SPECIAL REPORT

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

8 August 2001

MISSION HIGHLIGHTS 1. OVERVIEW 2. SOCIO-ECONOMIC CONTEXT 2.1 General Background 2.2 The Agricultural Sector 3. FOOD PRODUCTION AND SUPPLY PROSPECTS IN 2000/01 3.1 General 3.2 Cereal Production 3.3 Factors Affecting Production 3.4 Livestock Production 3.5 Markets and Prices 4. WHEAT SUPPLY AND DEMAND 2001-2002 5. RELIEF FOOD ASSISTANCE 5.1 Food Aid Intervention in Serbia in 2000 - 2001 5.2 Food Assistance Programme for 2001-2002

1. OVERVIEW

An FAO/WFP Crop and Food Supply Assessment Mission visited Serbia between 17 June and 30 June 2001 to: (i) assess prospects for crop production in 2001; (ii) review the overall food supply situation and prospects at the national level and (iii) determine the needs for food assistance during the marketing year 2001/2002. The Mission's findings are based on crop data provided by the Institute of Statistics, Belgrade, cross-checked against updated information from Chambers of Commerce, Agricultural, Water and Meteorological Institutes, NGOs and UN Agencies. Field visits through 45 municipalities in Vojvodina and Central Serbia afforded the opportunity for crop inspections, sample crop-cutting and detailed semi-structured interviews with key informants including farmers in the private and social sectors, managers of co-operatives, millers, traders, combine drivers and agricultural extension workers. Discussions with Serbian agricultural and economic specialists provided essential background on the current socio-economic situation and the effects of isolation, sanctions and the NATO intervention.

The Mission estimates the 2001 wheat harvest at 2.59 million tonnes, which is 38 percent higher than last year's post-harvest estimates from an 8 percent larger area. It is also slightly greater than the average production for the past ten years. Increase in average yield is due to optimal planting, a mild winter and good rains throughout Serbia in spring and early summer and a virtually insect pest and disease-free year. Heavy rains close to harvest, including early hailstorms had localised effects in several municipalities affecting crops negatively in some 2 percent of the area. Crop production is far below levels achieved in the 80s due to substantially reduced use of fertiliser and other agricultural chemicals, less than efficient field operations due to ageing and cannibalised machinery, the decline of co-operatives and banks and a virtual absence of credit. Conditions improved in spring, following the political developments since October 2000. Fuel became available on the open market and international support improved nitrogenous fertiliser availability.

Maize crops this year are in very good condition following excellent establishment and early growth conditions, and are likely to provide a harvest in the order of 5.41 million tonnes. This is 84 percent higher than last year's post-harvest estimates and close to the average of the past ten years. This level of output, if confirmed, will easily cover natural livestock feed requirements. Other spring crops are in equally good condition. However, the Mission notes a significant reduction in soya area this year following a poor performance last year. Sugar beet and sunflower crop areas are also lower this year. All industrial and fodder crops are likely to have better yields this year, thanks to favourable rains. Last year's very dry summer caused stock numbers to fall in both the ruminant and non-ruminant sub-sectors, with a concomitant effect on production and farm incomes. This year's wet spring and early summer is supporting the production of twice as much forage as last year with an associated positive effect on animal breeding condition and milk production from grass-based systems.

The Mission's current wheat supply and demand balance suggest a surplus production of 314 000 tonnes that would be available for export to neighbouring former provinces of the Federal Republic of Yugoslavia or to the Russian Federation in exchange for much needed gas supplies.

The current UN food aid strategy in Serbia is to progressively phase out the operations through the year 2002, while continuing to provide support to the reform process.

2. SOCIO-ECONOMIC CONTEXT¹

2.1 General Background

For many years, the Federal Republic of Yugoslavia (FRY) has been confronted with regional and international conflicts and confrontation which culminated with a NATO bombing campaign in March-June 1999. The destruction of infrastructure, industry and commerce during the bombing resulted in an estimated 23 percent decline in both industrial output and social product in 1999. Although reliable data specifically related to Serbia is scarce, signs of economic recovery have been noted since the lifting of sanctions in late 2000, following major political changes in the Republic and the FRY, including presidential and parliamentary elections.

