Milan Prostran, Agricultural Economist

Serbia is a country of great natural resources that has good and well-educated farmers. That’s why, during these global crises, there are no major food supply problems and Serbia is managing to provide enough food for both its own needs and those of neighbouring countries

The war in Ukraine and sanctions imposed against Russia have served to remind us once again that the agricultural sector is of strategic importance during both peacetime and war, as our interlocutor, agricultural economist Milan Prostran, likes to say.

One of Serbia’s preeminent experts in this field, during this conversation with him we touched on new technologies and the enduring poverty in Serbia that ensures the level of meat consumption in our country remains below that of the former Yugoslavia. As a recurring theme of this entire interview, and a way of better understanding the context in which farmers and the food industry operate, one of our interlocutor’s statements stand out – when he states that, over the course of more than 20 years, he’s failed to convince the authorities, from any part of the political spectrum in Serbia, of the need to invest more in this sector. Perhaps this crisis provides an opportunity for that.

“Food for the future” is among the key sectors singled out within the scope of smart specialisation processes as representing a competitive advantage for Serbia. Are you encouraged by this when it comes to the development of agriculture and the food industry in Serbia?

Serbia, as an agrarian country, has fewer worries than many other countries when it comes to food production. In the former Yugoslavia, Serbia produced 60 per cent of total food required for all Yugoslav republics, while today it exports surplus production and the turnover generated from exports of agricultural products exceeds four billion dollars and is heading towards five billion. On that front, Serbia has no major problems supplying its own population with food during these global crises, while it also participates significantly when it comes to serving the basic needs of the countries of the region for food and agricultural products.

On the other hand, Serbian agriculture has yet to receive the respect it deserves from the government, from the creators of budgetary policy and incentive systems, and we shouldn’t overlook the fact that this sector sustained great devastation during the privatisation process. We should also add to this the difficulties experienced by associated industries that ensure that, today, our farmers have major procurement problems with mineral fertilisers, plant protection products, agricultural machinery and spare parts, while there are also global issues, such as the price of oil as an ever-increasing cost.

From the standpoint of unexploited potential, our country is dominated up to 78 per cent by small farmers and agricultural smallholdings with estates of less than 0.5 to five hectares, which is also our critical point to an extent. That is a task for the years ahead: to utilise this great potential of small and medium-sized producers in the function of increased food production and increased income.

Nonetheless, regardless of all of its problems, Serbia is a lucky country of great natural resources that has good and well-educated farmers and which manages, despite the circumstances, to provide enough food for both its own needs and those of neighbouring countries.

You are of the opinion that the agrarian budget’s share of the national budget of the Republic of Serbia should correlate to agriculture’s contribution to generating the country’s GDP. Why is this still not the case?

The agrarian budget is 50 per cent lower than deserved, which I’ve been trying to convince the authorities of for more than 20 years. Although a law was passed stipulating that the share of the agrarian budget mustn’t be less than five per cent of the total national budget of the Republic of Serbia, that five per cent has never been achieved.

In today’s difficult conditions, agricultural resources have been shown to be the most precious, and countries that have large areas of well-utilised agricultural land are the happiest. When things are established in such a way, it’s clear that we will suffer for a while due to the sale of land to foreigners, but it is what it is

Over the last 10 years, according to the new calculation methodology, agriculture has contributed a share of around 9.5% to the country’s social product, while I’ve always insisted that it should be at least 10 per cent. If that was the case, instead of 400 million euros, its share would amount to a billion euros, and if the budget of Serbia had a billion euros a year for the needs of agriculture, we could do much more. Unfortunately, we won’t have higher investments and more intensive programmes for agriculture without a higher agrarian budget. This correlation must be established.

Agriculture is today a sector where new technologies are being applied more than ever – from smart tractors to artificial intelligence. How can Serbia handle such technological changes if 80% of farmland is still in the hands of small owners?

These problems aren’t easy to overcome. U.S. and EU experience shows that the state must have a professional service that’s better organised and 100 per cent funded from the state budget. In the U.S., for example, the optimal farm size is 1,000 hectares, because that reduces costs and increases productivity, which is why, in our country, trust is again being placed in the cooperative system or the communal system. Small, independent farmers can’t compete on the market if they aren’t backed by an association that will protect them and unify them in an economic sense, which will have both educational and lending functions. That unification is key, provided we don’t disregard the weaknesses of the former cooperatives and we restore everything that was positive. This is also how the EU works, via so-called cooperatives that are the equivalent of our agricultural cooperatives.

This would also enable the better utilisation of resources and secure the long-term security of farmers, because we mustn’t forget that agriculture is an open-air factory and that it carries huge risks regardless of the availability of modern devices and technologies.

