Production:

According to the Serbian Grain Fund, Serbian producers planted 556,000 HA of wheat in MY2013/14, or about the same as the year before. Steady planting of wheat and other winter crops occurred since winter crops suffered almost no damage from the extreme drought of the previous years and even experienced higher yields. The wheat planted in the fall was at the optimal time for seeding. However due to mild winter and very wet spring there was some yellow rust (Puccinia striiformis) that was not noticed in the right time and treated, so yields were affected. Even with high precipitation in spring and summer 2014, average wheat yields were 4.3 MT/HA and total production was 2.4 million MT (approximately 330,000 MT less than the previous year). Wet weather also influenced wheat quality that was not very good, but exports continued from July harvest to December 2014 as prices were competitive. Domestic consumption of wheat is estimated at 1.2 million MT, with 1 million MT available for export and approximately 350,000 MT remaining as ending stocks.

Wheat area and production, Serbia 2010-2015

Wheat

2010

2011

2012

2013

2014

2015

estimate

Area (HA)

488,000

490,000

480,000

563,000

556,000

600,000

Production (MT)

1,650,000

2,000,000

1,900,000

2,731,000

2,400,000

2,500,000

In fall 2014, Serbian farmers planted approximately 600,000 HA of wheat, or 8 percent higher than the previous year. With estimated average wheat yields of 4.2 MT/HA, total production could reach 2.5 million MT - more than sufficient to meet domestic consumption of approximately 1.2-1.3 MT, leaving again approximately 1 million MT for export and 200-300,000 MT for stocks. According to the Serbian Grain Fund, Serbia's wheat and wheat flour exports from July 2014 to March 2015 reached 514,378 MT or 40% less than the previous year (MY2013/14) when Serbia exported 1 million MT in the same period. Approximately 125,000 MT of Serbia's wheat exports were shipped by river barges to the Port of Constanza, Romania, while other quantities were exported to neighboring countries by truck, to Bosnia and Herzegovina (100,500 MT), Kosovo (92,000 MT), Macedonia (63,000 MT), Austria (38,5000 MT), Montenegro (32,000 MT), Croatia (12,000 MT) and the Netherlands (11,400 MT). Serbian wheat shipped to the Black Sea is mostly stored in Port of Constanza silos and shipped by sea vessels to North African countries (Tunisia, Allegers and Libya). Serbian market prices during July-December were lower and more competitive than other regional competitor's at 17.5 din/kg (USD 158/MT), but since December 2014 they have risen to 22 din/kg (USD 198/MT), and currently exports have slowed down.

Serbia had a mild winter this year that suited wheat development. The wheat harvest lasted long in the fall 2014, from mid-September to mid-December. The wheat was almost not covered by snow, but since the winter was mild with enough precipitation, the wheat did not suffer any frost damage. However, due to the wet and warm weather, some parts of the wheat crops are suffering from diseases typical for these weather conditions: yellow rust (Puccinia striiformis) and grey leaf spots (Septoria tritici). According to the Serbian Advisory Service, these diseases were spotted in time (February) and farmers were given adequate advice how to prevent their spread. To prevent the spread of these diseases it is important for the farmers to promptly apply adequate fungicides to provide for a healthier foliar mass and thus have a positive impact on the final wheat yield.

Since February and March were months with lots of rain, the fields are still wet and farmers are waiting for them to dry in order to tilled them and start spring planting. Winter wheat is mostly in good condition. According to the Agriculture extension workers in Vojvodina the wheat stalks will develop in April when the farmers will be ready to apply additional mineral fertilizers. Serbian farmers closely track wheat growing phases and diseases through the Agriculture Information System and Serbian Agriculture Extension Service.

The final crop size will depend on the weather conditions from March to July 2015. For MY2015/16, Serbia will have record high wheat stocks (over 350,000 MT) and probably a good crop, which will guarantee a good supply and likely lower prices that will be attractive on the world market, storage capacity may be a problem.

