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Serbia’s Agricultural Sector Grapples with Significant Challenges Due to Depressed Prices for Producers

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The yields of basic crops were solid last year, but their prices on the world market have been extremely low for quite some time, so farmers hardly reap significant material benefits from the abundant harvest. It is particularly challenging to sell wheat and sunflower, even though their prices are among the lowest in the last 15 years.

The situation with wheat is critical; farmers still sow it willingly due to its indispensable role in crop rotation, but there is no significant profit from extensive cultivation of this crop in Serbia, as reported by portal 021.

The autumn of 2022 will remain memorable for local farmers. The price of a ton of grain on the world market reached as high as 330 euros, and domestically it was sold for around 42 to 43 dinars per kilogram. In Serbia, a traditional exporter, there was approximately 1.4 million tons of wheat for export at that time.

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However, guided by the usual logic that prices are noticeably higher in the middle of winter or in spring than the previous autumn, farmers were less inclined to sell.

Wrong calculation

The farmers calculated a significant profit, so during the autumn sowing of 2022, they planted this crop on a staggering 720,000 hectares, 40% more than usual. An additional reason is the use of “attic” seeds in Serbia and the reduction of fertilizer usage to make cultivation cheaper. While this is a simple approach for wheat, it decreases yields and, more significantly, leads to a decline in the quality of the harvest.

The state also played its part poorly. When the war started in Ukraine, incorrectly assessing the situation with food reserves, it banned exports, even though the surplus of wheat never dropped below 1.2 million tons at any point.

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Of course, misfortune never comes alone. The decline in pig fattening also led to a reduced use of wheat for livestock feed, which is a common practice in regions south of the Sava and Danube rivers. Thus, in July of last year, we found ourselves with 1.2 million unsold stocks, and there was still a harvest of 3.45 million tons. As our annual needs are not higher than 1.55 million tons, there were 3.1 million tons of surplus in storage, earmarked for export after setting aside goods for domestic needs.

Seemingly better

The problem is that there has been a drop in the price on the world markets to around 210 euros, and these prices persist today. In the last three months of the previous year, barely 600,000 tons were exported, leaving around 2.3 million tons surplus in Serbia. Considering the price, exports are on the verge of profitability.

Farmers reacted by reducing autumn sowing by 18%, to approximately 590,000 hectares, which is still noticeably above the usual acreage. It is estimated that by July, with the new harvest, the surplus for export could reach 3.3 million tons, and there will be significant issues with storage. Simply put, the entire organization of wheat cultivation in our country relies on exports, from which profits and foreign exchange have been coming for years.

With corn, the situation is only seemingly better. After a brief pause, larger orders started coming from the world markets in the second half of last year, and we sold almost 750,000 tons in three months. However, last year’s harvest of 6.8 million tons allows for exports of around 2.8 million tons.

There are already orders for larger quantities than those exported. The problem lies in the price. It is challenging to obtain more than 165 euros on the world markets, so the price for Serbian farmers ranges between 17 and 18.5 dinars per kilogram. Just two seasons earlier, it reached 290 euros, or 32 dinars.

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