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Competitiveness of Serbian Agriculture

Think globally,act realistically

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Think globally, act realistically

To be ahead of others

Misconceptions and Reality

Liberalisation and Globalisation

Farmers as the Best Investors

Gold: Red and Yellow

Single Agriculture – Different Approaches

Fruit then Everything Else

Variety of Stories: the Nice Ones and Others


Summary of the Study


June 2017




срeдинe

Name of the publicationCompetitiveness of Serbian Agriculture ISBN 978‐86‐80964‐00‐3

PublisherSeedev d.o.o, BelgradeAddress: BulevarMihajlaPupina 10d, BelgradePhone: +381 11 311 23 85 Fax: +381 11 311 23 85 E‐mail: [email protected]: www.seedev.orgOn behalf of the publisherDragana TarAuthorsGoranŽivkov, Ivana Dulić Marković, NemanjaTeofilović,ĐorđeTeofilović, Dragana Tar, Mijat LakićevićTechnical support Kikindske ‐ Gradski informativni nedeljnik (Informative weekly ofthe City of Kikinda), KikindaProofreading and translationMilan MarkovićText designMiroslav Dragin and Željko BodrožićPrinted by: Bigraf +, Belgrade Circulation: 100Place and year of publication: Belgrade, June 2017This document was made with the support of the Government ofthe Federal Republic of Germany through the German Organisationfor International Cooperation (Deutsche GesellschaftfurInterna‐tionaleZusammenarbeit (GIZ) GmbH) under the project entitled“Support to Negotiations with the European Union in Serbia”.

CIP

In the words ofthe Minister

“Competitiveness in its essence repre‐sents a strong urge to be more successfulthan others. Competitiveness of any farmor agricultural company is quite specific,ever changing and hard to measure. It isthe same when it comes to the competitiveness of the entireagricultural sector in Serbia. Be that as it may, to analyse com‐petitiveness and compare oneself with others, as well as toanalyse the trends occurring in the sector are all very important– both on the state level and on the level of individual farms.Analytical approach to studying competitiveness serves as abasis in understanding trends and processes in Serbianagriculture, which in turn inform presentation of the sector inthe process of EU accession, yet it is even more important whenit comes to the analysis of the implemented measures and as asupport in adopting the measures of agricultural policy.”

Branislav Nedimović,

Minister of Agriculture and Environmental Protection,

Government of the Republic of Serbia

COMPETITIVENESS OF SERBIAN AGRICULTURE 4

1. Production structure for the main groups of agricultural products (2009-2014)

2. Export structure for the main groups of agricultural products (2010-2015)

The structure represents the share of total production / trade of

major groups of agricultural products. Selected groups of pro ducts

make up to 100%, it is not the overall agriculture. Certain products

which can not be classified into these main groups, and account for

not more than 5% of production or sale distribution are ignored.


The word competitiveness is derived from the word competitionwhich indicates contest among individuals, groups, organisations,animals, plants, etc., for space, resources, market, etc. Competitionoccurs when at least two subjects fight for a reward which cannotbe shared.

Competitiveness in its economic sense is defined as the abilityof individual, company, sector, region, or country to sell certaingoods and services on the given market. According to the OECDdefinition, it marks the ability of a country, in free and equalmarket conditions, to produce goods and services which couldpass the test of the international market. Accordingly, competitivenessis always presented as a measured relation to other participants inthe market.

Competitiveness is a category defying measure and change.This is particularly valid for agricultural competitiveness, influencedby a great variety of factors, where change in just one of thefactors can cause the competitiveness of the entire sector to beprofoundly changed. These factors can be related to production,such as weather conditions and price of inputs, but can also begeneral and unrelated to immediate agricultural environment –

national currency exchange rate, customs, harvest in anothercountry, etc.

Competitiveness also depends on the context, i.e. on thewider perspective. Thereby, for example, Serbia may be the mostcompetitive European country when it comes to the productionof soybean, but when compared on the global market with theUSA, Brazil and Argentina, it can suddenly become one of theleast competitive countries. When discussing competitiveness,economists often concentrate on the single factor – that of price –even though competitiveness in quality may often prove to bemore important than price competitiveness.

SEEDEV has developed its methodology from the experiencesand conclusions of the preceding theories and methodologies.However, our methodology is also informed by the great variety ofdata pertaining to trade, production, yield, sown area and livestocknumbers, subsidies, prices, etc., which is readily available today.The analysis that you have before you is the result of combiningmethodological/scientific approach, analysis of a great amount ofdata, interviews with the key participants in the market chain,policy makers and experts, as well as practical experience.

1. On Competitiveness To be ahead of others


3. Competitiveness index

Index represents a competitive value of the individual products

in relation to others as a result of the positioning of the product for

each in a series of indicators which express competitive position

both in relation to the relevant markets and in relation to the

dimension of time, that is growth in the relevant time period.

