FAO GLOBAL INFORMATION AND EARLY WARNING SYSTEM ON FOOD AND AGRICULTURE
WORLD FOOD PROGRAMME

SPECIAL REPORT

FAO/WFP CROP AND FOOD SUPPLY ASSESSMENT MISSION TO THE FEDERAL REPUBLIC OF YUGOSLAVIA (SERBIA AND MONTENEGRO)

10 August 2000

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1. OVERVIEW

An FAO/WFP Crop and Food Supply Assessment Mission visited the Federal Republic of Yugoslavia (FRY) (excluding the UN Administered Province of Kosovo) between 21 June and 7 July 2000. In view of the adverse agro-meteorological conditions in 1999/2000 which exacerbated the economic difficulties, the aim of the Mission was to conduct a thorough examination of the information about the expected production of wheat, appraise first-hand the standing foodcrops, forecast the 2000 harvest and assess the current and prospective food supply situation at the national level. Throughout its work, the Mission received assistance from the government, the Economics Institute, the Yugoslav Chamber of Commerce and Industry, the International Rescue Committee, and all UN agencies present. During its stay, the Mission made field visits to the Vojvodina, (Pancevo, Novi Sad, Stara Pazova, Zrenjanin, Kikinda, Kovacica, Konak, Mokrin, Jasatomic, Sid), and Central Serbia (Kraljevo valley, Kragujevac, Cuprija, Nis, Pirot, Zajecar, Vranje, Leskovac), visiting 40 out of the 160 municipalities in Serbia. These visits enabled the Mission to observe fields and talk with large and small scale farmers in different geographical, economic and organizational settings. Information on the harvest outlook in Montenegro, where cereal production is not significant, was obtained from in-country project staff.

The agricultural sector in the country has been generally in decline since the early 1990's, but the 1999/2000 cropping year was particularly difficult. Man-made and natural disasters, (sanctions, bomb damage, floods, water logging and drought), shortages of inputs, particularly fertilizer, but also fuel, and low prices have combined to reduce average yields. The yields of winter and spring cereals as well as fodder and industrial crops are expected to be lower than in 1999.

The Mission estimates that the wheat area for harvest in Serbia and Montenegro for 2000 has fallen to 581 000 hectares, from 619 000 in 1999 and 800 000 in 1991. The Mission estimates the 2000 wheat harvest at between 1.66 million tonnes (low scenario) to 1.8 million tonnes (best case). The lower forecast is based on the Mission's estimate of the harvested area, at 34 percent below the 10 year average and 82 percent of the 1999 harvest. The best case scenario is based on the official estimate of the area for harvest, 650 000 hectares and has output 27 percent below average and 10 percent less than in 1999.

The yield potential of spring crops such as maize, sugar beet and soya has also been affected by the high temperatures and water shortages since April and production is expected to be less than in 1999. However, the outcome will depend crucially on rainfall in July/August. Output of fodder crops is sharply less and reduced availability of animal feed could lead to further sharp reductions in animal numbers.

Domestic food availability is also determined by the volumes of agri-food exports necessary to secure essential import requirements, particularly oil, gas and medicines. The country needs to import 70 percent of its fuel requirements and traditionally has financed them by industrial and agricultural exports. With falling GDP, industry in ruins, and the share of agriculture in GDP increasing, agri-food exports accounted for 22 percent of exports by value in 1999. Exports of agricultural products, including maize and a small amount of wheat are continuing this year but were below target up to May. Targets for 2001 will be drawn up once the harvests have been completed.

The government regulates the domestic market for basic foodstuffs, particularly that of wheat and flour, and sets subsidised controlled prices for bread, milk, sugar, vegetable oil and fresh meat. The state regulated prices are low and did not cover the cost of production of wheat in 1999 when input prices soared because of severe shortages.

The outlook for the coming year is for food supply to tighten considerably and prices to rise further, jeopardising the food security of the low-income population. The availability of food at the low controlled prices, already inadequate, is decreasing while an increasing amount of food is being channelled to the more loosely regulated, higher priced market. At the same time, real salaries and wages are decreasing. Food already accounts for a significant proportion of the household budgets of the population with low incomes.

WFP is currently targeting about 700 000 refugees and socially vulnerable people. In addition the ICRC assists 200 000 IDPs with an individual food ration and 100 000 beneficiaries (social cases) through a hot meal under their soup kitchen programme.

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2. AGRICULTURE IN THE ECONOMY

The conflicts since 1991, the loss of markets in the Former Socialist Republic of Yugoslavia, international sanctions and damage to vital infrastructure and industry during the air strikes in 1999 have compounded the problems of an economy in transition. This has led to increased government regulation, particularly of the exchange rate and of pricing and trade in agricultural products.1 Agricultural commodities are considered strategic commodities in that they are used to achieve government's priorities. Two of the chief priorities are to maintain a supply of low-priced essential foodstuffs, thereby keeping inflation down, and to secure enough energy supplies to keep the economy functioning and provide heating.