Serbia's annual consumption of wheat seed is 150,000 MT from domestic and imported seed sources. This year, seed companies in Serbia are offering more than 70 varieties of wheat planting seeds. The majority of the market (about 70 percent) is controlled by the local seed-producing institutes. About 50 percent of the wheat seeds are certified, while the rest are wheat seeds from the previous crop and are used by small Serbian farmers with limited financial resources who cannot afford to buy certified seeds. In fall 2014, the price of seed wheat in Serbia was around 45 dinars/kg (USD 405/MT), or about 25 percent higher than in the fall of 2013.

Serbian farmers use less than half the amount of chemical fertilizers that farmers in developed countries use, due mostly to a lack of financing. As a result of the limited use of mineral fertilizers and certified planted seeds, crop yields in Serbia are much lower than in most EU countries. Mineral fertilizer prices are similar in the MY2015/16 planting season to those of MY2014/15. Almost half of the 800,000 MT of fertilizers used in Serbia annually are imported from Russia, Croatia, Romania, the Ukraine, and Hungary.

Prices of fertilizers and diesel (in Din and US$)

Commodity

March -2013

March-2014

March-2015

Din/MT

USD/MT

Din/MT

USD/MT

Din/MT

USD/MT

Fertilizer

37,000

435

37,000

435

37,600

339

Urea

44,000

519

42,000

490

40,500

365

Diesel

153 din/lit

1.80 USD/lit

155 din/lit

1.82 USD/lit

149 din/lit

1.34

USD/lit

Source: Novi Sad Commodity Exchange

Note: Please note that there was a significant change in dinar/USD rate, thus it looks from the table above that prices in USD are lower this year, which is not the case since prices for fertilizer and urea increased in the local currency (dinar). Diesel for spring planting is cheaper, due to lower world fuel prices that are influencing prices in Serbia as well.

Wheat is an important crop in Serbia, which not only takes up significant planted area but is important for crop rotation, farmers' cash flow ("first vapor in the year") and contracting with cooperatives (often farmers borrow wheat, fertilizer and other crops). Wheat production has undergone a transformation from a highly profitable subsidized culture, to a more vulnerable commodity not assured for most wheat farmers.

The main factors influencing trends in Serbian wheat production are as follows:

  • Competition from other field crops (corn, sunflower, barley, soy), which for the past few years have been more profitable than wheat;
  • Wheat is practically the only winter crop grown in Serbia and therefore plays significant role in the sowing structure, for crop rotation purposes;
  • Structural shifts whereby large family farms are buying and renting land from elderly households and the government is improving the growing technology, therefore yields are increasing as more land is cultivated by professional producers who are better informed about new technologies and modern production equipment;
  • Serbia is still low wheat quality supplier to the EU, but for the last few years with increasing use of foreign wheat varieties, the quality and yields have been increasing;
  • The wheat production (both in terms of area and yields) increasing in the CIS countries (Commonwealth of Independent States), especially Russia, Ukraine and Kazakhstan;
  • Increased wheat production and new agrarian policies (subsidies, export ban ...) have been more common in the CEFTA (Central European Free Trade Agreement) countries;
  • The current Serbian agrarian policy of subsidies per hectare is very good for wheat farmers.

The main barriers to developing larger wheat production areas are:

  • Serbian farmers still consider wheat to be low investment crop and are unwilling to put too many resources into it;
  • There are still significant fluctuations in wheat prices, planted areas and yields, which make the regional markets unpredictable;
  • Serbia is still lagging behind in quality and the offering of domestic seed varieties. Foreign companies still have not established serious breeding program in the region.

Consumption:

Total domestic consumption of wheat in Serbia for MY2014/15 is estimated to be approximately 1.2-1.3 million MT annually. Serbia's annual consumption of wheat seed is approximately 150,000 MT. Wheat for human consumption is estimated at 1 million MT annually with per capita consumption at 180 kg, which is significantly higher than consumption levels in most European countries. Currently, there are estimated 400 wheat silos (of various sizes) in Serbia owned by milling companies, grain traders, and farmer cooperatives. The total capacity of these silos is estimated at 3.8 million MT. Wheat milling capacity is estimated at about 2.5 million MT, but only 60 percent of this capacity is currently utilized. There are 120 industrial bread production facilities in addition to a large number of registered bakeries (1,700) with an annual capacity of about 1.5 million tons. There are six large companies involved in pasta production and over 600 small private pasta producers in Serbia.