The normalisation of international relations has progressed rapidly in past months and, on 29 June 2001, a Donor Conference for the Federal Republic of Yugoslavia took place in Brussels, co-chaired by the European Commission and the World Bank, and attended by representatives of all major donor countries and international organizations. Donors pledged some US$1.28 billion for 2001 to an Economic Recovery and Transition programme for the country, prepared by the World Bank and the European Commission with the FRY authorities. This programme outlines a comprehensive structural reform agenda, including sectoral policy reforms and priority public investments, as well as urgent balance of payments and budget needs for 2001. Conceived in the framework of private and financial sector development, the reform agenda stresses actions in key infrastructure sectors (especially energy, transport, telecommunications and water), and in the agricultural sector.

This process is expected to strengthen recent policy improvements in the agriculture sector, which has always been an important component of the economy of FRY, accounting for 22 percent of both GNP and total exports in 1999. The sector had deteriorated significantly in the past decade and productivity is considered low. During the period, and as a means to preserve stability, the government, particularly in the Republic of Serbia, kept producer prices and food prices very low, which resulted in disincentives for production and export. Positive changes have been recently initiated, particularly in price legislation and improved availability of inputs.

2.2 The Agricultural Sector

Agriculture, an important contributor to the economy of FRY prior to 1990, has doubled its share of GNP in the past ten years to some 22 percent. It also provides 22 percent of total exports. The figures reflect the decline of the industrial sector and the importance of cereals as a barter commodity for energy imports, rather than an upsurge in agricultural activity. Historically, Serbia has produced the bulk of FRY agricultural production particularly wheat, maize, oilseeds, sugar beet and soya from a vibrant state/social sector and a much larger private sector. As with the industrial sector, the State/social agricultural sector collapsed during the 1990s. The loss of export markets to neighbouring areas of western Europe and the former COMECON countries and the failure of the rural banking system to support the farming community, has challenged large-scale high-input enterprises. Consequently, farmers in both social and private sectors have adopted medium-to-low input systems, reduced both investment and recurrent expenditure on plant and machinery, and accepted lower yields at unprofitable prices to provide employment and to survive. For the private farmers, who farm 85 percent of the cultivable land in fragmented units of 2-5 ha, a locally focussed production-marketing system has emerged, based on satisfying household requirements and selling surpluses through the green markets. The small farmers have proven to be resilient, resourceful and effective in coping with the increasingly difficult conditions up to and including the autumn of last year.

The social sector enterprises, in various stages of incomplete privatisation, are now mostly insolvent and functioning way below previous levels with no access to credit, high numbers of employees and with outdated machinery which shrinks from year to year from the cannibalising of parts.

Cereals presently dominate crop production with wheat and maize production from the private sector, usually more than enough to meet domestic requirements.

The main agricultural areas are Vojvodina and Central Serbia. Vojvodina is a mainly lowland region dissected by four rivers, the Danube, Tisa, Sava and Tamis. Loess plateaux, loess terraces and alluvial plains along the rivers provide 1.789 million ha of agricultural land, 67 percent of which is privately owned by the population of some 2.0 million people. Production from the sown area of 1.584 million ha on the low-lying plains, is characterised by intensive, arable systems producing half the nation's cereals and almost all industrial crops. Central Serbia, by contrast, is a hilly region comprising 3.329 million ha of agricultural land of which only 1.67 million ha are sown. Pastures, meadows, orchards and vineyards make up the remainder. Ninety-six percent of the area is privately owned by the population of some 5 million people.

In Central Serbia, the demise of the state-social sector is almost complete, however, in Vojvodina the decline, although dramatic, has been less shattering, reflecting the larger areas involved, a comparatively greater investment in infrastructure to sustain employment levels, and the emergence of a handful of companies-in-transition that have been able to make their way through the tangle of uncertainties associated with agri-businesses in Serbia at the present time. All crops, except soya, have experienced significant reduction in area and yields since 1991.