GDP in 1999 was less than half that in the late eighties. Reflecting sharp decay of the industrial sector, the share of agriculture in GDP has doubled to 20 percent since 1991 and the share of agricultural products in total exports by value has risen from about 13 percent in 1991 to 22 percent in 1999. The agriculture sector has been more resilient in the wake of the general economic deterioration, but crop yields have fallen significantly since 1991 reducing exportable surpluses. Investment in agriculture, which still employs about 17 percent of the population, has been very limited in the past decade. The real budget for the agriculture sector has contracted sharply. Rural to urban migration has been marked and the active rural population is old.

About 85 percent of the cropped land (3.7 million hectares) is privately owned and the balance cultivated by the state sector. Private farms tend to be small and fragmented, and many are part-time operated. The bulk of output is used for household consumption and any surplus sold on the local agricultural market or to the state sector. Households not associated with state agricultural enterprises or cooperatives generally have to pay cash for any inputs obtained from the state (mainly fuel and fertilizer). This severely limits their input use and results in lower yields than in the state sector.

By contrast, farms in the socialized sector - Agricultural Enterprises and Cooperatives - generally farm large areas, are highly mechanized and tend to be concentrated in the more fertile and flat north (the Vojvodina). They account for a disproportionate amount of marketed production. Indications are that these farms have better access to inputs provided by the State, which are often paid in kind. Privatization (into joint stock companies and other forms of corporate ownership or farmer led/responsive cooperatives) of the socialized sector enterprises and the large processing industries was interrupted by the social and economic disruption as of 1991 and the process is largely incomplete, allowing considerable government influence over production and marketing.

Hyperinflation in 1993 and inflation at rates between 90 and 18 percent have left most enterprises, cooperatives and households with little working capital and savings. Under these conditions, access to established marketing channels for both input and output are important and limit farmers' ability to move to alternative crops even if producer prices for some commodities are kept artificially low.

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3. WHEAT PRODUCTION IN 2000

3.1 Factors Affecting Wheat Production

The wheat harvest was primarily affected by poor weather, input shortages particularly of fertilizer and fuel, which reduced the timeliness and quality of land preparation.

3.1.1 Weather

Autumn planting conditions were favourable. Relatively wet weather provided good moisture reserves and the late frosts provided a window of opportunity for late planting. This was important in view of delays in harvesting the bumper 1999 maize crop and disruptions in input supply.

Rainfall was exceptionally heavy in November and December, with 170 mm of rain compared to a normal rainfall of 70 in the Vojvodina. Heavy rains and floods in neighbouring countries contributed to the overflowing of the Tisa-Danube-Tamis rivers. This was followed by water logging in early spring 2000, mainly due to inadequate budget allocations to maintain the drainage system and the lack of fuel and spare parts for the pumps. Excessive moisture adversely affected winter and spring cereal production. A total of 500 000 of the 1.78 million hectares of arable land in Vojvodina were affected, particularly the area bordering Romania, stretching from Kikinda to Kovin Municipalities.

Since April, the country has experienced exceptionally hot and dry weather with only 62.5 mm of rain in the period April to June, compared to an average of 190 mm in the past decade (Figures 1 and 2). High temperatures - at least 3 degrees above normal throughout the period - exacerbated moisture stress. The harvest began 15-20 days earlier than usual.

Figure 1: Rainfall in East Vojvodina Region

Figure 2: Rainfall in East-Central Serbia

3.1.2 Fertilizer Use

The use of fertilizer has fallen sharply over the past 10 years due to economic sanctions, which limited the domestic production capacity as well as shortages of working capital. In addition, the major plant - Pancevo HIP - Azotara - was severely damaged in April 1999. The nitrogen production line restarted only in February 2000 (too late for systematic spring top-dressing) and the complex fertilizer (NPK) production line is not expected to restart before August 2000. However, the limiting factor remains the availability of imported raw materials. Imports are reduced and sometimes suspended due to debts accumulated, and the factories are unlikely to work at full capacity.

Consequently, the availability of fertilizer prior to planting was reduced to a minimum and complex fertilizer was used mainly by co-operatives and state enterprises which had preferential access and had on-farm stocks. Limited imports from neighbouring countries were available but prices were higher than usual and had to be paid in DM2. Many farmers used only organic manure. Only one-third of nitrogen top dressing fertiliser needs were covered this spring. The minority of farmers who top-dressed their wheat had to buy fertilizer from private enterprises.3 Again, Nitrogen was spread mainly by co-operative and state enterprises in one application up to a total amount rarely exceeding 100 kg per hectare. Imported fertilizer tends to be of poor quality and is delivered without appropriate quality control certificates.

3.1.3 Machinery and Fuel Availability

Machinery is generally 10 to 20 years old. Most private farmers own small domestically produced tractors, while state enterprises and co-operatives have large domestically produced and imported tractors. Due in part to the greater dependence of imported spare parts, state enterprises and co-operatives experienced delays in planting which continued into mid-December, at least one month beyond the optimum time4. The age of the harvesters, shortages and high prices of spare parts and lack of maintenance, increased the risks of breakdown and slowed the harvest.