4. Competitive position in relation to the CEFTA market


Agriculture belongs to the more advanced part of Serbianeconomy, as it demonstrates bigger growth and better trendsthan many other sectors. In the past, some unrealistic expectationswere created pertaining to Serbian agriculture, such as old mis‐conception that “Vojvodina could feed half of Europe”, regardlessof the fact that Serbia with its 3.44 million hectares does notrepresent any kind of “agricultural force”. Serbia makes for 0.8%of farmland area of Europe, while Vojvodina itself holds 0.5% ofthe European total.

Since 2002, Serbia has achieved significant results in tradingin agricultural products, as both export and import have beenon a constant rise. Since 2005, Serbia has had surplus. Only in2009, due to the global economic crisis, fall was recorded bothin export and in import. In 2016, Serbia exported twice as muchagricultural products than it was imported in the same year (3.2against 1.5 billion USD respectively in value), thus attaining asurplus record of 1.7 billion dollars. The last year’s surplus is asmuch as 40% higher than that achieved a year earlier. Serbiaalso has surplus when it comes to trade with the EuropeanUnion: in 2016, export amounted to 1.45 billion dollars, whilethe value of the imported goods was 912 million dollars. What isparticularly striking is the surplus achieved in trade within the

CEFTA region, where the goods were exported in the total valueof almost 1.06 billion dollars, while the export was merely 247.7million dollars. Finally, the last year’s export to Russia was 342.7million dollars, while the import value was 61 million dollars.

Serbian agriculture relies on family farms. However, this is nolonger extensive, “catchall” production. These are rather a greatnumber of highly professional agricultural producers, increasinglyoriented towards export. In today’s Vojvodina, 22 thousand farmshold 80% of agricultural land. In Central Serbia, 155 thousandfarms hold 80% of arable land. They are the engine behind thedevelopment of Serbian agriculture and majority of the successstories are related to these producers.

Serbia is offered the opportunity to become one of the rarecountries that would join the EU, which would simultaneouslymean that its agricultural production will become a part of theCAP. Serbian agriculture must take this historic opportunity, as itsbenefits would be both measurable and immeasurable. The roadto the EU membership also entails some prices that need to bepaid. To be familiar with the situation in agricultural sector, and beable to recognise the chances being offered are among the maintasks for Serbian negotiators

2. Introduction Misconceptions and Reality


5. Competitive position in relation to the EU market

6. Competitive position in relation to the global market


3. Trends Liberalisation and Globalisation

Contrary to the traditional belief that it is something slow andsteady, agricultural production of today is quite dynamic and in‐novative. Thus, the changes in agribusiness are quick and frequent,so the only subjects that can remain competitive are those whopossess the knowledge, abilities and capacities to understandmarket changes, both locally and globally, are able to identify themain trends and to accordingly adopt and implement correspondingstrategies. This equally refers to the Ministry and to the producers.

The World: Stabilisation The increase in the prices of food, which in 2008, but also in

2011, led them to their historic maximum, had one key consequence.The production became highly profitable, which attracted the at‐tention of investors. Subsequently, the competition increased andthe prices accordingly became lower, though never on par with itspre‐crisis level. It is expected that the prices will remain relativelyhigh and stable in the future. The key lesson which may be drawnfrom this situation is: everyone, wherever he/she may live andwork, will be able to sell his/her product somewhere else in theworld. The only condition would be for such producer to be com‐petitive, i.e., to have competitive prices, or – and this may prove tobe crucial – that his/her product possesses additional quality, orsome specific characteristic that other producer’s goods lack. Ofcourse, the precondition is that the consumers are willing to payfor such product. Fortunately, consumers all around the world areever so able and willing to honour the higher prices of thoseoffering them some special pleasure.

Serbia: A Small Agricultural Revolution In Serbia, especially in Vojvodina, in the previous decade or so,

a small and quiet agrarian revolution took place. Almost everyvillage in Vojvodina now has a few dozen agricultural producerscultivating dozens, or even hundreds of hectares each. Those pro‐

ducers realised in which way the market operated and theyrefused to wait for the state to solve their problems, or createideal conditions for work and development. They rather undertookthe risk and invested the money at their disposal (either earned,or loaned) in land – either renting it, or buying it.

These producers became holders of Serbian agrarian devel‐opment, by applying the latest technical and technological im‐provements, thus increasing the quality and yield, and accordinglypositioning themselves as major exporters.

The four main factors influenced this change. First, the borderswere opened, which allowed access to foreign inputs, technologiesand machinery; second, credit market began to develop; third, thestate owned land became available on the market and everyonewas able to obtain it through fair procedures; and fourth, the highprices of grains and oilseeds which did not initiate, but didaccelerate the process of enlargement. The general impression isthat few transition countries (or even, no other country) had sucha speedy land market development and land enlargement basedon family farms, as was the case with Serbia.

In this context, it needs to be specially emphasised that, inspite of the many clashing opinions, the structure of family farmsin Serbia, i.e. fragmentation of land ownership, is not a limitingfactor in the development of Serbian agriculture. The structure ofSerbian farms is similar to that of Poland, the country which suc‐cessfully transformed its agriculture and achieved the best resultsamong the new EU members.