3. FOOD PRODUCTION AND SUPPLY PROSPECTS IN 2000/01

3.1 General

Agricultural statistics in Serbia are primarily collected, analysed and interpreted by the Institute of Statistics in Belgrade. The Institute employs a network of 1 450 enumerators, who are each responsible for 2  800 ha of cultivable land. Data are collected six times a year on area and status of 80 crops. A summary of such data for wheat, maize, sugar beet, sunflower and soya, by eleven formal clusters of municipalities, for crop years 1999/2000 and 2000/2001, was provided to the Mission by the Institute. The data were then cross-checked against updated data received from a sample of Chambers of Commerce, Institutes with agricultural activities, extension offices and farmer cooperatives in the districts of Srem, Bácka and Banat in Vojvodina, and in major cereal growing clusters of Central Serbia including Smederevo, Kragujevac, Kraljevo, Leskovac, Nis and Belgrade. In addition, the visits to production areas allowed the team to drive a continuous transect through some 45 of the 160 municipalities in Serbia, affording the opportunity for crop inspection, spot-check crop cutting and detailed semi-structured interviews with farmers in both the private and social sectors, millers, traders and combine drivers.

During the past year, the FAO and WFP offices in Belgrade have collected data relating to agricultural activities, food consumption, trade, and fertiliser use and support activities. Such information was incorporated into the Mission's analyses along with data from NGOs and bilateral agencies working in Serbia in the agricultural domain.

3.2 Cereal Production

This year's estimates of wheat and maize production are presented by the official clusters of municipalities, designated by the most important municipality in the group. Last year's final post harvest assessment has been juxtaposed with this year's data for comparison purposes. The estimates are presented in Tables 1 and 2, below. A wheat harvest of 2. 59 million tonnes is forecast from an area of 686 000 ha, which is 38 percent more than last year from an 8 percent greater area, but, is only slightly greater than the average production for the last ten years.

Tentative forecasts for maize at this early stage anticipate a harvest of 5.41 million tonnes from 1.21 million ha, an area very similar to the area harvested last year (Table 2). Again, this is substantially (84 percent) higher than last year's post harvest estimates and close to the average production for the past ten years, but, both area and yield data for maize are highly speculative given that at the time of the Mission, maize had not begun to tassel.

Table 1: Serbia - Wheat Area, Yield and Production

Table 2: Serbia - Maize Area, Yield and Production

3.3 Factors Affecting Production

Rainfall

Although Serbia has a vast network of drainage and irrigation canals, the former serving 1 million ha, and the latter some 120 000 ha; only around 20 000 ha are currently irrigated. The past decade has witnessed a rapid deterioration in both systems due to lack of funds for repairs, maintenance and development. Consequently, agriculture throughout Serbia is predominantly rainfed and, therefore, subject to the variations associated with its location. Average annual precipitation is 734 mm masking a range from 600 mm to 1 000 mm in Central Serbia and from 500 to 700 mm in Vojvodina. Long-term averages for Central Serbia and Vojvodina are shown in Figure 1 compared to precipitation over the growing season 2000/20001.

Figure 1: Serbia - Rainfall and Temperature

Figure 1 shows that autumn was particularly dry in both Vojvodina and Central Serbia, followed by an average to dry winter depending on location and a universally wet spring and early summer. Higher than average autumn and winter temperatures normalised by early summer, but the average figures mask a cold snap in mid-April, in both regions, accompanied by frost and snow in some locations. The hot, dry autumn followed a hot dry summer the accumulated effect of which made early land preparation difficult. However, warmer temperatures in November and December extended the optimum-sowing season for autumn sown crops. Good spring rains encouraged the planting of maize and sunflower. Areas of soya have, however, dropped significantly due to the very poor harvest last year. Sugar beet areas have continued to decline for reasons other than climatic. Summer storms accompanied by hail occur frequently. This year the storms were early occurring in mid June and the hail caused damage to crops in certain localities.

