, Srem sausage, Homolje honey, Fruska linden honey and Sjenica lamb, concluded Puaca.

21) Toennies Lebensmittel to Invest EUR 300 Million in Serbia March 1st, 2016, http://www.danas.rs/dodaci/biznis/da_li_ce_nemacki_kapital_oziveti_ili_dokrajciti_srpske_farme_.27.html?news_id=316777

German food and livestock giant Toennies Lebensmittel is to build a pork processing plant in Serbia. A final agreement will be reached in June, prior to which a location for the factory must be found, pig procurement secured, and 200-300 Serbian personnel trained in Germany. Owner Clemens Toennies said the company plans to invest EUR 300 million in the country, stressing that, rather than pushing local producers out of the market, it plans to boost local pork production and exports. The company breeds 2.8 million pigs a year, with plans to increase production to 4 million.

According to Miladin Sevarlic, Professor at the Faculty of Agriculture, Toennies has secured from the Serbian government: subsidization of equipment – which will come from Germany – and employee salary payment for 3 years. However, since Serbian pigs are not officially classic swine fever free, its products will not be exportable, said Sevarlic.

Focus should instead be on developing domestic production. Denmark has a good model, where holdings are limited to 300 hectares, and all production is required to be organic within 25 years, said Sevarlic. Moreover, Serbia should make more use of its 424,000 hectares of arable land, with the potential of 100,000 being converted to organic production within a year; while Acacia, lime and chestnut should be planted, providing sustainable honey production, according to Sevarlic.

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Prepared by Business & Finance Consulting (BFC) www.bfconsulting.com In this bulletin, BFC provides extracts from articles that have been published by others and as a result cannot be held responsible for such content.

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