An important constraint for both the private and public sector was the reduced access to fuel. It is reported by the Co-operative Union of Serbia, and confirmed by private farmers, that no more than 50 percent of the required fuel for the autumn planting season was available through the subsidised arrangements5. Given the higher prices on the open market, only the better of farmers could prepare their land optimally. The government made a particular effort to mobilise adequate quantities of fuel for combine harvesters this summer and no significant shortages during the harvest period were reported6.

3.1.4 Pesticides/Herbicide

Pest management has declined markedly since 1990 (even more sharply than the use of mineral fertilizers) and prices of agro-chemicals increased sharply over the past year. The high prices of herbicides have seriously constrained their use by the farmers. Weeds pose a more serious problem in Central Serbia than in the Vojvodina, where intensive cultivation reduces proliferation.

3.1 5 Planted and Harvested Areas

Official data indicate that 650 000 hectares had been sown with winter wheat in the autumn of 1999, well short of the 812 000 hectares initially planned. Given the low official wheat prices, which did not cover intensive production costs, late plantings and reduced availability of fuel and fertilizer, the Mission considers that the official figures may be somewhat over-estimated. The Mission estimates the total planted area at 591 000 hectares. As crops are officially reported to have been completely washed out on 10 000 hectares, the harvested area is estimated at 581 000 hectares.

3.1.6 Winter Wheat Yields

Based on comparative NDVI satellite images and information obtained from field visits and interviews with farmers, key agricultural informants and representatives of the Federal, Republic and municipal governments, the mission identified three homogeneous zones of productivity for wheat. Yield potential was found to be higher in Vojvodina (Zone 1) than in the northern part of Central Serbia (Zone 2) while the south-eastern part of Central Serbia (Zone 3) was most affected.

The Vojvodina region is the breadbasket of the Federal Republic of Yugoslavia (FRY) with more than 1.7 millions hectares of arable land, of which 70 percent is dedicated to cereals (including seed production) and the balance is used for industrial, fodder and vegetable crops. Nevertheless, wheat fields are slowly being replaced with more remunerative crops such as soya and sunflower. The districts of Belgrade and Cabac, administratively part of Central Serbia, present some similarities with the Vojvodina in terms of soil quality, potential yields and the preponderant role of state farms and co-operatives.

This area was particularly affected by floods and water logging from November 1999 to April 2000 and some 10 000 hectares of winter wheat are officially estimated to have been completely destroyed.
The main findings of the mission are the following:

Given the above, and based on extensive field observations, the mission forecasts the average yield of winter wheat at 3.8 tonnes/hectare in the public sector (down from 5 tonnes often achieved in recent years) and 3 tonnes/hectare in the private sector (instead of 4 to 4.5t/h). The average yield for the Northern zone is calculated to be 3.16 tonnes/hectare7. Given an area for harvest of 369 000 hectares, wheat production is forecast at 1.165 million tonnes in Zone 1.

The Northern part of Central Serbia is hilly. Farming is characterised by extensive mixed crop production for home consumption and oriented to livestock breeding. Crop production is concentrated in two valleys formed by the Morava River and its fertile alluvial soils give higher yields (3.4 tonnes/hectare in 1998 for wheat and around 5 tonnes/hectare for maize) than in Zone 3.

The restitution of state lands to the private sector in 1990 led to the decline of the co-operative and state enterprises, which no longer play a major role in input provision or technical backstopping. Farmers had to manage as best they could, and this is reflected in their yields. Low market prices of meat have further reduced farm incomes. The main findings of the mission are:

In Zone 2, the mission forecasts the average yield at 2.5 tonnes/hectare instead of the 3.4 tonnes/hectare in 1998. The area sown is estimated at around 119 000 hectares (142 000 hectares in 1998) production is estimated at 297 000 tonnes (497 000 tonnes in 1998).

The south and eastern part of the region is traditionally oriented to cattle breeding, vineyard production (Vranje, Leskovac) and orchards. Nevertheless, cereals are important for animal feed and human consumption. Co-operatives and state enterprises are still active in the vine sector, and to some extend in the sugar beet sector, but their involvement in cereal crop production is marginal. Farmers faced the same difficulties as in the northern part of Central Serbia. The mission observations are:

Based on the above and taking into account the results achieved in the harvested fields, the mission estimated the average yield at 2.1 tonnes/hectare. The harvested area should be around 93 000 hectares (110 500 hectares in 1998) and the production up to 194 000 tonnes (345 000 tonnes in 1998).

The Republic is very mountainous and agriculture is focussed on livestock production and forestry. Average cereal output, which has been less than 20 000 per annum since 1995, includes only 6 000 tonnes of wheat and 12 000 tonnes of maize. All crop production has been affected by hot and dry conditions this spring/summer. Given average yields for wheat of 2.6 tonnes since 1995, and allowing a yield reduction of about 15 percent (as in the neighbouring regions) wheat output is tentatively forecast at 3 200 tonnes.