Wheat Area and Yields

Although the dry summer and autumn made early land preparation difficult, farmers responded by universally adopting minimal tillage operations. These involved discing twice and sowing mechanically in Vojvodina, or, sowing mechanically and by hand in Central Serbia. Fuel was readily available in autumn, on the black market, at prices ranging from 0.9 DM to 1.1 DM per litre instead of 0.7 DM per litre through official channels, such channels being open only to well-placed individuals and some well-supported state (social) companies and co-operatives. Spare parts for tractors and agricultural machinery were also noted to be available as imports from Turkey, old stocks from Serbian factories or made locally, by small enterprises, in the larger cities. Wheat seeds were plentiful but only 60-70 percent of the farmers were noted to have used certified seed, sold through authorised dealers from the multiplication centres. The remainder used their own seeds, carried over from the previous harvest. A process of buying seeds every other year seems to have become an established routine adopted by many private farmers with no access to delayed payment schemes. Farmers contracted to the major millers are provided either certified seeds and fertilisers or cash advances to purchase seeds from recognised breeders and fertilisers from merchants. The co-operatives theoretically offer the same facilities to their members and clients, however, only a low percentage of coops are functioning. Most are unable to obtain credit due to debts they owe and debts owed to them by their clients. Terms of trade this year ranged from 1 kg wheat seed: 1.76 to 2.7 (median 2.2) kg of wheat grain, depending on location, dealer and time of repayment. Sowing rates varying from 250 kg/ha to 400 kg/ha were reported but as most wheat was sown at the optimum time, average sowing rate is noted at 300 kg/ha this year. No replanting was necessary. However, due to the late rains, germination was slow and patchy. Crop development became more even in spring, encouraged by warm temperatures and plentiful rains in both regions.

Fertiliser use at one-quarter to one-third of the levels used in the eighties, is noted throughout Serbia. In Vojvodina, NPK (15:15:15) was available in autumn through the larger and well-organised flour mills and coops on barter terms and delayed payment schemes. Exchange rates were 1 kg NPK: 1.9 wheat grain; 1:1.6 (KAN) and 1:1.7 (urea). Fertiliser on the black market in autumn was purchased at 21 to 23 DM for a 50 kg bag. However, the quantities available are noted to have been limited. Farmers in Vojvodina have also, in recent years, used more nitrogenous than compound fertilisers giving cause for concern regarding phosphate levels in the high potential areas. In Central Serbia, prices are noted to be higher at barter rates of 1:2 kg NPK and 1:1.9 kg urea, and at 25 DM-27 DM per bag for cash sales. Imports in spring of some 200 000 tonnes, comprising 28 000 tonnes of urea as aid from Japan and 172 000 tonnes imported commercially, plus 100 000 tonnes of domestically produced KAN and urea since January 2001 and 40 000 tonnes of fertiliser stocks suggest that: a) total use may have been around 340 000 tonnes; b) the total use was similar to levels used in the past five years; c) more was available in spring than in autumn; d) most of the fertiliser was nitrogenous fertiliser; e) under the circumstances it is probable that most NPK was used on vegetables. Mission findings confirm a low use of NPK on wheat and a less than recommended use of top dressing resulting in an average total fertiliser use on wheat of around 200 kg - 250 kg per ha amounting to about 60 kg/ha N.

By the same token, few other agri-chemicals are used on cereals. Only the herbicide 2.4D is noted to have been applied on some 30-40 percent of the wheat fields in Vojvodina, and some 10-15 percent of the wheat fields in Central Serbia. The wetter spring, which supported good cereal growth has also encouraged weeds and weeds are noted to be the major pest this year. Although some incidents of rust were reported, no attacks were considered serious enough to warrant intervention at the time of the Mission.

Concern was, however, expressed regarding the effect of heavy storms with hail in Srem and eastern Banat. Some 2-5 percent of the fields in these localities and also in Belgrade and north Kraguejevac are noted to have logged crops. In one or two villages, all the wheat and barley fields were down, and farmers were anxious regarding the response of their creditors regarding insurance (milling companies and breweries). Fortunately, such cases were exceptions and combines were noted to be successfully harvesting the lodged crops elsewhere². Wheat harvested earlier to avoid deterioration may require drying and farmers will be penalised accordingly, through payment deductions by the milling companies.

As a result of the foregoing, the Mission estimates a total wheat harvest of some 2.59 million tonnes, produced from 352 000 ha in Vojvodina at 4.15 tonnes per ha, and from 334 000 ha in Central Serbia at a yield of 3.36 tonnes per ha.