7. Ranking of products

The ranking in relation to production indicators (x‐axis) and export indicators (y‐axis).


4. General Competitive Advantages of Serbia Farmers as the Best Investors

As it has already been mentioned, competitiveness, especiallyin agriculture, is not easily measurable and is prone to changes.There are many factors influencing competitiveness, while oftenonly minor change in only one of them may contribute to adrastic change in general competitiveness. These factors may betied to the very agricultural production, but can also be related toa wider economic or even social context. In this wider sense, thecompetitive advantages of Serbia are the following:

Producers The greatest assets of Serbia are its farmers. Namely, in the

last fifteen years, a quite wide class of successful agriculturalproducers was born. This was primarily a result of their efforts andpersistence, but also due to agricultural policy, i.e. putting state‐owned and socially‐owned land on the market (buying andrenting). Today, these are major farmers who follow global trends,use state of the art machines and technologies, are orientedtowards international markets and tend to specialise their production.Finally, and the most importantly, they are also our biggestinvestors.

For all these reasons, our agricultural producers could betrusted and worthy partners to the biggest international companies.This is especially important, as the experiences, especially in thenew EU member countries, for example Poland, evidenced thatthe countries who had the fastest development were in fact thosewho had good farmers, i.e. those countries favoured by theinvestors due to the possibility of organising market chains.

Regional specialisation Professionalization of farmers resulted in their increased

concern for the efficiency of their production, i.e. profit – whichleads towards specialisation in cultivating the crops for the

production of which the conditions are the most favourable. Thisleads to specialisation of regions, where different areas becomerecognised for their production of certain goods: sour cherry fromOblačina, paprika from Leskovac, raspberry from Arilje, grapesfrom Topola, peach fom Grocka, sunflower from Banat, cabbagefrom Futog, to name just some of the products and their corre‐sponding regions.

This leads to yet another potential opportunity which has notbeen exploited enough, or actually not at all, by Serbia so far – de‐velopment of products with geographical indications. Today, theconsumers in Europe, but also in our immediate neighbourhood,wish to know what they eat or drink, i.e. where the products theyconsume come from. Serbia is generally recognised as a countrywith good food, but this still needs to be valorised on foreignmarkets.

Free Market There is still arable land in Serbia which has not been given to

producers. In the majority of European countries, Holland forexample, there is practically no land on the market. In Serbia,however, there is some 800 thousand hectares of the state‐owned land which would become available on the market sooneror later. Be that as it may, the half of this land is covered bypastures and meadows which are not highly attractive at themoment. However, providing that food will be increasingly soughtafter, it would not be long before even this land become precious.What is more important, the state owns some 400 thousandhectares of arable land, mainly in Vojvodina, which means thatthis is the land of superior quality. This land would soon appearon the market, either directly (being sold by the state in thesecond round of privatisation), or indirectly (being sold by itsnew/old owners, to whom it was returned through the process of


Ratings, unlike ranks, are enabling precise positioning on the

competitiveness map by assigning the value on a predefined scale,

taking into account the ranking position for each of the proposed

indicators, but avoiding ideal distribution as in the case of ranks. So,

products are evaluated on a scale from 1 to 10 depending on the

competitive position of the product for each indicator. The average

score for the production (x‐axis), and the export indicators (y‐axis)

respectively, represents the position of a product on the competi‐

tiveness map.

8. Competitiveness scoring


restitution). Furthermore, the farms owned by elderly persons stillpossess the land which would be available for sale in a foreseeablefuture. Accordingly, all serious investors, both national and inter‐national, may count on the fact that in Serbia they would be ableto find the basic resource for agricultural production – land.

Trade Agreements Serbia has agreements on free trade with the countries of our

region (the CEFTA agreement), as well as with Russia, the largestimporter of food. Serbia also received a special status by the USA,meaning that it is able to export there under favourable conditions.Of course, Serbia also has possibility to export its agriculturalproducts to the EU, tax‐free. The export within the region and tothe EU makes 70% of the market for Serbian food products. Apartfrom these favourable export conditions, Serbian market, providingthat the country is still not an STO member, is protected fromimport by different customs and non‐customs related barriers. Inthis way, Serbian agriculture and all its actors would still bespared, at least for some time, from their biggest competitors.

European Union Serbia’s future EU membership needs to be emphasised as an

especially attractive fact when it comes to the country’s strategicpositioning and investments. Once a country becomes EU member,it gains access to all potential benefits, primarily, the access to themarket of half a billion people. Additionally, one of the advantagesof belonging to the EU is their big agrarian budget providing formany development incentives. Finally, large European marketenables price and production predictability. These increase thestability of the domestic market, which in turn has beneficialimpact on attracting foreign investments.

IPARD Fund For every investor, either big or small, it is important to receive

some kind of support and stimulation. In this sense, IPARD Fundwhich provides half of their investments as grants, i.e. free ofcharge, as a gift, represents highly attractive “lure”. European

companies are accustomed to these funds and they often maketheir investment decisions only when such funds are available. Inthe European Union, practically everything was built with thesupport of these grants. Therefore, Serbia should not miss the op‐portunity to utilise IPARD Fund to the maximum and thus securenecessary investments in agriculture and rural development.

