Serbian agriculture is in serious trouble and requires a big reform

Serbian farmers have never had it so difficult. The situation is bad in every single segment of agriculture.

The prices of wheat and maize have drastically fallen and now a farmer can get barely 19 dinars for a kilo of wheat, although up to half a year ago it was 42 dinars. It is similar with maize, although last year the harvest was disastrous, writes

Sugar beet probably wouldn’t have been sown in larger areas this spring if the state did not jump in with substantial subsidies with the intention of helping the revitalization of the entire sugar industry.

The road to loss

For years, raspberry has been Serbia’s biggest export produce and a substantial source of foreign currency income. This year, Serbian raspberry growers probably won’t have enough raspberries to export while the purchasing price dropped from last year’s 500 to below 200 dinars.

Consumers are also complaining about the ridiculously high prices of potatoes, as a result of last year’s disastrous harvest and years of overreliance on imports.

Dairy farmers seem to have it the hardest. Milk production, the most complex agricultural activity, now leaves dairy farmers with a loss of between 5 to 20 dinars per litre, depending on the number of dairy cows that a farmer has. The situation in this branch of agriculture has been continuously deteriorating for years, and Serbia has gone from being a country that exported more than 60 percent of its dairy production for decades to being dependent on imports.

Serbian agriculture suffered an additional blow from the war in Eastern Europe. The European export of cheese and other dairy products to Russia has stopped, which has led to large surpluses of milk in the European Union despite the fact that, unlike Serbia, dairy farming is at the centre of the EU’s agrarian policy.

Now that the EU exports to Russia have almost dried up, stacks of milk powder are being sent everywhere just to get rid of the extremely large reserves in European warehouses. Older people remember a similar crisis forty years ago when hundreds and hundreds of tonnes of butter and milk powder ended up at the bottom of the Atlantic Ocean.

The fact that there has been a hyperproduction of milk in the EU makes the milk crisis in Serbia extremely acute. Although the current state subsidies are not small, it seems that they have to go up to at least 20 dinars per litre of milk and 35,000 dinars per dairy cow as soon as possible.

However, subsidies, as indispensable as they are, will not solve everything. The crisis of the dairy industry in the whole of Europe has clearly indicated the major weaknesses of Serbian agriculture. And they are often caused not only by wrong agrarian policy but also by Serbia’s economic policy or rather an overvalued dinar.

The overvalued dinar suits importers but not exporters since now a litre of milk produced in Europe costs noticeably less than a litre of Serbian milk. Currently, the average price of a litre of milk in Serbia is around 140 dinars (or 1.2 euros). If the euro/dinar exchange was 180 dinars for 1 euro instead of 118 dinars for 1 euro, then a litre of milk in our country would not cost more than 0.8 euros which means that it would become unprofitable to import it.

(Biznis i finansije, 17.05.2023)

This post is also available in: Italiano

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