Table 1. Federal Republic of Yugoslavia (FRY): Winter Wheat Area, Yield and Production

 
1998 Wheat production 1/
Scenario 1 3/
Scenario 2 4/
LOCATION
ZONE 1
1998 wheat
harvested
area (Ha)
1998 yield
(T/Ha)
1998 wheat
prod. (T)
1999 Autumn
wheat
planted area
(Ha)
2000 Summer
wheat
harvested area
(Ha)
2000 yield
estimation
(T/Ha)
2000 wheat
production
Forecast
(T)
1999 Autumn
wheat
planted area
(Ha) 3/
2000 Summer
wheat
harvested area
(Ha)
2000 yield
estimation
(T/Ha)
2000 wheat
production
Forecast (T)
Vojvodina region
366 622
4.17
1 529 806
307 046
297 046
3.16
938 665
338 282
328 282
3.16
1 037 371
Kolubarski district
16 429
3.77
61 889
13 759
13 759
3.16
43 479
15 159
15 159
3.16
47 903
Macvanski district
33 983
3.75
127 587
28 461
28 461
3.16
89 936
31 356
31 356
3.16
99 085
Beograd district
35 162
4.00
140 519
29 448
29 448
3.16
93 056
32 444
32 444
3.16
102 523
Sub total 1
452 196
4.1
1 859 801
378 714
368 714
3.16
1 165 137
41 ,241
407 241
3.16
1 286 882
ZONE 2        
           
Borski district
23 465
3.21
75 427
19 652
19 652
2.5
49 130
21 651
21 651
2.5
54 128
Branicevski district
27 625
3.37
93 144
23 136
23 136
2.5
57 840
25 490
25 490
2.5
63 724
Podunavski district
16 429
3.71
60 874
13 759
13 759
2.5
34 398
15 159
15 159
2.5
37 898
Sumadijski district
23 369
3.52
82 347
19 572
19 572
2.5
48 929
21 563
21 563
2.5
53 906
Pomoravski district
16 399
3.32
54 416
13 734
13 734
2.5
34 335
15 131
15 131
2.5
37 828
Zlatiborski district
4 078
2.84
11 579
3 415
3 415
2.5
8 538
3 763
3 763
2.5
9 407
Moravicki district
10 010
3.29
32 916
8 383
8 383
2.5
20 958
9 236
9 236
2.5
23 091
Raski district
6 672
3.06
20 432
5 588
5 588
2.5
13 970
6 156
6 156
2.5
15 391
Rasinski district
13 662
3.26
44 522
11 442
11 442
2.5
28 605
12 606
12 606
2.5
31 515
Sub total 2
141 709
3.4
475 657
118 681
118 681
2.5
296 703
130 755
130 755
2.5
326 887
ZONE 3                      
Zajecarski district
20 950
3.38
70 864
17 546
17 546
2.1
36 846
19 331
19 331
2.1
40 594
Toplicki district
15 153
2.89
43 832
12 691
12 691
2.1
26 650
13 982
13 982
2.1
29 362
Nisavski district
26 713
3.00
80 139
22 372
22 372
2.1
46 981
24 648
24 648
2.1
51 761
Pirotski district
9 913
2.96
29 316
8 302
8 302
2.1
17 434
9 147
9 147
2.1
19 208
Jablanicki district
23 833
3.28
78 141
19 960
19 960
2.1
41 916
21 991
21 991
2.1
46 180
Pcinjski district
13 945
3.05
42 528
11 679
11 679
2.1
24 526
12 867
12 867
2.1
27 021
Sub total 3
110 507
3.1
344 820
92 550
92 550
2.1
194 354
101 965
101 965
2.1
214 126
Total Serbia
704 412
3.8
2 680 278
589 945
579 945
2.8
1 656 194
649 961
639 961
 
1 827 896
Montenegro 2/
1 680
2.74
4 600
1 458
1 458
2.2
3 207.6
1 458
1 458
2.2
3 207.6
Total Montenegro
1 680
2.74
4 600
1 458
1 458
2.2
3 207.6
1 458
1 458
2.2
3 207.6
General FRY total
706 092
3.8
2 684 878
591 403
581 403
2.85
1 659 402
651 419
641 419
2.85
1 831 103

1
/ Source: Republic Statistical Office - "Municipalities in Republic of Serbia 1998.
2/ Source: Federal Statistical Office.
3/ The district areas are extrapolated from 1998 official figures on the basis of a global planted area of 590 000 hectares.
4/ The district areas are extrapolated from 1998 official figures on the basis of a global planted area of 650 000 hectares (Federal Ministry of Agriculture source).

3.1.7 Forecast of Winter Wheat Output

Scenario 1 in Table 1 is based on the Mission's estimate of 581 000 hectares of wheat for harvest in 2000. The national average yield of winter wheat is forecast at 2.85 tonnes per hectare, and output at 1.66 million tonnes. This would be 34 percent below the 10 year average and 18 percent lower than the 1998/1999 harvest. Scenario 2 is based on the official estimate - 650 000 hectares - of the wheat area for harvest. The Mission's yield estimate of 2.85 tonnes per hectare would result in a 2000 wheat output of 1.83 million tonnes. This would be 27 percent below the 10 year average and 10 percent down from the1999 harvest.