Feed consumption, mostly for cattle, varies between 100,000-200,000 MT, depending on the quality of the crop in a given year. Due to the low price of the wheat, mediocre quality and abundant crop in MY2014/15, more than the usual amounts were exported for feed consumption. In MY2014/15, Serbia began separating high quality wheat for human consumption from wheat sold at lower prices and mainly used for feed. For the wheat crop of MY2014/15, the Novi Sad Commodity Exchange listed different prices for wheat depending on the wheat quality parameter hectoliter weight, since wheat above 76 hl/kg is considered human consumption quality, while below 76 hl/kg is mostly sold as feed wheat.

Quality of wheat:

The overall quality of the MY2014/15 wheat crop was reported to be good, with some disease, but generally at the level of the five-year average. There was a significant quantity of wheat with a hectoliter weight below 76 hl/kg that was exported for feed consumption. The percentage of moisture was high, while the proteins were good. Serbia still has a 30 years old regulation that classifies wheat into 1st, 2nd and 3rd quality classes. The Ministry of Agriculture is planning to adopt by the end-2015 a new Rulebook on quality and other parameters for wheat and other food grains for the milling and baking industry. The new Rulebook will harmonize Serbia's wheat quality standards with international standards. It will determine the minimum parameters that wheat must have to be declared as fit for human consumption, and below which it can only be sold for cattle feed. The key problem for Serbian wheat producers is the mixing of different wheat qualities when stored and the inability to always offer a consistent quality for export. Once the Rulebook is adopted Serbian producers and storing facilities will have to separate wheat for human and cattle consumption, which will also assist exporters in fulfilling international trade contracts. It is also planned that through the Rulebook, Serbia will also prescribe trade classes of wheat. The Serbian Grain Fund is proposing that wheat will be separated into quality groups such as A/A1 (elite wheat for improvement), B/B1 wheat (wheat for bread and other milling wheat) and wheat for feed. This is based on the Hungarian model of dividing wheat into four classes.

MY14/15 Wheat Quality Parameters

Parameter

Average values of Serbian MY14/15 wheat crop

Hectoliter Weight

76 hl/kg

Moisture

13.8%

Proteins

12.60%

HTM (kg/hl)

79

Hagberg Falling Number

259

Alveogram W

182

Wet Gluten Content

28%

Trade:

In MY2013/14, Serbia exported record high volumes of wheat and flour, 1,087,481 MT of wheat and 188,382 MT of flour. Part of Serbia's wheat trade is shipped by truck to neighboring Bosnia and Herzegovina, Montenegro, Macedonia and Albania, while the largest quantities of wheat are shipped by barge to Port Constanza, Romania. Serbian wheat is mostly sold to foreign international companies FOB at the Port on the Danube in Serbia. Serbian (higher quality) wheat is sold to Spain, Germany, Italy and France. Serbian wheat flour is mostly sold to Montenegro, Bosnia and Herzegovina, Kosovo, Macedonia and Albania.

According to the Serbian Grain Fund, Serbia's wheat and wheat flour exports from July 2014 to March 2015 reached a total of 514,378 MT (388,061 MT of wheat and 126,317 MT of flour) or 40% less than the previous year (MY13/14) when Serbia exported over a 1 million MT during the same period. Of the almost 1 million MT of wheat available for export in MY2014/15, it is estimated that total wheat exports by the harvest in June 2015 will reach a maximum 700,000 MT, leaving huge ending stocks of approximately 350,000 MT. This would be the largest ending stocks since MY2009/10.