Maize Area and Yields

Following the poor performance in the 1999/2000 growing season due to an unusually dry spring and summer, the maize harvest at 2.94 million tonnes comprising 1.81 million tonnes from Vojvodina and 1.13 million tonnes from Central Serbia was the lowest in recent history with the whole country not achieving the production usually reached in Vojvodina. Consequently, as 90 percent of the maize is grown on small farms in the private sector and is not an internally traded commodity, access to maize on the market was limited, prices were high and harvested stocks have been exhausted. Farmers have, therefore, planted more maize this year than last year. Unlike wheat, only purchased hybrid maize seed is sown and as the multiplying units of certified seed are irrigated, hybrid seed was available in spring in sufficient quantities to meet the demand of 1.21 million ha planted at rates 12-15 kg per ha.

This year cultivation practices were enhanced by the warm dry spring and plentiful supply of fuel on the official market in all municipalities, which eliminated time lost in sourcing supplies.³ Fuel price increases to 1.2 DM per litre during the spring did not deter farmers from completing traditional operations comprising ploughing, discing (2x) and planting. The cold spell in April caused replanting in the municipalities around Kraljevo and in such circumstances seed was difficult to get and was more expensive at 0.55DM to 0.6 DM/ kg instead of 0.45 DM to 0.5DM earlier in the year.

Herbicide use on maize was widespread in Vojvodina at a cost of 120 DM/ha (including contractors' fee) but was used far less frequently in Central Serbia. Weeding maize fields is ubiquitous, with at least 2 passes being undertaken by hand, horse or tractor, or combinations of all three, depending on location and time of the event. Given casual labour rates of 25-30 DM per day (plus meals) and that weeding one ha of maize requires at least 5 man-days, hand weeding is costing more than 120 DM per ha this year compared to 75-100 DM last year. This suggests tractor hoeing is the best option for the first weeding at 10 DM per ha fuel costs for farmers who have tractors and steerage hoes or harrows. Unfortunately, tractors cannot be used when the maize is intercropped with white beans or pumpkins.

Given the upsurge of fertiliser imports and the resumption of domestic production of nitrogenous fertiliser, since the plants began functioning in January and March, basal and top dressing (1x) of maize was noted in both regions. The colour of most crops in all municipalities visited confirm its widespread use in Vojvodina. Chlorotic crops were noted as present on the hillsides in Central Serbia.

Since 1992, insects of the Diabrotica species have been attacking early season maize plants in Central Serbia and Vojvodina. Farmers are now aware that the effects of pests can be practically eliminated by crop rotation, consequently pests have ceased to be a major problem. No other pests or diseases of maize were noted and no use of pesticides on maize was noted.

The Mission notes that in all municipalities in the lowland areas maize fields look in very good order. Weed-free, well-established crops, evenly spaced and with very regular in growth and development are the norm rather than the exception. Crops on the hills of Central Serbia are more variable. Consequently, a maize harvest of 5.41 million tonnes is anticipated from the 1.21 million ha planted. Of this, 3.13 million tonnes is expected to come from Vojvodina from 637 904 ha at a yield of 4.9 tonnes per ha. The remaining 2.28 million tonnes is anticipated from Central Serbia from 574 795 ha at a yield of 3.9 tonnes per ha. However, harvest will not be until September/October, therefore, although there is probably enough soil moisture already present to sustain full development and grain-fill on the heavier soils, crops on the lighter soils in Central Serbia are still hostage to fortune of the rainfall of the next few weeks.

Other Spring Planted Crops

A comparison between areas sown this year and last is given in Table 3 by clusters of municipalities.

Table 3: Areas of Major Industrial Crops (ha)

This table shows a decline in both sugar beet and soya areas but an increase in sunflower area reflecting the position in Vojvodina, where the performances of sugar beet and soya yields were dreadful last year at 64 percent and 50 percent of the last five years' averages at 24 tonnes/ha and 1.2 tonnes/ha respectively. Sunflower yields were, however, only 17 percent below recent performances at 1.5 tonnes per ha.^. This year, the condition of all industrial crops in Vojvodina is good and higher than average yields are anticipated.

Industrial crops in Central Serbia are of much less importance. They are mostly located in the clusters of municipalities and Belgrade, Kragnejevac, Smederevo and Sabac, close to the factories. Areas sown exhibit a slight decline in all crops despite local increases in and around Belgrade. As with the crops in Vojvodina, all fields were noted to be in good condition and higher than average yields were anticipated.