This is also a story of education to a certain extent. We have developed education, several agricultural colleges, a few good agricultural secondary schools, and it’s particularly important that a large proportion of these young people are being educated to work on their own farms, which guarantees more intensive production, higher yields and higher income.

When we liberalised the agricultural sector, we also made it possible for foreigners to own land, prompting great fears that all our land would be bought. What actually happened to the ownership structure of farmland in Serbia?

This was the consequence of a mistake made during the signing the of the [EU] Stabilisation and Association Agreement, when we were purportedly promised that we would become a full member of the EU in 2016. We conceded to the 2008 agreement allowing the sale of land to foreigners after only four years, despite us not even being close to joining the EU. Unfortunately, the SAA cannot be changed.

In my opinion, prices will continue rising until autumn, until the harvest is finished. If the wars stop, if the prices of additional components fall, a better period will begin in 2023

The largest swathes of agricultural land still remain in the hands of domestic owners, but there are also large areas held by companies from Arabic countries, while there are also Croatian landowners. The latest major transaction was the sale of PKB to company Al Dahra.

Do you expect the war in Ukraine and the sanctions imposed against Russia to substantially change the way all countries, including Serbia, view agriculture as a strategic resource – as you said, during both war and peacetime?

I think that many countries that don’t have developed agriculture, or don’t have enough agricultural products, will finally change their attitude towards this resource. When sanctions were imposed against Russia in 2014, it’s agriculture was very underdeveloped, even in parts of the country with excellent conditions to do so. They quickly changed their agrarian policy and, to the surprise of everyone, Russia became one of the world’s largest producers of wheat, barley and rye, and one of the largest fruit producers. And today many countries, including us, I hope, will change their stance regarding agriculture. It is important that this need is grasped by the politicians who make decisions, and the crisis is an opportunity for that.

What will this war change when it comes to agricultural production and prices in our country?

Prices will rise and we, unfortunately, won’t be able to influence that much, primarily due to the global market, or due to the high prices of energy, mineral fertilisers, plant protection products, agricultural machinery, spare parts and other outgoings that are included in the cost of agricultural products. Wealthy countries will be able to use subsidies to compensate for prices, i.e., to use budget contributions to help agricultural producers slightly reduce the prices of their products. Another way is for farmers not to use some of these components, to save on additions, but that would reduce their yields, and thereby also their offer, which would again result price hikes.

In my opinion, prices will continue rising until autumn, until the harvest is finished. If the wars stop, if the prices of additional components fall, a better period will begin in 2023. We mustn’t forget that these two warring countries, Ukraine and Russia, are responsible for more than 80 per cent of the world’s total production of sunflower oil and more than 25 per cent of world wheat production, and that can’t help but be reflected on the market.

We used to consume 65 kilograms of meat per capita annually, while today that total has fallen to 52 kilograms, which is significantly below the EU average. Should we rejoice in that as part of the transition to healthier lifestyles, or is it still a sign of poverty?

During the time of our crisis, in the 1990s, meat consumption fell from 65 to 30 kilos. That total has improved slightly over the past twenty-odd years and we’ve now reached a level of 52 kgs per capita, but I don’t believe we’ll return to old levels anytime soon. We have a large number of ‘national kitchens’ [to feed the poor], which – as my parents told me – didn’t exist even in the post-WWII period, when the country was devastated. We have a lot of poor citizens who survive on basic foodstuffs and for whom meat is inaccessible, even the cheaper categories of meat. Beef today costs more than 1,000 dinars a kilo, veal costs more than 1,500 dinars, and quality chicken meat costs more than 500 dinars.

Does it make sense today to promote “meat produced in Serbia” if our livestock farming is under threat?

The numbers are terrible… In 1975 we had 2,250,000 head of livestock, while today we have approximately 800,000. Livestock is in a great crisis, and numbers of all domestic animals, with the exception of goats, are facing major decline. People have forgotten that destroying livestock also destroys agricultural land, because we have no organic manure and we don’t sow grass, unlike the Netherlands, which is important for recultivating land. You know, for example, that irrigation is extremely inefficient, and even harmful, without manure, because runoff/ leaching turns agricultural lands into barren wastelands or deserts.

I’ve been to Israel twice and seen how irrigation and manure turns deserts into fertile land. And they wouldn’t be able to do that without developed livestock, fantastic farms and the highest production of milk.

Livestock farming is the engine that drives agriculture, as shown by the fact that the value of European agriculture is set 70 per cent through livestock and only 30 per cent through plant production. Unfortunately, that ratio is flipped in our country, so livestock accounts for only 30 per cent of agriculture.