In MY2014/15 approximately 125,000 MT of the Serbian wheat were shipped by river barges to the Port of Constanza, Romania, while other quantities were exported to neighboring countries by trucks, to Bosnia and Herzegovina (100,500 MT), Kosovo (92,000 MT), Macedonia (63,000 MT), Austria (38,5000 MT), Montenegro (32,000 MT), Croatia (12,000 MT) and the Netherlands (11,400 MT). Serbian wheat shipped to the Black Sea is mostly stored in the Port of Constanza silos and shipped by sea vessels to North African countries (Tunisia, Allegers and Libya). Serbian market prices during July-December were lower and more competitive than other regional competitors at 17.5 din/kg (USD 158/MT), but have risen since December 2014 to 22 din/kg (USD 198/MT), causing exports to slow down.

Due to the low market supplies and high prices (22 din/kg or USD 198/MT) that started at the end of November 2014 (farmers stopped selling their wheat to see what will happen with price, as Serbia's wheat exports slowed down). In December 2014, Serbia's Ministry of Agriculture announced it would land 30,000 MT of wheat to the milling companies from the State Commodity Reserves and are also considering temporary remove of the import taxes on wheat. The custom tax for wheat imports from EU and CEFTA countries is 18 percent and 30 percent from all other countries. In January 2015, the State Commodity Reserves opened a public tender for the 30,000 MT of wheat to millers/bakers to be returned to the Reserves by July 30, 2015. The Government probably will not remove the import taxes as prices have started to decline as farmers have begun to put more wheat on the market. By mid-March wheat was sold for 19.5 din/kg (USD 176/MT).

The goal of the Commodity Reserves was to boost the very low wheat demand and to reduce wheat prices. After the Government tender and announcements and the fact that the new wheat crop will most probably be good many wheat farmers decided to offer their wheat on the market. Tender of 30,000 MT wheat is only one third of Serbia's monthly consumption, so other than psychological effect the offered wheat volume likely did not have much of an effect on the wheat prices.

Wheat exports in MY14/15 (July 2014-February 2015)

Month

Wheat MY14/15 in MT

Flour MY14/15 in MT

July

106,672

15,287

August

104,930

15,905

September

76,090

16,002

October

37,812

18,465

November

14,157

17,981

December

12,467

17,078

January

15,198

11,691

February

20,735

13,908

TOTAL:

388,061

126,317

Source: Serbian Grain Association

If the weather remains fair over the next four months, wheat production in MY2015/16 could reach 2.5 million MT with estimated wheat yields of about 4.2 MT/HA. Total production would be enough for an estimated domestic consumption of 1.2 million MT and wheat exports of 1 million MT, leaving estimated MY15/16 wheat ending stocks approximately 300,000 MT.

Per the Stabilization and Association Agreement (SAA), approximately 95 percent of all EU imports became duty free effective January 1, 2014. The remaining items now have an average duty rate of 0.99 percent, although the rate is significantly higher on certain sensitive agricultural commodities. These products include honey, fresh tomatoes, peppers, potatoes, leafy greens, cucumbers, fruits, dry plums, live animals, fresh/chilled/frozen meats (except turkey and goat meat), processed meat products, pasta, wheat, corn, sugar, edible sunflower oil, fruit juices, fruit jams, fruit brandy and most dairy products.

The duty rate for imported wheat (tariff no. 100190 99 10) from EU and CEFTA countries is 18%, and for wheat flour (tariff n. 1101 11 15) from EU and CEFTA countries is 19.5%, while the general duty rate for wheat and wheat flour imports from other countries including the U.S. will continue to be 30 percent.

In 2014, there were approximately 200 exporters from Serbia with quantities ranging from 10 MT to 60,000 MT. The largest wheat exporters in 2014 were: Agroglobe, Novi Sad, MK Commerce, Novi Sad, Konzul, Novi Sad, Ciric and Son, Sakule, Agromarket, Kragujevac, Dumico, Belgrade and Glencore SRB, Novi Sad.

During 2014, approximately 209 Serbian companies exported flour mostly by truck to neighboring countries. The five largest exporters of wheat from Serbia in 2014 were: DPS Klas Group, Sabac, Zito Backa, Kula, Zitopromet-Mlin, Senta, Kikindski Mlin, Kikinda and Zitopromet-Ruma, Ruma.

