Serbian agriculture: a solid sector, with plenty more rewards to reap
At first glance Serbia’s agricultural sector may seem to be trudging along. But look more closely and you’ll see rich and exciting opportunities
Agriculture is a vital cog in the Serbian economy, contributing 6.3% to GDP in 2020 and on average 6-7% annually over the last decade.
Serbia is among the European countries with favourable land resources, since it has 0.7 ha of agricultural or 0.45 ha of arable space per capita and, as of 2020, the sector employs around 15% of the total labour force – high in comparison to other countries. Unsurprisingly, agriculture is a primary export field, too.
Foreign direct investment has seen a boost to other areas of the economy, such as manufacturing, which gives the false impression of Serbian agriculture slowing down. In reality, it is thriving. “Agriculture is one of the strongest parts of the economy, recording a positive trade balance, and a significant contribution to the export economy of Serbia,” says Predrag Milenović, Head of Corporate and SME Division of Banca Intesa, Belgrade.
A source of stability in testing times
Serbia’s strength in agriculture helped stabilise the GDP of the entire country in the face of the Covid-19 pandemic. 2020-21 saw good yields and the government didn’t apply restrictions for producers.
In fact, the Minister of Agriculture launched an initiative to help small producers sell produce online, to counter the closure of market stalls during the state of emergency when Covid-19 hit.
Domestic shoppers, who already spend a large proportion of their income on food (around 35%), spent more in the face of lockdowns and the closure of restaurants. “Agriculture saved us last year, in terms of the economy, in terms of GDP. It delivered very good results,” says Milenović.
Way before such times of global crisis, Banca Intesa helped lay the groundwork for a robust agricultural sector in Serbia, introducing a specialised agricultural service model in 2008.
“It recognised agriculture as one of the most important business segments and tried to accommodate our service model in our branches,” says Milenović. “In the last 13 years we have learnt a lot: how to serve them, what kind of products they need, what kind of support and advisory products they need.”
Small producers, big opportunities
Serbia’s agricultural story is one of contrasts: 70-80% of farms are small producers, with less than five hectares, less than adequate infrastructure and no specialised production equipment.
As in many European countries, the past three decades has seen rural areas depopulate, meaning workforce numbers are falling.
Young people are moving to cities in increasing numbers and together with a lack of consistency in the government’s agrarian policy, another lingering hangover of the transition from a socialist economy, there have been stagnant periods in the development of small holdings. “We need to harmonise our processes with the standards of the marketplace,” says Milenović. “This is one of our key challenges.”
During the socialist period the infrastructure for irrigation in the north of the country was built, but it has not been deployed to its full potential. Only 1.5% of land is currently under irrigation, against the European standard of 17%.
Changeable weather means volatility of food production is very high, and both modernising and mobilising the irrigation structures in the country could help to stabilise it.
“This is one of the important enablers for future development,” says Milenović. Other areas for development come from implementing the Circular Economy to make food production efficient and make the best use of food waste.
Banca Intesa offers support to even the smallest of agricultural businesses by advising them on how to access resources beyond just immediate finance. For example, Serbia is in a favourable position to access financial resources through the EPA programme, (a US-European environmental initiative that includes financing tools). Agribusinesses can combine financing applications with grant applications for modernisation.
“The idea is not only to finance them, not only to have a specialised product in terms of loans, but to try to help them utilise all available instruments that they can get from the market. Some of those come from EU funds, some from the Ministry of Agriculture, some we have even created ourselves as a bank,” says Milenović.
Additionally, through a credit line with the European Bank for Reconstruction and Development (EBRD) and the European Union (EU), Intesa Leasing offers SMEs access to finance for the purchase of construction, agricultural and production equipment and commercial vehicles to improve their competitiveness. The arrangement allows companies to recoup 50% of the total investment costs. [2020 SOURCE]
While there are many smallholdings, the other story in Serbia is of big agricultural companies adopting and creating state-of-the-art technology, growing at pace and giving examples to smaller, more cautious producers on how agri-tech can help their business.
Soil nutrition, disease management, consumer sales and risk management are key areas where technology is changing agribusiness practices in Serbia – and agri-tech is an exciting adjacent sector.
For example, the BioSense Institute in Novi Sad has developed technologies to give ‘agri advice’ in real time. Based on modelling, the tech advises producers on the kind of protections they have to apply to their crops. “Our technologies are recognised locally but also globally,” says Milenović.
With the help of agri-tech, apple production in Serbia has scaled so well that it is
one of the main export products to Russia. In the near future, other larger agribusiness in Serbia will likely repeat this pattern, supplying big chains, as well as big countries.
Another, less obvious opportunity lay with the development and backing of small producers, who are creating natural and niche products that bear the mark of Serbian agricultural pride.