Quality Serbia has high quality agricultural products. What is even

more important, Serbia also has space to majorly increase theproduction of superior quality goods.

Organic production can also become one of Serbian trademarks.This is not that simple, as is often thought in Serbia, but thecompanies who have their market (primarily in the EU), and alsohave both financial resources and knowledge to organise thisprocess, can find here the resources required to fulfil all their plans– both when it comes to land, and other necessary resources.

The Danube Serbia is becoming more and more significant producer and

exporter of cereals. Having this in mind, the Danube as thecheapest route for transferring goods to Constanta on the BlackSea, may prove to be highly significant when it comes to attractinginvestors in cereal production. Furthermore, free and industrialzones may be constructed on the banks of the Danube, toincrease processing capacities and thus widen production range.

Domestic Market Serbian market, with its seven million people, is not small and

is simultaneously quite underdeveloped. Thereby, there is spaceon this market for many new products to appear. Serbianconsumers in general are not so poor that they would not be ableto handle a wider product range (which does not have to includesome exclusive or expensive goods, anyway). What is more, it hasbeen proven in practice that high quality products, even whenthey are (relatively) expensive, find their way to consumers withoutany problems.


9. Ranking of groups of products

A ranking value of a group of products is obtained in the same way as in case of individual products, but in the way that the actual values

for each of suggested indicators represents the average value of the products’ values that make up the group, for a given indicator.

10. Competitiveness scores of groups of products

Scoring for a group of products is performed based on the ranking of the same group, according to the principle described with

reference to a graph 8.


Serbia is the most competitive when it comes to fruit production,mainly of red fruit: raspberries, strawberries, sour cherries. Thecountry is relatively competitive when it comes to the productionof cereals, especially corn, but also wheat, as well as industrialcrops: sugar beet, soy and sunflower.

Serbia is the largest producer of agricultural and food productsin the region, but is however not that significant on the European,let alone world market. In the CEFTA region, Serbia provides for ahalf or even more of the regional production of the two thirds ofdifferent products. Its strongest field is the production of fruit,where 80% of raspberries, apricots and pears, and more than 60%of plums, sour cherries and strawberries are produced in Serbia.Serbia also provides for more than the half of the regionalproduction of corn, barley, sugar beet, pork, chicken meat…

When observing the structure of the regional export, Serbianshare is the largest in fruit and industrial crops. When it comes toindividual products, the first place is held by raspberry (more than90%), with vegetable “leader” carrot in the close second (nearly90%), and sheep at the third place (85%). The participation ofSerbia is quite high in the export of strawberries, sour cherries,corn, sugar beet and cows.

In the European context, fruit is undisputedly first, whereSerbia produces almost 35% of European plum and some 30% ofraspberry and sour cherry. Only other crop with similar representationis soybean (30%), as the next one on the list are beans, with 15%share in the total European production. However, corn and water‐melon need to be emphasised here, as Serbia produces morethan 10% of the total European production of these.

When it comes to participation in European export, the first israspberry (almost 30%), followed by sour cherry (15%), plum (10%‐ which is surprisingly low, providing that Serbia is Europeanleader in plum production) and corn (10%). Additionally, we needto mention sugar beet in the fifth place, with participation of 7‐8%.

On the global level, participation of Serbian agriculture is un‐derstandably negligible. Even Serbian “undisputed leader”, raspberryholds only 6% of the global production; it is followed by sourcherry (almost 5%) and plum (around 2.5%). Obviously, when itcomes to global agricultural production, Serbia is visible only infruit production.

The situation is somewhat better when Serbian participationin the global food products’ export is considered. Serbian raspberryholds some 13% of the global export; sour cherry holds 8%, sugarbeet 5% and plum 3%. The corn exported from Serbia holdsalmost 2% of the global market, similarly to sunflower. Hence thetitle of this section is justified.

5. Sectoral Competitiveness of Serbia Gold: Red and Yellow


11. Share of Serbian production at different markets 2009-2014

12. Share of Serbian export in total export at selected markets 2010-2015

Share represents a percentage of Serbian export in total agricultural export of each of the analyzed regions. When it comes the share in

the EU, the assumption was that Serbia is part of the European Union.


Single Agriculture – Different Approaches On the global level Serbia is the most competitive in fruit pro‐

duction: mostly raspberry, followed by cherry, sour cherry, plumand quince. Other competitive products are corn and industrialcrops – sunflower and sugar beet. Serbia is the least competitiveglobally in the field of poultry production. The situation gets pro‐gressively better if we concentrate on our region and Europe (inEurope, Serbian share is higher than on the global level), but eventhere poultry production is in the last third of the list.

In the European Union, fruit is also Serbian most competitiveproduct, but industrial crops are also highly competitive – sugarbeet is right behind raspberry and sour cherry. Furthermore,sunflower and soybean are also ranked high, even though soybeanis among the lowest ranked products globally. Interestingly, veg‐etables are more competitive than a few years earlier: beans,cabbage and paprika now have good ranking on the Europeanlevel.