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4. OTHER CROPS

4.1 Maize

The outlook for the 2000 maize harvest remains crucially dependent on rains in July/August. Official indications are that a total of 1320 000 hectares were planted this spring (0.4 percent more than 1999 but 3 percent less than in 1998). A large proportion of land sown to maize was prepared only in spring. Floods and water logging delayed plantings in the eastern part of Vojvodina, and damages were observed in the triangle Kikinda-Zrenjanin-Konak. Elsewhere, maize was planted on time (15 to 25 April) but with reduced or no fertilizer application and no pest management. Consequently, corn borers and weeds became more active this year.

However, weather is the main limiting factor for maize this year. Fields ploughed in the fall and/or seeded before 15 April are experiencing less water stress than those planted after the 15 April. The average density of maize does not exceed 36 700 plants/hectare (compared to a normal of 50 000 plants/hectares), which indicates poor germination due to the lack of water. The Mission anticipates a yield reduction of 25 percent, resulting in 3.15 tonnes/hectare (75 percent of the 10-year average). The production of maize is tentatively forecast at 4.2 million tonnes. However, output could be lower if dry weather prevails in the coming weeks.

4.2 Sugarbeet

Sugarbeet production is directly affected by the economic problems in the agricultural sector. Payment delays by the processing enterprises have resulted in a steady reduction in the area sown by private producers. Only 48 000 hectares were planted this year (59 000 in 1999), mainly in Vojvodina where co-operatives and state sugar factories are still contracting farmers to produce sugarbeet. Yields will be sharply reduced due to drought and lack of inputs. The average yield is expected to fall from 35 - 40 to less than 30 tonnes/hectare.

4.3 Sunflower

Sunflower production has increased slightly in recent years (from 161 018 hectares in 1997 to around 175 000 hectares in 2000) and is concentrated in the Vojvodina. This crop is also affected by reduced nutrients and pest management, but is affected in a lesser degree by drought.

4.4 Soya

The area sown to soya has increased steadily in response to remunerative producer prices, and the timely provision of inputs by the processing company. The planted area is estimated to have reached 150 000 hectares this year (108 000 hectares in 1999 and 82 500 hectares in 1998). However, soya is severely impacted by drought and output could be sharply reduced. The yield may not be higher than 1.0-1.5 tonnes/hectare (compared to an average of 2.05 tonnes/hectare for the period 1994/98).

4.5 Fodder Crops

Output of fodder crops (alfalfa, clover, vetch, cowpeas) is very low this year due to the long dry spell. None of the area was irrigated and only one cut of alfalfa was possible in May.

4.6 Vegetables/Fruits

The effect of the drought on fruits and vegetables is likely to be contained as farmers use cow manure and can irrigate the crops from their household water supplies.

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5. LIVESTOCK

Livestock numbers have declined in response to limited marketing opportunities for livestock products, due to loss of markets in neighbouring countries, loss of preferential market access to CEFTA countries and import competition on Eastern European markets from third country (subsidized) meat exports. The domestic market has also contracted sharply due to reduced purchasing power. The decline is particularly marked in 1999, when cattle, cow and poultry numbers fell by about 20 percent, and output of meat declined by 7 percent while that of milk and eggs fell by about 15 percent. Pig numbers are more resilient (-7 percent). Indications are that these trends are continuing in 2000. A further sharp reduction in animal numbers is expected in the coming year in the wake of the poor fodder harvest and rising prices of maize. Milk production will be affected by the reduced availability of protein feed and market regulation.

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6. AVAILABILITY OF FOOD ON THE DOMESTIC MARKET

6.1 Factors Affecting the Overall Availability of Food

6.1.1 Role of the State in Marketing and Trade

The bulk of food storage, processing and distribution facilities are in the state sector, often located in the Agricultural Enterprises, and consist mainly of large enterprises or kombinats, which are still closely linked to the state. Recently however, a number of small scale private enterprises have emerged, which have lower operating expenses than the large enterprises, working at well below capacity. Private farm marketed output, particularly in the fertile north, is generally sold/bartered through contracts with the socialised sector organisations, which have a monopoly of purchasing in their area. Private farmers have always had the option of selling their produce independently on the "green" market, but these markets are small in scope, and unsuitable for crops that requires industrial processing.

The state regulates the prices of most crops and livestock products. The price of wheat is the minimum guaranteed purchase price at which purchases are made for State Reserves, but in effect is the ruling price at which the enterprises, co-operatives and kombinats purchase. Barter rates for inputs and other commodities are determined when the guaranteed purchase price is set and in turn influence a host of other commodity prices. Thus, when the guaranteed wheat price was raised in June 200 to dinars 3.6-4 per kg, the barter ratios were as follows: 5 kg wheat for 1 litre fuel; 2.9 kg wheat for 1 kg NPK; 100 kg wheat for 57 kg flour, or 125 kg animal feed or 60 standard loaves of bread of about 800 grams. In the past there were fixed parities for the other commodities, (e.g. the maize price was 80 percent of that of wheat) but these parities have been disturbed and the state now intervenes directly in their pricing, albeit to a lesser extent than wheat. The price at which the state will purchase maize is still to be announced but is expected to be higher than that of wheat this year.