The Serbian Grain Association (SGA) has approximately 40 members representing a sector valued at over USD 500 million. In May 2014, the SGA joined COCERAL (Europe's leading umbrella trade association for cereals, rice, feedstuffs, oilseeds, olive oil, oils and fats). COCERAL is a strong advocate for the distributors, storage facilities and traders of these commodities with the European Commission and EFSA (European Food Safety Authority).This new membership is very important for Serbian producers and exporters of agriculture commodities, given Serbia's EU pre-accession negotiations.

Stocks:

It is estimated that currently Serbia has 720,000 MT of MY2014/15 wheat in stocks. Domestic consumption until the new wheat harvest is estimated to be 355,000 MT and Serbia is expected to export an additional 200,000 MT thru July 2014, so current estimates for the ending stocks of MY2014/15 wheat at the end of June are high of about 350,000 MT. Small wheat producers usually sell their crops to traders and milling companies' immediately after the harvest. The milling companies take advantage of their large storage capacity to negotiate competitive prices from the farmers. However, for the past couple of years, the government has started to intervene by providing storage subsidies in order to allow smaller farmers to store their wheat and then sell it later when wheat prices are more advantageous.

Policy:

The Ministry of Agriculture and Environmental Protection is responsible for the Government's strategy in the field of international and domestic agricultural trade, food processing, rural development, environment, forestry, and water management. Although the Serbian Parliament adopted the Law on Incentives for Agriculture Production and Rural Development in January 2013 stipulating that the agriculture budget could not be less than five percent of Serbia's total budget, the Serbian Government adopted in December 2014 a final budget for 2015 of 1.12 trillion dinars (USD 10.9 billion) and only allocated 41.44 billion dinars (USD 406 million) to agriculture. This is only 3.7% of the total adopted budget and a significant decline from last year (more than 10%), but is attributed to overall budget restrictions.

In December 2014, the Ministry announced it would continue a 12,000 dinars/Ha (USD 118/HA) subsidy, of which 6,000 dinars/HA (USD 59/HA) would be paid for fuel, certified planting seeds and fertilizers, while a final 6,000 dinars/HA (USD 59/HA) would be made available as a direct payment according to the arable land registry. The Ministry of Agriculture and Environmental Protection limited payment of incentives to smaller agricultural concerns by reducing the maximum farm size for registered agricultural households to be eligible to use State subsidies from 100 HA to 20 HA. In Serbia, approximately 94% of registered farmers have up to 20 HA of arable land, while the remaining 6% are big farmers with arable land over 20 HA.

Also, farmers that lease State owned agricultural land will not be entitled to State subsidies.

Most of the other agricultural policy measures remained the same as in 2014, including the milk premiums and the introduction of two new incentives for livestock development.

On February 19, 2015, the Serbian Government adopted the Rulebook on the Allocation of Subsidies for Agriculture Production and Rural Development Measures for 2015. The rulebook covers direct incentives, rural development support, credit support and special incentives for investments in agriculture. The Ministry of Agriculture announced the following policy measures to support agricultural production: subsidized short and long-term loans for registered farmers; funds for development and improvement of livestock-farming (25,000 dinars/head, approximately USD 240/head) and breeding efficiency, preserving genetic resources and increasing milk production (7 dinars/liter of milk, approximately USD 0.07/liter); production incentives for wine, brandies and foods with designated geographic origins; subsidies for building and improving grain storage capacity and transshipping; and subsidies for organic food production.

For 2015, over 50% of the agriculture budget or approximately 24.5 billion dinars (USD 230 million) will be used to cover production subsidies (mainly for milk, livestock, and fruits), 7 billion dinars (USD 67 million) will be dedicated to diesel fuel payments and certified seed refunds to registered farmers, and 8 billion dinars (USD 78 million) will be for new investments in the food and agriculture sector, such as supporting further processing of agricultural products (e.g. new storage facilities, including cold storage for fruits and vegetables, as well as new processing capacities and incentives to modernize livestock production).

