Serbia: Difficulties in the agroeconomy

Average inflation 15.3% in first half of year

In the first half of the year, the average y-o-y growth in consumer prices was 15.3%. Products that had the biggest impact on the growth of total consumer prices included dairy products, vegetables, meat, household electricity, bread & cereals, and solid fuels (firewood), the Statistical Office of Serbia (RZS) published.

Dairy products, vegetables, meat, bread and cereals accounted for 36.6% of the increase in prices. The rise in the prices of dairy products (39.1%) had the biggest impact on the y-o-y growth of total consumer prices in the first half of 2023. The y-o-y increase in the price of vegetables (30.7%) was predominantly determined by the price of onions, potatoes (especially red), peppers, tomatoes and carrots. After the first half of 2023, cabbage is the only vegetable that had a deflationary impact on the total price of vegetables, and that by a full percentage point less.

The increase in the price of meat of 18.4% was mostly influenced by the increase in the prices of pork, beef & chicken meat, bacon, and sausages, accounting for 48.6% in the structure of the annual growth rate of the price of meat in the first half of 2023. The y-o-y increase in the prices of bread & cereals (21.8%) was mostly generated by the increase in the prices of white bread, salty snacks, burek, salty pies, and cakes, accounting for 63.8% in the structure of the overall growth rate of bread and cereals prices in the first half of 2023.

Household electricity & solid fuels (firewood) had a share in the annual growth rate of consumer prices in the first half of 2023 of 13.1%. The y-o-y price growth of the energy group in the first half of 2023 was 13.6%. This growth was mainly generated by the increase in the price of electricity for households and the price of firewood (solid fuels), announced the RZS.

Market share of green markets in decline in last 10 years

Green markets in Serbia have 16% market share in the total turnover and sale of agricultural products. That is a downward trend in the last 10 years and is due to the change in consumer habits and the expansion of large retail chains, stated Serbian Chamber of Commerce (PKS).

Mr. Savo Duvnjak, the Executive Director of the Business Association of Green Markets of Serbia, said that there is an increase in market turnover in 2022 by 21% compared to 2021 but it does not mean much if the increase in prices of agricultural products by more than 30% is taken into account. “We are doing everything to have as many farmers as possible at the green markets, and we will officially launch the initiative to reduce the VAT rate for market services to direct agricultural producers from 20% to 10%, which is symbolic but, in any case, still a stimulus,” announced Duvnjak at the celebration of 20 years of the existence of the Business Association and the Group for Market Activities of the Serbian Chamber of Commerce.

He added that together with the Ministries of Economy and Agriculture, they would try to provide incentives for farmers who sell their primary products in green markets, and especially for those who add value to their primary products, such as traditional food spreads like pepper-based spread ajvar, cheese and cured meat products.

PKS Secretary of the Association for Communal Activities Mr. Dalibor Joknic told reporters that the market is in a delicate position due to changes in the purchasing habits of Serbian citizens and the increasing market share of shops that sell agricultural products.

“We are trying to make the green  market part of the agricultural policy because it is difficult for those who produce fruit and vegetables to compete with large retail chains,” Joknic pointed out. He explained that the lower number of farmers is the reason for the decrease in sales at the green markets, as their average age is 58, as well as alternative ways of selling agricultural products, for example via the Internet.

Belgrade Berry Festival to take place on September 22- 23

The second Berry Festival will be held this weekend in Belgrade, organized by the Serbian Chamber of Commerce (PKS) and the German Agency for International Cooperation (GIZ).

The goals of the festival are to encourage the consumption of berries and highlight the importance of the fruit-growing sub-sector, which has exceptional results even in the years of the greatest crises and disruptions in the market, Mr. Veljko Jovanovic, Adviser to the PKS President told reporters yesterday. “We will gather everyone all stakeholders from production, processing and distribution of berries, for which Serbia is well known in the world,” Jovanovic added.

The first day of the festival will be in the premises of Chamber, where experts in marketing, innovation and production will talk about sustainable production and the market. On the second day, the festival will take place on the plateau at the Belgrade Waterfront. Jovanovic said that the prices of berries -being raspberries, strawberries, blueberries and blackberries - are not the main problem in production. Despite occasional fluctuations, they remain stable in the long term. He pointed out that it is necessary to work on the development of marketing and maintaining quality in order for domestic producers to maintain their position on the global market.

“We are happy that, together with the PKS, we are supporting this very important sector for Serbian agriculture through education and promotional activities, of which the upcoming festival is the highlight,” said GIZ representative Mrs. Zagorka Markovic. She reiterated that according to statistical data from 2021, 31.8% of the total export value of frozen organic berries was exported to Germany, worth €18.25 million. Berries occupy about 40.000 hectares in Serbia.