The above, notwithstanding the major problems of the industrial crops still pertain. Out-of-date factory layouts with obsolete equipment exacerbate the inefficiency of effectively bankrupt social structures. Payment delays push more private farmers, with low purchasing power, out of the industrial crop sub-sector each year. Until issues regarding privatisation and credit among others are solved it is unlikely that much will change despite the probable improved harvest this year.

Fruit and Vegetables

Orchards, vineyards and vegetable gardens are concentrated in Central Serbia, where the topography, climate and soil conditions offer less opportunity to grow large areas of arable crops. Land use data from 1999 in Table 4 demonstrates the difference between the two regions.

Table 4: Fruit and Vegetable Areas (ha)

The private sector accounts for 95 to 99 percent of such areas in both regions and as such, production has emerged from the last decade relatively unscathed when compared with industrial crops.

Production in Vojvodina has been quite consistent for top fruit, peaches and cherries over the past 10 years, but apricot production dropped dramatically in 1997 and 1998. All indications suggest that fruit production in Central Serbia has also been sustained in a similar fashion. Cherry production has expanded, as has the production of soft fruit⁴ through the emergence of small exporting companies that escaped trade embargoes sanctions and were not restricted in egress by the then Government. This year fruit and vegetable yields are expected to be similar to yields in the past five years.

3.4 Livestock Production

The livestock sector has suffered from constraints similar to the crop production sector over the past decade. Loss of external markets and a fall in disposable incomes affecting home markets, caused a steady decline in total numbers of cattle and sheep until 2000, whereas total pig numbers more or less remained unaffected over the same period as shown in Table 5, pig meat being the cheaper option for urban consumers.

Table 5: Total Numbers and Breeding Stock (000's head) - Time Series 1990 to 2000

Closer examination of the statistics indicates distinct differences between the two regions. In Vojvodina, where far fewer animals are kept, cattle and sow numbers rose until 1999/2000, although the number of fattening pigs fell.

In Central Serbia, in the period 1991-2000, cow numbers fell by 8 percent and all cattle numbers dropped by 17 percent but breeding sows increased by 2.6 percent. Pig fattening was sustained, suggesting that the smaller local rural marketing procedures were largely unaffected by the crisis that affected the larger urban suppliers located in the social sector in Vojvodina.

Sheep numbers declined in both regions, particularly in Vojvodina, where breeding ewes have been reduced by 52 percent as against 18 percent in Central Serbia, whose rough grazing and meadows sustain extensive systems for households with no alternative means of livelihood. Generally, in the private sector, livestock provide a source of animal products for household consumption as well as a source of income in both Regions that acts as a safety net. Given the size of the private farms, stock-holdings per private unit have always been small consisting of 2 cows plus followers, 3 or four pigs and 20 to 30 chickens. Recent years have witnessed a decline in numbers as breeding stock have bottomed-out on such farms. Fattening stock numbers vary from year to year according to maize availability. For instance, last year's poor maize harvest has not encouraged any more than the lowest numbers of fattening stock to be kept for household needs. Indeed, in the past year, the decrease in stock numbers, across the board, has been more dramatic than at any other time in the past decade due to the poor wheat and maize harvests, which cut back access to wheat bran and feeding maize to social and private enterprises alike. Data from both sectors shown in Table 6 confirm a 6 to 8 percent loss in breeding stock in Central Serbia and Vojvodina over that period. Farmers most severely hit by the bottoming-out of the breeding sub-sector are the hill farmers in Central Serbia, who rely on livestock as their main source of income. The data suggest they are not able to retain herd and flock replacements under the current conditions.

Table 6: Breeding Stock Changes (000's head)

Reduction in numbers of fattening stock and followers were 15 percent and 11 percent respectively. Table 6 also indicates that the comparative importance of the social sector in Vojvodina, particularly to the pig industry, has been maintained. No abnormal pest or disease outbreaks have been reported, and veterinary services have been functioning.

This year the mild winter and good rains have benefited all classes of stock and animal performance is expected to be good. No untoward incidents of pests or disease outbreaks were reported and both the A service and veterinary service were noted to be functioning in the areas visited by the Mission.