Serbia is the biggest producer of food in the CEFTA region,

has the greatest production resources, as well as the biggestmarket. Serbia dominates most of the production fields, providingfor more than a half of the total production of the most ofindustrial crops and fruit varieties. When it comes to cereals, cornholds the largest share, while barley holds the smallest. Vegetablesare the least represented, both those easily perishable and thosethat are not. On the regional level, Serbia is the most competitivewhen it comes to the production of fruit. However, regionally,apricot is the leader (over raspberry and strawberry). These typesof fruit are closely followed by sugar beet, which holds similar po‐sitions in the global and European ranking, while carrot took thefifth place from corn. Interestingly, except for carrot, Serbian veg‐etable production is not particularly competitive regionally. Finally,we need to emphasise good competitiveness of soybean (entirelyuncompetitive globally), which is a recent development.


13. Production and export growth trend 2009-2015

Growth trend represents a line index of production and exports growth in the reporting period, that is average annual growth in the

five‐year period. Growthi in relation to the World indicating if Serbian growth is faster or slower than the World average growth for the

given product.


6. Competitiveness of Groups of Products Fruit then Everything Else

Serbia is competitive when it comes to the production ofcereals, where excellent production and export results are achieved.Serbia exports cereals to different markets and does not need toworry about its competitiveness in this field. An increase of theprices of cereals secured more serious approach to the production,which resulted in increased yield, as well as more profit which wasprimarily invested in obtaining arable land.

The period of high prices and preferences (sugar – export tothe EU and high customs protection; soybean – prohibition ofimport; sunflower seed oil – Bosnian export to Turkey) influencedpositively the production of industrial crops. However, there havenot been sufficient investments to create a sustainable sectorwithout privileges, and this sector is now faced with major challenges:sugar – liberalisation of the EU sector and increased yield per

hectare; soybean – increase in cultivated area in the region;sunflower seed oil – definition of the strategic position and im‐provement of competitiveness of the food processing industry.

Even though Serbia has favourable climate, trade position andagreements, capable farmers, access to high quality inputs andother advantages, it still fails to capitalise on these competitive ad‐vantages in vegetable production. Up until few recent years, whenintense growth has begun, no significant results were achieved inthe production and export of vegetables. Favourable trends needto be affirmed by increasing the scope of both production andexport. Potential is certainly there. This is why we say that this pro‐duction is at its turning point.

Fruit is currently the most competitive group of products. Theproduction has been modernised in recent years, stimulated by


14. Growth and share of Serbia in the CEFTA market 2009-2015

Share represents the participation of Serbia in the production and export in relation to CEFTA, and the global market. Growth trend is the

average annual growth for Serbia. Growth in relation to the World represents the average growth trend in relation to the global average.

15. Growth and level of participation of Serbia in the global market 2009-2015


the potential of exporting fresh fruit to Russian market, and frozenfruit to European market. However, fruit production is to facemany a challenge, as the production and export trends (of sourcherry) are negative, indicating that there is an increase incompetition. Serbia has a chance to be a major producer andexporter of fruit, providing that structural changes are continuedand the production is modernised, investments are increased, es‐pecially in research and preparation of the products for selling. Ad‐ditionally a consensus needs to be reached between the producersand processing facilities to share both the risk and profit inherentin this production, while the market has to be diversified.

Serbia has decided to protect its primary meat production withhigh import tariffs, which indeed protected the production, butalso decreased its competitiveness. Be that as it may, the rate ofproduction is constantly falling, as the CEFTA market is beinggradually lost and domestic consumption is also decreasing. Tradein both directions is exceptionally low, inhibited by inability toexport on the EU market, as well as by the tariffs which becomemore and more ineffective when it comes to preventing import.There have been attempts to solve this problem through agrarianpolicy measures, namely high subsidies to support the sector, butthis did not yield the desired results.

Meat processing sector has to fight the competition from theCEFTA and EU countries, where raw materials are cheaper. Theyfind it increasingly difficult to keep their market share in such cir‐cumstances, both in the domestic and CEFTA markets. It has been

attempted to overcome these problems through export, primarilyon the Russian market. However, the industry is too weak andfragmented to cope with the domestic market, let alone to conquersome new ones.

Milk production sector is not competitive even in the

CEFTA market, and it is yet to face the EU competition. This is asector with no increase in the production; Serbia is still on the levelof EU acceptable milk, just like ten years ago; there have been nonew farms for years, while the existing milk farms are being closedfast; unlike constant and significant export surplus of earlier years,since 2012 Serbia has been in constant deficit. What is encouragingis the increase in the export of cheese, especially on the Russianmarket (which made 71% of the export market in 2016). However,even there, slowing down and decrease of export have beenevident in the previous two years.