The Ministry of Agriculture has adopted a Rulebook on state-subsidized farm loans, which will be in dinars, without a foreign currency clause, and signed contracts with commercial banks and insurers. The annual interest rate on loans for livestock farming will be 4% and loans for other agricultural purposes 6%. The lending will come with repayment schedules ranging from one to three years, including a grace period of up to a year. Loans will be available to individual farmers and micro and small agricultural enterprises up to a maximum amount of 5 million dinars (USD 50,000) and for cooperatives of at least 10 members up to a maximum amount of 15 million dinars (USD 147,000). The government has decreased the fees charged to register farms and to seek various approvals relating to crop protection and improvement and soil improvement products.

In July 2014, the Serbian Government adopted a new Agricultural and Rural Development Strategy for the period 2014-2024. The strategy, a requisite for receiving EU funding, sets guidelines for adjusting Serbia's agriculture to meet EU and WTO requirements and defines the basic reforms that are needed in the agricultural sector. The strategy aims to proposed reforms that will improve Serbia's business environment and competitiveness, raise living conditions, and introduce greater stability for Serbia's farmers in rural areas. According to the Ministry of Agriculture, Serbia needs to define budgetary incentives and adopt laws and rulebooks that facilitate agricultural development, as well as greater farmer training and exposure to new technologies. In addition to the Agriculture and Rural Development Strategy, the Ministry of Agriculture is currently preparing a National Development Program for Agriculture and Rural Development that will be valid from 2015-2020, with more specific measures for implementing Agriculture and Rural Development Strategy.

In January 2015, the European Commission set aside USD 220 million for 2015-2020 to support Serbia's agriculture and rural sector under its Rural Development Program for Serbia (IPARD). The program aims to increase food-safety in Serbia and improve competitiveness of the agro-food sector as well as to help Serbia progressively align with EU standards. The funding will be offered in the form of grants to co-finance appropriate investments up to a maximum public contribution of 70%, which should lead to a total investment in the sector of about USD 500 million. Grants will be provided for: farmers producing milk, meat, fruit and vegetables and other crops: micro-, small, and medium-sized enterprises processing milk, meat, fruit and vegetables: farmers that introduce organic production: and the development of private rural tourism facilities.

Marketing:

The Serbian wheat market price during July-November 2014 was approximately 17.5 dinars/kg (USD 158/MT), which was lower and more competitive than wheat from Hungary and the Ukraine (Serbia's top competitors). However by the end of November 2014 the price was 22 din/kg (USD 198/MT). After some announcements from the Serbian Government and forecast that the new wheat harvest will be good, from mid-March 2015 the price decreased to 19.5 dins/kg (USD 176/MT), that is making Serbian wheat again competitive in the world market. The current price of wheat from Hungary is 21 din/kg (USD 189/MT) and from the Ukraine is 22 din/kg (USD 198/MT). Wheat prices will probably decline even more in the coming months due to the large quantities of wheat available in country three months before the harvest.

On January 31, 2015 the Serbian Government adopted a Decree on mandatory production and sale of „social" bread from flour type „ T-500", valid thru July 31, 2015. The maximum retail price of this bread is limited to 46 dinars (EUR 0.38/loaf) and bakers must dedicate at least 40% of their daily production to bread from flour type "T - 500".

Production, Supply and Demand Data Statistics:

Wheat Serbia

2013/2014

2014/2015

2015/2016

Market Year Begin: Jul 2013

Market Year Begin: Jul 2014

Market Year Begin: Jul 2015

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

600

563

520

556

600

Beginning Stocks

243

243

395

161

356

Production

2,940

2,700

2,400

2,400

2,500

MY Imports

7

18

10

15

16

TY Imports

7

18

10

15

16

TY Imp. from U.S.

0

0

0

0

0

Total Supply

3,190

2,961

2,805

2,576

2,872

MY Exports

1,195

1,300

800

700

1,000

TY Exports

1,195

1,300

800

700

1,000

Feed and Residual

400

300

300

320

300

FSI Consumption

1,200

1,200

1,200

1,200

1,300

Total Consumption

1,600

1,500

1,500

1,520

1,600

Ending Stocks

395

161

505

356

272

Total Distribution

3,190

2,961

2,805

2,576

2,872

1000 HA, 1000 MT, MT/HA