Animal Feed Use 2001-2002

Maize production this year is forecast at 5.41 million tonnes and 2.59 million tonnes should supply 646 000 tonnes of bran plus a variable wheat grain component of on-farm produced rations that depends on household circumstances. Anticipating an average annual per capita use of supplementary feed for existing stock numbers at 1 tonne, for cows, 0.70 tonnes for followers; 0.02 tonnes for ewe and lamb couples; 1.2 tonnes for sows and 0.45 tonnes for fatteners; and 0.120g per day for layers and pullets (20 million birds), the demand for cereal-based supplementary feed is likely to be in the order of 4.13 million tonnes which should be more than adequately covered this year, leaving a substantial quantity of maize for export.

3.5 Markets and Prices

The bulk of food storage, processing and distribution facilities are in the state sector, often consisting of large enterprises or kombinats closely linked to the state. However, small-scale private enterprises have recently emerged in the marketing and trade of food products. 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 areas. Private farmers have traditionally had the option of selling their produce independently on the "green" market, but these markets are small in scope, and unsuitable for crops requiring industrial processing.

Until October 2000, the state regulated the prices of most crops and livestock products and prices of agricultural products were used as one of the key features of the social safety net by Serbian authorities. A controlled regime was imposed on prices of all main agricultural products. Considering that the state was the main buyer of harvested crops, farmers and agricultural enterprises had limited alternatives. However, as the overall economy became depressed, the ability of the state to compensate for losses to the producers decreased and the main burden of low agricultural prices was born by producers. This led to a substantial decrease in the production of main agricultural products with reallocation of land to products not affected by price regulation. The regulated price of wheat was the minimum guaranteed purchase price at which purchases were made for State Reserves, but in effect was the ruling price at which the enterprises, co-operatives and kombinats could make purchases. Since the market liberalization process began in October 2000, there are no more restrictions to trade and the former regime of export and import licences has been eliminated. Fresh milk and white bread are the only remaining food items still subsidized by the state, there is 30 percent producer subsidy on milk production (roughly 4 YuD/Litre), while a type of white bread is subsidized through state and designated private bakeries.

Figure 2 below shows producer and retailer price indices for agricultural products inflation and wage rate indices from 2000 to 2001. Producer prices seem to have increased more rapidly than the general consumer prices and wage rates, while retail food prices have continuously lagged behind inflation, producer prices and wage rates. The gap between the agricultural producer prices, inflation and food consumer prices has increasingly widened over the past 15 months.

Figure 3 depicts retail prices of major food items between March 2000 and March 2001. The effect of market deregulation in October clearly shows a surge in retail prices, in particular sugar prices. The price levels seem to have levelled after November 2000, while milk prices seem to have shot up again during the first quarter of this year. As shown in Figure 2 wage rates have kept up with inflation, hence no major decline in consumer purchasing power has been experienced.

.

4. WHEAT SUPPLY AND DEMAND 2001-2002

Bread is the main staple in Serbia. Per capita consumption is high and varies from year to year between 190 and 220 kg per year according to official sources. The estimated supply and demand balance for Serbia is shown in Table 7. The following parametres have been used in the calculation:

• Mid-year population of 9.26 million including 8.94 million indigenous Serbs; 250 000 long-term refugees no longer fed under separate schemes; 70 000 IDPs outside of the targeting range of feeding programmes;
• Opening stocks of wheat at 210 000 tonnes including 7 333 tonnes of food aid wheat, in-country in the form of flour;
• Food consumption at 198 kg per head per annum based on updated information for Serbia from the Institute of Statistics, Belgrade. This is higher than the 180 kg per annum used last year and significantly affects estimated local demand;
• Feed component of on-farm rations in Central Serbia at 100 000 tonnes;
• Post-harvest losses of 4 percent for a harvest of 2.585 million tonnes;
• Wheat seed requirement for the coming year of 0.330 kg per hectare for 650 000 ha;
• Closing stocks at some 230 000 tonnes.

Table 7: Serbia - Wheat Supply/Demand Balance (`000 tonnes)

The Mission anticipated a surplus of 313 700 tonnes that would be available for export to neighbouring provinces and to Russia to offset debts for gas. This estimate is higher than the official export figures in 1999 at 175 000 tonnes and in 1998 at 150 000 tonnes. It is worth noting that 780 000 tonnes of wheat were exported from the FRY in 1991.