State regulated prices are low, (although wheat price was raised from Dinars 1.5 to D 4 per kg in June 2000, (equivalent to about US$100 per tonne). Nevertheless, the State is able to mobilize supplies and influence output by means of the provision of subsidized inputs (notably fuel, fertilizer, cheap flour), as well as capital equipment to producers and processors. This is important in an economy where working capital and inputs are scarce. In addition, marketing of inputs and outputs is also regulated by longstanding agreements between the state and the enterprises, between the enterprises themselves, and increasingly, between the enterprises and the private sector. The state and private sectors are inter-linked insofar that former enterprise managers, with good contacts in the state sector, have set up private enterprises. Such contacts are important to obtain import/export licenses and facilitate barter trade. The state also pays premiums (production development incentives) targeted at primary producers and compensation (targeted at the processing industry) in principle to cover the cost of production of price-controlled processed foods.

The intensity of state involvement varies from product to product. In the case of wheat, only agro-enterprises, state silos/mills and large state bakeries are allowed to purchase wheat and co-operatives may be authorised to purchase on their behalf. The bulk of wheat storage capacity is in the state sector (the mills store the State Reserve) and the movement of grain into and out of the silos is controlled. Individuals are prohibited from dealing in wheat although in practice, private traders, mills and bakeries, with an interest in utilising their capacity, are also operational to some extent. All trading of grain in the State reserves has to be reported. By contrast, maize not subject to short or long-term contracts with the state/enterprises in payment for machinery and inputs, tends to be stored on farm and is actively traded in the open market. As a result, maize prices have moved considerably higher than wheat prices in 1999/2000, despite a bumper 1999 harvest and reduced demand by the livestock industry but reflecting substantial export demand by licensed exporters.

With regards to foreign trade, all agricultural products fall under the regime of export and import licenses, which have to be issued by the Federal Minister of Trade. In addition, minimum export prices for wheat are determined and companies wishing to export have to declare the export price of the goods. In the case of wheat, this price is currently "recommended" at US$138 per tonne of wheat. Other regulations further limit trade; e.g. exports of cereals and their products to the Republic of Montenegro, the UN Administered Province of Kosovo, as well as some other neighbouring countries have recently been prohibited (also to prevent re-exports by third parties of hitherto low priced Serbian wheat). Price differentials with the neighbouring regions/countries, coupled with the crippling shortage of working capital in the economy, also provide incentives for illegal trade. Private sector companies tend to obtain licenses to import consumer goods, while the imports of fuel remains mainly in state hands. To export, small unlicensed private companies have to ally themselves with licensed importers/exporters.

6.1.2 Overall Domestic Availability Affected by Exports

Domestic availability of basic foodstuffs is also determined by the volume of exports necessary to meet essential import requirements particularly for oil, gas, medicines and inputs for industry. Such exports are bound to continue, perhaps at a reduced rate, as needs to import 70 percent of its fuel requirements. The country used to produce a substantial exportable surplus of agricultural products, notably fruit and vegetables, meat and cereals. The balance of trade is increasingly becoming negative: exports covered only 45 percent of imports in 1999, compared to 85 percent in 1991. Compared to 1991, the value of total exports has fallen by nearly two thirds while imports are down by 40 percent.

The share of agricultural exports in trade has increased (see Table 2). Agricultural exports consist mainly of food and livestock products (88 percent), as well as liquors/wine, tobacco, oilseeds and derived products. Local purchases for targeted distribution in foreign exchange, e.g. by the WFP and IFRC, require an export licence and are considered as external trade. The main exports of food and livestock in 1999 by value are fruit and vegetables (48 percent), cereals and cereal products (24 percent) and live animals and livestock products (12 percent). In 1999, agricultural exports were planned to reach US$370 million: targets were exceeded for meat and livestock, wines and liquors, tobacco and products but that for cereals and products and fruit/vegetables fell short by 30 percent and 10 percent respectively. Only exports of livestock products have increased significantly.

Table 2. Federal Republic of Yugoslavia: Exports of selected food products

 
1991
1997
1998
1999
Wheat1/ (`000 tonnes)
7802/
50
150
175
Maize (`000 tonnes)
n.a.
120
463
255
Live animals ('000 tonnes)
n.a.
7
7
3
Meat (fresh and frozen) ('000 tonnes)
n.a.
0.350
1.279
2.220
Of which fresh meat
0.628
0.140
0.335
1.570
Animal fodder ('000 tonnes)
n.a
98
121
147
Value of agri-food exports (US$ - Million)
598
n.a.
408
332
Percentage of total exports
13
n.a.
14.5
22

Source: Federal Statistical Office.
1/ Includes wheat flour in wheat equivalent.
2/ Excludes wheat flour.

The official target for maize exports in 2000 is 500 000 tonnes. Agri-food exports in the first five months of 2000 are 40 percent below target (US$447 million in 2000) and exports of cereals are about 30 percent below target. The country is a net importer of sugar and confectionery. Imports of sugar will be necessary in 2000/2001, but import capacity is severely constrained and the current shortage of sugar is likely to persist.