Serbia has more than five million tons of surplus grain, transport hindering export

Serbia will have a surplus of around 2.5 million tons this year after the corn harvest, the same amount of wheat, and around 100.000 tons of sunflowers. Export is now significantly hampered by logistical problems, lack of means of transport and high costs, explained the Director of the Serbian Grain Association, Mrs. Suncica Savovic.

She clarified for Beta news agency that the domestic market shares the fate of the regional and world market of grains and oilseeds, which is experiencing an of products from Ukraine and some other countries, resulting in tight competition and lower prices. “Serbia has large stocks from last year: 1.2 million tons of wheat, 350.000 tons of corn of the worst quality and 55.000 tons of sunflowers,” said Savovic. She added that from March to April last year, exports were prohibited, and after that, until the end of July, exports were hampered by the introduced quotas, which irrevocably reduced liquidity in the Serbian grain sector. The consequences of that, as she said, are felt by everyone in the chain, from producers to exporters. Savovic added that the warehouses are overloaded with surplus goods and that, after the corn harvest, it will be necessary to start selling some of the cereals and oilseeds in order to relieve them.

Wheat, even when a market is found, cannot be exported, according to Savovic, due to logistical obstacles, transportation and its high prices, or the lack of financial means of exporters to rent 10-20 barges each to load an overseas ship for Africa or Southeast Asia. As she said, at some point, Serbia will have to do something to improve the infrastructure in order to facilitate the transport of agricultural products across the Danube or to secure investments for the reconstruction of the Belgrade-Bar railway and the acquisition of additional railcars for the transport of bulk cargo, because, through the port of Bar, Serbian exports gained direct access to the sea and access to seagoing ships.

“Better price” campaign started

After the Montenegrin government decided back in March to create an anti-inflationary basket, which includes 25 products and a limit on their prices, the Serbian government used this example to launch the Better Prices - Prices for the People campaign. The Croatian government joined in and agreed with the representatives of retail chains that the prices of certain items would return to the level from the end of last year. Hungary also had had a price cap policy in place for 1.5 years which ended in August.

Serbian Minister of Trade, Mr. Tomislav Momirovic stated for news agency Tanjug that more than 2.500 retail stores across Serbia are involved in the Better Price - Price for the People campaign. He emphasized that the prices have been reduced by 20% to 40%. “This is not a couple of items, and we are not talking about 5% reductions, but reductions of 20% to 40%. This is a real and great support for the citizens, and they will be satisfied with the price decrease of numerous commodities such as: edible sunflower oil, jam, jelly, oil, flour, biscuits, Sirko (a dairy product), Gradistanac beans, frozen peas, cabbage, margarine, sour milk, sausages, pâté, onions, soap, and toothpaste.,” said Momirovic.

Commenting on the allegations that in some stores the items within this campaign were unavailable, the Minister says that it is a matter of technical problems, which are being resolved because the campaign is of a large scale and is carried out in the entire country. “It happened that even by 11 a.m. in the morning, some items were sold out, sometimes it took an hour, sometimes an hour and a half, for those products to arrive again. The demand is really great. Our partners, retail chains and manufacturers made the campaign possible and are always filling the stores. For now, everything is going as planned,” said the Minister. When asked if there could be a big increase in the prices of other items due to this campaign, the Minister said that it was designed carefully and there is no possibility of such a drastic increase in the prices of other products.

“A joint campaign by the government and retail chains was planned out in such a way that no one can, referring to it, raise other prices, try to compensate for it elsewhere. It has been carefully designed, very carefully managed,” said the Minister. Momirovic stated that there are regular talks with trade chains and producers and that communication is excellent.

Government’s measures will lead to shortages

Economist Ljubomir Madzar told portal Vreme that inflation cannot be treated or prevented by the government’s Better Price - Price for the People campaign. “Fiscal and monetary policy measures are being taken. We need to print less money and relieve the business sector in the fiscal sphere, to enable it to function well even at lower prices,” says Madzar. As he says, the government should not interfere in trade flows.

“It is an attack on the market and its laws. This is an example of a measure that should not be taken and that all governments should be wary of. Because it is impossible to impose on the market what the market itself generates through its spontaneous functioning, it only creates a certain imbalance,” said Madzar.

He added that violence against the market is never successful and always brings more harm than good. “I expect that shortages will appear in the foreseeable future as a result of such a violent, administrative reduction. With these prices, the demand is significantly higher than the supply, and this directly leads to shortages. Nothing good can be expected from that, I would say, very unreasonable measure,” says Madzar.