Food processing sector is the greatest failure and still thegreatest potential of Serbian agriculture. Whether this is processingfor the price competitive brands, or small, quality oriented processingfacilities – chances for success do exist, not only due to mostly com‐petitive raw materials, but also because of the significant potentialinherent in the CEFTA market and the agreements signed by Serbia.Be that as it may, the obstacles which have prevented major invest‐ments thus far need to be removed. The most important of theseobstacles are: overall business climate in Serbia, high customsprotection tariffs for certain products, unfinished reform of institutionsin agriculture and ecology, grey economy in agriculture, etc.


16. Exports of certain types of vegetables

Potato Tomato Onion Cabbage Carot Cucumber Pepper


7. Competitiveness of Individual Products Variety of Stories: the Nice Ones and Others

When it comes to wheat, Serbia is highly competitive in

the CEFTA region, much less in Europe, and even less than thatglobally. The competitiveness of Serbian wheat production hasbeen largely influenced by significant increase of the yields inrecent years (consequence of modern technologies, changed as‐sortment and realisation that investments in wheat productionmake sense), as well as by the increased prices of food. Thesewould enable Serbia to place its wheat without problems, at leastin the immediate neighbourhood.

Serbia is highly competitive in corn production: it holdsthe fourth place on the CEFTA list, seventh on the EU list and sixthplace on the “global list”. This resulted in corn making the secondplace on the list showing consolidated competitiveness for theworld, EU and CEFTA region. Favourable trends in recent yearsand large shares in production influenced the good position.However, when it comes to corn, the question is whether the CIScountries’ producers who have experienced significant increase ofproduction in recent years (a trend bound to continue in thefuture) may become more competitive then Serbian producers,thus causing Serbia to cease exporting corn. The chances for thisare small, since Serbian producers have three important advantages:

they possess price efficient logistic capacities; they have the op‐portunity to sell their corn both in CEFTA and EU market; and,finally, their yield is considerably higher.

The competence of sugar beet producers and sugar

refineries has been increased which guarantees that Serbia shallbecome a significant sugar producer, once it joins the EU. Thereare a few challenges lying before the creators of economic policyand producers: 1) to keep domestic prices low after eliminatingcompetition and consolidation of the sector; 2) to increase com‐petitiveness which would enable Serbia to stay on the list ofsignificant producers in pre‐accession and post‐accession period;3) to secure sufficient profit and production in the period oflowering prices as a consequence of the reform in the EU sugarproduction sector and 4) to negotiate joining the STO so that do‐mestic production is preserved and the entire sector becomesmore competitive.

Paprika may become new Serbian trademark and a signif‐

icant export commodity. While domestic consumption andhome processing were the main impetus for the growth in thepast, in the future export needs to play this role. This requires ad‐ditional orientation towards quality. Furthermore, systemic and


17. Raspberry production growth in relation to the average world growth and share in the world production for the period 2009 - 2014

Serbian raspberry production represents 14% of the global production and the annual production in the reporting period grows 10% slower than

the world average


systematic initiatives in the promotion, designations of qualityand processing of paprika, would aid competitiveness and export.State support to the promotion, guarantees and preservation ofquality, would all accelerate the process of conquering newmarkets.

Serbia is not highly competitive when it comes to the pro‐

duction of tomato. The problem lies in the fact that 80% of thisproduction is on the open fields, i.e. gardens. In other words, asmall number of the producers opt for greenhouse production.There is a couple of reasons for this: (1) low product price duringthe open field season (there have been efforts lately to securenew export markets for this period, and building of new greenhouseswould largely depend on this) and (2) competition in the regionwhere the heating costs are low. This is why winter harvestpractically does not exist in Serbia, the first products are on themarket in March at the earliest, when the tomato from Macedoniaand Albania is already available (this tomato is more competitivein price, though not in quality). Be that as it may, export of tomatoon the Russian and EU markets may prove to be profitable, yetonly if quality competitiveness is achieved in the period of lowprices.

Even though it is not quite competitive when it comes to

the production of potato, Serbia became net exporter of this

product. This is primarily the consequence of decreased importand stabilisation of export. The main reason for the import decreaseis professionalization of the production and erection of high quality

storage facilities, which enabled long and high quality storing untilspringtime, when Serbia used to import the largest quantities ofpotato. In the periods when it was price competent, Serbia did notexport potato, and in the meanwhile the prices have been constantlyrising. An average price in 2005 was 10.18 RSD/kg, while in 2016 itamounted to 32.24 RSD/kg. Obviously, the price in dinars tripled,while the price in euros is more than double. However, in recentyears, the producers have become increasingly professional andthe production has increased with higher yield, decreased importand entering new foreign markets. All these should secure asignificant scope of export in the following years.

Carrot is the new breakout product of Serbia. In recentyears, the export of carrot has significantly increased to differentmarkets. What is even more important, perspective is good, as theproducers are in position to considerably improve both their pro‐duction and export. To support this claim is the fact that a consid‐erable number of superior class producers have occurred, theypossess rich knowledge pertaining to the production, storing andplacement of their product, and they are primarily export oriented.In order for these positive trends to be kept and improved,particular attention needs to be paid to the investments intostorage facilities (with medium size producers) and consolidationof the supply (with big and medium size producers) through as‐sociation and organisation into a market chain.

