Snapshot of Serbia's Agricultural Sector

Snapshot of Serbia's Agricultural Sector

According to the first results of Serbia's Census of Agriculture 2012, there are 631,122 agricultural holdings in Republic of Serbia: 2,567 holdings of legal entities and unincorporated enterprises and 628,555 family agricultural holdings. The Republic of Serbia has the total...

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Snapshot of Serbia's Agricultural Sector Business News Correspondent - 20.09.2013

According to the first results of Serbia's Census of Agriculture 2012, there are 631,122 agricultural holdings in Republic of Serbia: 2,567 holdings of legal entities and unincorporated enterprises and 628,555 family agricultural holdings. The Republic of Serbia has the total utilized agricultural area of 3,355,859ha in its territory, while the total number of cattle amounts to 908,990: 3,403,288 pigs, 1,729,278 sheep, 235,576 goats, 2,662,738 poultry and 673,651 colonies of bees.
Agricultural holdings in the territory of the Republic of Serbia have 408.734 two-axle tractors in their ownership.
The agricultural holdings in the territory of region Vojvodine, i.e. Juznobanatska oblast utilize the largest agricultural area.
An average family holdings in Serbia uses 4.5ha of agricultural land, owns one two-axle tractor and raises and raises one head of cattle, four heads of pig, three heads of sheep, 26 heads of poultry and one colony of bees. Family agricultural holdings make 99.6% of the total number of agricultural holdings in the republic of Serbia. 
Family holdings participate with 91.7% in the total number of cattle in the territory of the republic of Serbia. Region of Sumadija and Western Serbia holds the first place by the number of cattle in the republic of Serbia. Srbija – jug participates with 53% in the total number of pigs in the republic of Serbia. Vojvodina features the largest number of pigs, while the largest number of pigs resides in Macva region. The largest number of sheep and colonies of bees are found in Sumadija and Western Serbia. Southern and Eastern Serbia are in lead when it comes to number of goats, while poultry is the most widely raised in Vojvodina.
Southern and Eastern Serbia also feature the largest number of tractors per 100ha of utilized agricultural area.
Family holdings in Serbia predominantly utilize up to 2ha of agricultural land.
The agricultural sector can be divided into several sub-sectors - primary agricultural production, production of animal feed and trade of agricultural products. Overall, the agricultural sector is well operated for the third year row, achieving the growth of revenues of close to 24% in 2011. However, this increase was mostly driven by companies from the field of primary production and tot so much by the trading companies and companies engaged in the production animal feed.
The price of wheat on the global market has increased after the field fires in Russia in August 2010 and this has spurred the rapid growth in exports of wheat from Serbia. This has led to the decision to plant a larger area under wheat. Intensive exports have led to the introduction of Regulation on the three-month ban on the export of wheat and flour from March to June 2011 in order not to jeopardize the national reserves. As if 2009, Serbia is a net exporter of agricultural products. Total agricultural exports in 2011 amounted to €674 million and that is a 23.6 percent increase compared to 2010. The largest exporters of agricultural products in 2011 were: Delta Agrar (€23 million), Consul (€18.7 million ), Almex (€11.8 million) and Gaby (€11.5 million).
Although Delta Agrar primarily deals with the trade of agricultural products and production of food and animal feed, it falls into this group because primary production is becoming increasingly important generator of income to the company. Delta Agrar is thus by far the largest company engaged in primary agricultural production. Its EBITDA has increased by 70% based on significant reduction in operating expenses, debt reduction and investment growth. The debt of the company was reduced by 38% (Net debt/EBITDA - 9.4 in 2010 dropped to 3.4 in 2011), which may be related to selling the Maxi retail chain to Belgian Delhaize. This sale has also launched an investment cycle with results yet to come. The Delta Agrar owns Yuhor, Danubius Mioni and Florida Bell companies which have launched a series of new products, redesigned and modernized existing lines products. Delta Agrar is continuously expanding its operations to other segments of agriculture (development of livestock).
In addition to Delta Agrar, PKB was also doing well after being taken over by the city of Belgrade. The acquisition initiated reorganization and the company got out of the debt zone. On the other hand PIK Becej continues to have serious financial problems, but unlike previous year its EBITDA had positive.
The second company on the list is Almex, which has achieved a significant increase in operating income in 2011 (38.7%) and the highest financial indicators (ROAA of 26.9%, ROAE of 56.5%, EBT margin 26.9%), with an increase in number of employees, loans and investments, which is probably related to the acquisition of Pescara PD company from Banat Karlovac (engaged in growing grains and oilseeds) at the end of 2010. For years this company takes over and consolidates smaller companies and expands activities in the fields. In addition to agricultural production, the company is engaged in manufacture and sale of machinery, as well as warehousing and transportation. In fact, vertical integration is an on-going trend across the industry. Just like Delta Agrar and Almex, other companies are also moving away from trade and beginning to invest significantly in primary production, which for these companies is a safe basis for trade. On the other hand, Victoria Logistic Granexport has streamlined its portfolio and focused on trade to the extent where its questionable where the most of the money is coming from. We have classified them as wholesalers. Expansion and increase of scope of operations is noticeable among large farmers engaged exclusively in primary production. This goes primarily to Filip from Pozarevac and ZZ Trlic where the results of aggregation were very visible in 2011. Filip recorded a growth of business incomes of 54.3% (ZZ Trlic - 48.6%). Expansion is also noticeable with small producers (sixty farmers from New Becej which were jointly granted a €7.5 million loan for the buy-off of 1,700 acres of arable land). A good wheat crop also affected the good performance of companies engaged in the mill business, of which Mlinostep, still the biggest company, recorded the highest profitability y-o-y. Ciric & Sons, which acquired Ekonomija in 2011, also stands out, as well as Veliki Braca from Vlajkovac.
Slightly lower profitability in 2011 was recorded by the manufacturers of animal feed. Seven companies in this sub-sector found their place on the Top 500 list - despite growth in operating income they have featured a decrease in EBITDA and lower financial results. One of the reasons for the decline of profitability in this group was the lower demand caused by significantly reduced livestock. On the other hand, there was a rise in prices of raw materials in 2011, primarily corn and soybeans.
Fruit yield in 2012 was at the lower level than in 2011, mainly due to extremely severe drought in the summer. This, however, did not significantly affect business performance of companies in the sector due to rise in market prices. However, according to the official statistics in September 2012, the volume of maize production in the 2012 was reduced by as much as 46 per cent y-o-y (42 percent of soya beans), and that could have had a very negative impact on manufacturers of animal feed. In that sense, Government measures to mitigate drought, doubling of the amount of subsidies for farmer’s livestock, as well as increase in milk premiums for about 40%, can have positive results. When we look at the primary agricultural production on the whole, it seems that the government is committed to supporting development of the sector. Subsidies for agriculture were increased in 2013 budget for about one per cent.
All said, local agriculture has a significant potential for growth, but only with consolidation of arable land, intensification of production and additional investments to increase productivity. This requires the long-term agricultural development strategy with clear guidelines for producers in the form of predictable conditions (premiums, subsidies and other incentives). An example of this is a very intense development of large enterprises in the agricultural sector and food complex. For this reason, in this area there is a large untapped potential, attractive for domestic and foreign investors.  SIEPA


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