6.1.3 State Reserves

The composition and level of the state reserves are not revealed. However, as the country has a structural deficit in oil and gas, the availability of fuel is thought to be tighter than that of domestically produced agricultural products. Reserves of basic foodstuffs, possibly with the exception of sugar, are thought to be significant as the country was under siege last year. The Federal Republic of Yugoslavia (FRY) being a centrally planned economy tends to keep large stocks of basic foodstuffs (including wheat) and carry forward stocks of maize, after last year's bumper harvest, are substantial. Moreover, recent releases of vegetable oil, (a commodity in short supply at the official price) to state employees was nearing its use by date. The Mission was informed that the current level of State Reserves is adequate to permit exports of some wheat but particularly of maize to continue this year.

6.2 Factors Affecting the Availability of Subsidized Food

The balance of the goods acquired by the state, not earmarked for exports or security /price stabilisation reserves, are channelled to the market by various means, under various agreements and at various prices. A proportion of the agricultural produce acquired by the state and its intermediaries is made available on the domestic market at the subsidized controlled price and is issued as salary supplements to federal and republic employees. An increasing proportion is being made available to the market at higher prices, via both the state and the private enterprises.

The Government of Serbia compensates the processing industry for the difference between the government controlled price and the cost of production of bread, vegetable oil, sugar, milk and fresh meat. This is done by allocating production inputs, free of charge, or at a discount (e.g. flour and fuel from the Federal Reserve for bakeries) or by paying monetary compensations. Due to rising input prices, inflation and budget constraints, the subsidies are either not paid out or paid out with delay. To help bridge the growing gap between producer and processing prices and the fixed low consumer prices, the availability of higher prices, more elaborate and more loosely controlled foodstuffs has increased, while that of price controlled items is becoming increasingly scarce. The increasing role of the private sector in mobilizing inputs (such as chemicals, fertilizers etc) generates more barter and incentives to produce and market foodstuffs not directly controlled.

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7. CURRENT FOOD SUPPLY SITUATION AND OUTLOOK FOR 2001

Currently, the food supply situation is characterised by adequate availability of higher priced foods but a shortage of basic foods at controlled price, with a large proportion of the population struggling to make ends meet. Overall, there is a surplus of meat and no shortage of bread or milk but bread and milk at the controlled prices (Dinars 5.91 and 4.83 kg) are difficult to obtain. However, sugar is not easily available in urban areas and vegetable oil, when available in supermarkets in the capital, is rationed. Neither sugar or vegetable oil was available in rural areas visited by the mission and reports indicate that these items have not been available for a considerable time. The variety and availability of foods in the shops/markets in the urban centres and especially the capital are markedly better than in rural areas.

The outlook for the coming year is for food supplies to tighten and prices to rise. Tighter domestic supplies means that the two priorities of the state (availability of food at affordable prices and securing enough fuel using, inter alia, agri-food exports) are moving into conflict. Nevertheless, wheat exports to a level which would cause domestic shortages are not anticipated by the Mission. However, expectations of substantial exports of maize, coupled with continuing hot weather, is causing maize prices to rise (by early July open market prices had reached twice the controlled price of wheat), which will negatively affect livestock industry and drive up meat, milk and egg prices. Already the dairy industry is requesting an 80 percent increase in the controlled price of milk. Prices of more loosely regulated, (e.g. sugar cubes instead of sugar) are also expected to rise. This will adversely affect the large proportion of economically vulnerable people. The shortage of vegetable oil and sugar on the market is likely to persist.

Moreover, the cost of subsidies to processors and consumers are likely to become increasingly unsustainable. Changes in the pricing/marketing of basic foodstuffs are expected in the coming months. The current controlled price of bread (5.91 Dinars/kg) is significantly less than that of flour (8.89 kg), but also less than maize and almost one third that of compound animal feed.

GDP declined by at least 20 percent in 1999 and no significant improvement is likely in 2000. In fact, indications are that GDP declined by 5.5 percent in the first quarter of 2000. This will have serious consequences for living standards. The average wage in April 2000 was Dinars 2 153 (DM 98) per month. In recent months, the average pension is set at 90 percent of the average wage, but payment is several months in arrears. Unemployment has increased sharply in 1999 in response to war damage and up to 50 percent of the workforce is estimated to be unemployed or underemployed. Inflation was about 42 percent in 1999 and is estimated at between 2-4 percent per month this year (3.5 percent in April 2000). The Figure 3 below clearly indicates the decline in the standards of living since 1999. Most market prices are based on the Dinar/Dmark exchange rate, further reducing purchasing power.

Undisplayed Graphic

WFP is currently targeting about 700 000 beneficiaries in Serbia (337 000 refugees and 360 000 social cases: handicapped, unable to work, and inmates of institutions and pensioners with incomes less than half of the average salary. In addition, the ICRC assists 200 000 IDPs from Kosovo with their Individual Parcel programme and 100 000 beneficiaries with their Soup Kitchen programme. In Montenegro, WFP distributes food aid to 15 000 refugees, 32 000 IDPs and 20 000 pensioners. Meanwhile, Catholic Relief Services assists 55 000 social cases. Some 27 000 additional social cases are assisted through other programmes. The monthly WFP food ration consists of 12 kg of wheat flour, and 1kg each of pulses, vegetable oil and sugar. In addition, WFP also distributes 150 grams each of canned protein and salt as and when these commodities are available.