Serbian production of sunflower seed is competitive, dueto the high yields, especially in the areas inadequate for other


18. Top 10 importers to Russia for the period 2010-2013 19. Top 10 importers to Russia for the period 2015-2016

20. The monthly price of pork carcasses at EU, Serbian and Croatian markets

Source: STPS, TISUP, EU


types of production. Together with soybean, sunflower is the cropwhere Serbia achieves high yields, better than the competition.Additionally, it is predominantly grown in Banat where precipitationis the lowest, so the conditions for other crops and vegetables arenot good, which makes this production even more significant.However, processing does not keep the pace with the productionand slows down the development of the sector. This industryneeds to find its competitive position and make efforts to processas much sunflower seed as possible in Serbia.

The CEFTA region becomes a major producer of cucum‐

bers/gherkins for European market. In Serbia, the trends arereally good, but the amounts produced are still small, as organisationof this market chain is not simple, either when it comes toproduction or logistics. However, there is a great number of pre‐conditions for this positive trend to continue and for the export toincrease from its current level of 5 million USD to a few dozenmillion USD.

The production of onion fully corresponds to the good

trends present with the majority of other vegetables: more export,less import, growth of the production, greater increase in yield thanin surface area. What negatively influence competitiveness are big

oscillations in prices. Even though onion is located in the lower halfof the competitiveness list, there would be some producers whowould find it easy to place their goods in the foreign markets.

Sour cherry is currently the most competitive agricultural

product in Serbia, even though the production and export

trends have been bad in recent years. Sour cherry from Oblačinawas the innovation which secured a position on the Europeanmarket of frozen sour cherry for Serbia. Since 2014, the relationson this market have changed, as the producers from Poland andHungary lost access to the Russian market, which directly influencedcompetition on the EU market, especially in Germany and Austriaas the main export destinations for Serbia, while the price of sourcherry has fallen. Unlike the productions of some other fruitvarieties, where some structural changes took place, the productionof sour cherries saw no change. Thus the chaotic production ledby unclear signals sent by prices and policies, inhibits goodproducers and processors.

Raspberry is still among the most competitive Serbian

agricultural products, while this sector undergoes significant

changes. The production in Serbia stagnates, and when comparedto the global growth, it is 10 percentage points behind. Simulta‐


21. Growth trend of sunflower yields


neously, Serbian main competition in the EU market, Poland,grows faster than the global average. Serbia is still the biggest ex‐porter of the frozen raspberry, and in 2015, it achieved the recordexport of 309 million USD. When it comes to the very production,after 40 years, there are finally some innovations in the sector, andthese are going to save it most probably. The technology ofgrowing raspberries has finally broke the mould – a few dozenhectares of greenhouses for growing raspberries were erected tocater to fresh fruit market, while Vojvodina already has centres inwhich primocane varieties are grown. The competitiveness ismostly endangered by state interventions. Namely, instead ofregulating the relationship between the producers and coldstorage facilities, the state should dedicate itself to regulatingphytosanitary and food safety issues, providing support to researchand innovative solutions and supporting investments in the pro‐duction and processing.

The production of plum in Serbia is in transition from ex‐

tensive to intensive and there are high chances for the com‐

petitiveness to be increased. The production of plum and frozenplum has the growing trend and this is valorised through theexport of fresh fruit to Russia, and frozen fruit to the EU – predom‐inantly Germany. Frozen plum accompanies frozen raspberry andsour cherry in cold storage facilities, so the value chain of frozenplum needs to be perceived in the context of diversification of pro‐duction in cold storage facilities, and as being attached to thevalue chains of raspberry, sour cherry and strawberry. These trendsare also positive with regards to justification of investments into

processing and storing capacities. From the producers’ perspective,even though it results in lower profit when compared to othertypes of fruit, plum enables the adjustment of one’s decisionpertaining to its selling, depending on each year’s prices, as well asthe choice whether it will be sold fresh, frozen, dried, or as brandy.

The production of cherry undergoes major changes and

modernisation which will significantly increase its competi‐

tiveness. This production saw the biggest changes among all fruitproductions, ranging from the changes in the system of growingand wider assortment, to the occurrence of new producers in thissector. Good prices on the domestic market and export to Russiaserved as impetus for these changes, where cherry producersbenefited from the gap on the Russian market which occurredafter the economic sanctions had been imposed for the EUproducts. There is a possibility of exporting to other markets,including CEFTA, EU and UEA, but this assumes the introductionof standards, packing of the cherries of an uniform quality, colourand size, as well as organising the logistics.

The export growth stimulated the production of strawberry.

The trend of export for fresh strawberry is 32 percentage pointsper annum, when compared to the export growth in the world,and is mainly oriented towards the Russian market, while frozenstrawberry is being exported to both the EU and Russia. The pro‐duction of strawberries has been modernised in the last ten yearsthrough introduction of new varieties and technologies of cultivation.However, this production still lags far behind the highly dynamicglobal innovations in strawberry production and trade. Only in


22. Growth trend of onion production

Production Surface


Europe, public and private fruit breeding stations report to theCPVO more than 100 new varieties of strawberries each year.From open field production and planting in August, the productionof strawberry has evolved into a dozen different productionmodels, with corresponding seedlings, period of planting and va‐rieties.