5. RELIEF FOOD ASSISTANCE

5.1 Food Aid Intervention in Serbia in 2000 - 2001

During the year 2000 and 2001, WFP had two types of food aid interventions in Serbia:

Food Aid Distribution to Vulnerable Beneficiaries

During the period 1 January 2000 - 20 June 2001, WFP delivered to Serbia 131 767 tonnes of food for distributions to vulnerable people (refugees and social cases), as follows:

Table 8: Food Aid Distribution

Of the 131 767 tonnes of food distributed, 33 611 tonnes were locally purchased (32 682 tonnes of wheat flour and 929 tonnes of salt), while 98 156 tonnes were imported from other countries.

EC Agriculture Support and Price Stabilization Project

Following the change of Government in Serbia in October 2000, the Donor's interest in Serbia grew. Consequently, WFP was requested by the EC to cover the procurement and logistics parts of an agriculture support and price stabilization project for Serbia. Thus, in order to achieve price stabilization of the local sugar and vegetable oil markets in Serbia (see Figure 3, above), the EC has made available funds for procurement of 15 000 tonnes of vegetable oil and 15 000 tonnes of sugar to be purchased on the international market for subsequent distribution in Serbia through local supermarket chains. WFP's role was to procure commodities at the international market and to deliver them in bulk to local sugar and oil factories selected by the EC. Commodities were sold at competitive prices in the local supermarkets and the funds generated were earmarked for investment in agriculture.

Procurement and delivery is still in process. Sugar delivery of 15 000 tonnes was successfully completed. Of the planned 15 000 tonnes of vegetable oil, 6 940 tonnes have already been delivered, while the remaining 8 600 tonnes are in the pipeline.

5.2 Food Assistance Programme for 2001-2002

Following the recent Joint UNHCR/WFP Food Needs Assessments, the food aid strategy in Serbia is now to progressively phase out the operation. However, the critical transition period that Serbia is facing since October 2000, suggests that food aid (albeit at diminishing levels) should continue to be one of the components of the international community temporary support to the Serbian reforms throughout 2001 and 2002.

The programme is currently assisting long-term refugees and social cases as planned in the approved extension of the Emergency operation last year. WFP is targeting about 575 000 beneficiaries, comprising 215 000 refugees and around 360 000 social cases. Among the refugees, a large majority is housed in private accommodation. There are various categories of social cases, the principal ones being the social pensioners (receiving the minimum pension) and the recipients of social welfare benefits.

This caseload will be progressively phased down, in line with the recommendations of the JFNAM mission mentioned above, the reduction during the year 2002 will be adapted to the progress in the social sector reform.

The targeting criteria adopted are in line with the social welfare assistance scheme, which is turning to the concept of vulnerability across all groups instead of targeting beneficiaries by specific categories.

The WFP programme in Serbia is based on the planning adopted for the Emergency Operation document approved last year. Under its phase-down strategy, the operation will focus on a gradual handover of the social cases to relevant government bodies. In the meantime, WFP will continue to liaise with UNHCR and ICRC in order to sharpen the targeting of the refugees and IDPs caseloads.

WFP implementing partners, in collaboration with WFP Monitoring teams, will provide all the assistance required to LDPs to achieve the re-targeting to the people most in need.

Other food aid programmes are also phasing down. The fresh food programmes implemented by CARE and funded through UNHCR and ECHO are soon to be phased out. Funding for further assistance with fresh food was not confirmed by the time of the mission. The ICRC Kitchen Soup Program will be handed over to the Serbian Red Cross in July 2001 and will continue depending on confirmation of further funding.

1 Sources of information include: Breaking with the past: the path to stability and growth (including Economic Recovery and Transition Program) vol. 1 and 2, FRY and the World Bank, June 2001; Country Profile 2000: Yugoslavia (Serbia and Montenegro), the Economic Intelligence Unit.

2 Combines with 4m cuts are small and manoeuvrable. The main effect would appear to be prolonging the harvesting time in such fields; but no extra changes were being made. Combining rates ranged from 130-170 DM depending on location, competition and whether baling was included.

3 Black market fuel was often purchased daily in litre bottles.

4 After aluminium, raspberries from Central Serbia were the most important export item in recent years (G17).