The Yugoslav Red Cross, through its Serbia and Montenegro branches (SRC and MRC) is the key local distribution partner for WFP, ICRC and IFRC. The YRC-SRC-MRC network covers storage at ten regional EDPs in Serbia and one in Montenegro, delivery to a total of 160 municipal warehouses in Serbia and 21 in Montenegro. Beneficiary lists are drafted by the Social Welfare Centers and by the Commissioner for Refugees.

Since July 99, international organizations have expanded the scale of food aid operations in Serbia and in Montenegro and the local Red Cross had to adjust their capacity to major caseload increases. As an example, the Serbian Red Cross distribution capacity has moved from 3 000 a year ago in 1999, to 15 000 tonnes per month, on average. Commodity handling and storage at the warehouses (Extensive Delivery Points as well as municipal Final Delivery Points) is good.

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8. CEREAL BALANCE 2000/2001

8.1 Wheat Supply/Demand Situation

Bread is important in the diet and a traditional staple food, and thus the wheat/wheat flour supply/demand situation is of particular importance in any assessment of the overall food situation. The overall wheat supply/demand balance for the Federal Republic of Yugoslavia (FRY) (excluding the UN Administered Province of Kosovo) in 2000/2001 (July/June) is, however, affected by a recent embargo on exports of wheat and other food products from the Republic of Serbia to Montenegro and the adoption of the DM as the operational currency in Montenegro. With the embargo, Montenegro is currently procuring its supplies from other neighbouring countries, plus food aid. As a result, the cereal balance shown in Table 3 is for the Republic of Serbia only and is based on the following parameters.

Table 3. Republic of Serbia: Wheat Supply/Demand Balance for 2000/2001 ('000 tonnes).

Population: 8.94 million

 
Scenario 1
Scenario 2
Domestic Availability
2 537
2 709
Opening stocks
881
881
Production
1 656
1 828
Total Utilization
2 637
2 809
Food consumption
1 610
1 610
Seed
185
185
Losses
85
90
Feed use 210 210
Estimated exports 1/ 47 114
Closing stocks
500
600
Import Requirement
100
100
Estimated food aid imports still be delivered to meet current food aid plan up to end-2000
100
100
1/ Estimated exports would include any food aid for targeted distribution purchased locally.

The total domestic availability of wheat in 2000/2001 is estimated at 2.5 million tonnes in Scenario 1, against total utilization requirement estimated at 2.6 million tonnes, leaving a deficit of 100 000 tonnes. Current humanitarian food aid programmes for the Republic of Serbia envisage the delivery of 100 000 tonnes. If delivered, the shortfall would be fully covered.

The best case scenario would most likely entail higher closing stocks and/or more exports. Moreover, maize meal is also used for human consumption and some replacement of wheat flour by maize meal is not inconceivable, if supplies of wheat/flour were to become more difficult to access than previously. This could occur, for example, in areas such as Central Serbia which is a deficit area for wheat, dependent on transfers of wheat and flour from the Vojvodina. However, this would affect the vulnerable population, particularly the landless refugees and IDPs and those dependent on subsidized bread.

This report is prepared on the responsibility of the FAO and WFP Secretariats with information from official and unofficial sources. Since conditions may change rapidly, please contact the undersigned for further information if required.
Abdur Rashid
Chief, GIEWS FAO
Telex 610181 FAO I
Fax: 0039-06-5705-4495
E-mail:GIEWS1@FAO.ORG
Ms. J. Cheng-Hopkins
Regional Director, OAC, WFP
Telex: 626675 WFP 1
Fax: 0039-06-6513-2863
E-Mail:Judy.Cheng-Hopkins@WFP.ORG
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1 The official exchange rate of Dinars 6 = DM 1 was relaxed to D.19 = DM 1 for the calculation of the export value (in dinars) of fruit as of May 2000. The latter rate is closer to the unofficial rate of Din 22 - 23 generally used in the open market.

2 Price NPK per 50 kg bags - 22 to 25 DM compared to 16 to 20 DM in autumn 1998.

3 Often imported from Romania or Bulgaria due to the proximity. Price per 50 kg bag - UREA in private shops: 21 to 24 D. Ammonium Nitrate: 15 to 18 DM/bag. Calcium Ammonium Nitrate: 18 to 20 DM.

4 60 percent before end of October and 40 percent from November to December.

5 Each farmer is entitled of 20 to 30 litres of fuel from co-operatives for the autumn planting season at a rate of 4 to 6 kg wheat grain per litre.

6 Each farmer was entitled to 30 litres of fuel per hectare.

7 Average yield calculation: (3 x 80 percent) - (3.8 x 20 percent)= 3.16 tonnes/hectare.

8 Average ears/m2 : 220 to 300 - Grains/ear: 10 to 15.