In the last ten years, the production of apple has become

one of the most attractive agricultural sectors when it comes

to investments. The export to Russia stimulated new investments,changes, progress and increase of the production. The increasedand modernised production took advantage of a new circumstance– the prohibition of export from the EU to Russia – and occupieda portion of the market formerly taken by the EU countries. In2004 the surplus in apple export first occurred, while in 2016almost 200,000 tons of apples were exported, the value of thisexport being 140 million USD. Apple production is more competitivethan 10 years ago, yet 84% of the export is directed to the Russianmarket under preferential conditions and with no major competition.Therefore the placement of this increased production output ishighly uncertain, in case no new placement channels are opened– while the competition which had already experienced thestressful loss of the Russian market would be a few years in frontof Serbia on other markets.

In recent history, Serbia has not been competitive when it

comes to the production of pork on European and globalmarkets, so it is quite unrealistic for it to become competitive now.There is a number of limiting factors, the most important of which

being: the lack of superior quality genetics with affordable prices, ahigh price of soybean meal when compared to competition, majoroscillations in price caused by the closed market, etc. This does notmean that certain producers are not, or that they would not beable to be competitive on the global market, but due to the failureto fulfil veterinarian and sanitary conditions they are unable toexport to the European Union. Serbia cannot be competitive onthe Russian market either. Russian prohibition of importing meatfrom the EU created an opportunity and sparked the hope thatSerbia would be able to export substantial quantities of meat toRussia. After the initial success, this hope soon proved to beunrealistic, as the Russian market was flooded with great producerswith the prices which were more competitive than Serbian.

The production of beef is the branch in which Central

Serbia has potential to become competitive, primarily due tolarge pasture potentials, but also due to the access to price com‐petitive animal feed from Vojvodina. The structure of theproducers is not a competitive advantage, but it does not need tobe an obstacle to achieving competitiveness. Namely, extensiveproduction which is characteristic for Serbian cattle breeding ishighly competitive, as it does not require major investments, oradditional workforce. Furthermore, racial composition of cattle isgood and may secure growth, i.e. competitiveness of the sector.All in all, Serbia could be price competitive (and also quality com‐petitive when it comes to certain markets and categories of meat)in the production of beef, and could significantly increase theexport thereof.

Chart list1. Production structure for the main groups of agricultural products (2009‐2014) .........................................................................page 42. Export structure for the main groups of agricultural products (2010‐2015)....................................................................................page 43. Competitiveness index .................................................................................................................................................................................................page 64. Competitive position in relation to the CEFTA market.................................................................................................................................page 65. Competitive position in relation to the EU market ........................................................................................................................................page 86. Competitive position in relation to the global market.................................................................................................................................page 87. Ranking of products....................................................................................................................................................................................................page 108. Competitiveness scoring...........................................................................................................................................................................................page 129. Ranking of groups of products .............................................................................................................................................................................page 1410. Competitiveness scores of groups of products .........................................................................................................................................page 1411. Share of Serbian production at different markets 2009‐2014............................................................................................................page 1612. Share of Serbian export in total export at selected markets 2010‐2015 ......................................................................................page 1613. Production and export growth trend 2009‐2015......................................................................................................................................page 1814. Growth and share of Serbia in the CEFTA market 2009‐2015............................................................................................................page 2015. Growth and level of participation of Serbia in the global market 2009‐2015............................................................................page 2016. Exports of certain types of vegetables ...........................................................................................................................................................page 2217. Raspberry production growth in relation to the average world growth and share in the world production

for the period 2009 ‐ 2014 .....................................................................................................................................................................................page 2418. Top 10 importers to Russia for the period 2010‐2013 ...........................................................................................................................page 2619. Top 10 importers to Russia for the period 2015‐2016 ...........................................................................................................................page 2620. The monthly price of pork carcasses at EU, Serbian and Croatian markets ................................................................................page 2621. Growth trend of sunflower yields ......................................................................................................................................................................page 2822. Growth trend of onion production ..................................................................................................................................................................page 30

Table of Contents1. On Competitiveness ........................................................................................................................................................page 52. Introduction ..........................................................................................................................................................................page 73. Trends .......................................................................................................................................................................................page 94. General Competitive Advantages of Serbia .....................................................................................................page 115. Sectoral Competitiveness of Serbia ......................................................................................................................page 156. Competitiveness of Groups of Products ............................................................................................................page 197. Competitiveness of Individual Products ..............................................................................................................page 23



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Think globally, act realistically

To be ahead of others

Misconceptions and Reality

Liberalisation and Globalisation

Farmers as the Best Investors

Gold: Red and Yellow

Single Agriculture – Different Approaches

Fruit then Everything Else

Variety of Stories: the Nice Ones and Others

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