Yugoslavia - Agriculture sector update

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 8243-YU YUGOSLAVIA AGRICULTURE SECTOR UPDATE May 21, 1990 Agriculture Operations Division Country Department IV Europe, Middle East and North Africa Region This document has a restric.ed distributlon and may be used by reciplents only In the perfofrmance of thelr oflcial duties. hs contents may not otherwise be disclosed wihout World Bank authorizatlon.  CIJRRENCY EQUIVALENTS Currency Unit = Dinar (Din) US$1.00 = Din 16,000 (July 1989) GLOSSARY Al Artificial Insemination AIK Agroindustrial Combine BOAL Basic Organization of Associated Labor COAL Composite Organization of Associated Labor EC European Economic Community FAO Food and Agriculture Organization FEC Federal Executive Council of the Republics GATT General Agreement on Tariffs and Trade GSP Gross Social Product IPM Integrated Pest Management NPC Nominal Protection Coefficient NBY National Bank of Yugoslavia PS Private Sector SS Socialist Sector SMS Subject Matter Specialist RAPs Republics and Provinces  Document of The World Bank FOR OFFICIAL USE ONLY Report No. 8243-YU YUGOSLAVIA AGRICULTURE SECTOR UPDATE May 21, 1990 Agriculture Operations Division Country Department IV Europe, Middle East and North Africa Re-ion This cocumeni has a resfnc!ert dismolution and may De useo DV erecipients oniv .n Ine pertormance ot their otfical outies tS contents 'i3v not omnerwise ne C:sc:osea vanout wvona eatnx autnorizaiton.X  CURRENCY EQUIVALENTS Currency Unit = Dinar (Din) US$1.00 = Din 16,000 (July 1989) GLOSSARY Al Artificial Insemination AIK Agroindustrial Combine BOAL Basic Organization of Associated Labor COAL Composite Organization of Associatea Labor EC European Economic Communitv FAO Food and Agriculture Organization FEC Federal Executive Council of the Republics GATT General Agreemenc on Tariffs and Trade GSP Gross Social Product IP.H Integrated Pest Management NIPC Nominal Protection Coefficient NBY National Bank of Yugoslavia PS Private Sector SS Socialist Sector SMS Subject Matter Specialist RAPs Republics and Provinces  YUGOSLAVIA AGRICULTURE SECTOR UPDATE Table of Contents Page No. EXECUTIVE SUMMARY i-xi I. INTRODUCTION. . . . . . . . . . . . . . . . . 1 Background. . . . . . . . . . . . . . . . . 1 The Current Situation in Agriculture. . . . . . . . . . 2 Purpose and Organization of the Study. . . . . . . . . . . 4 II. FAPR STRUCTURE AND AGR1CULTURAL PRODUCTIUN. . . . . . . . . 6 Land Use. . . . . . . . . . . . . . . . . . . . . . 6 Farm Size and Ownership. . . . . . . . . . . . . . . . . . 8 Cooperation Betweer the Individual and Social Sectors. . . . 12 Historical Perspective of Agricultural Production . . . . . . 13 Characteristics of Agricultural Production. . . . . . . . . 15 Crop Production. . . . . . . . . . . . . . . 15 Livestock Production. . . . . . . . . . . . . . . . . . 20 Etnironmental Concerns. . . . . . . . . . . . . . . . . . . 23 III. AGRICULTURAL SERVICES, INPUTS AND TECHNOLOGY. . . . . . 25 AGRICULTUP.AL SERVICES. . . . . . . . . . . . . . . . . . 25 Agricultural Research and Extension . . . . . . . ..... . 25 Veterinary Services .... . . . . . . . . . . . . . . . . 27 Plant Protection Services ... . . . . . . . . . . . . . . 27 Contractual Services . . . . . . . . . . . . . ..... . 28 Marketing . . . . . . . . . . . . . . . . . ....... . 28 Credit .... . . . . . . . . . . . . . . . . . . . . . . 29 AGRICULTURAL INPUTS. . . . . . . . . . . 29 Fertilizers. . . . . . . . . . . . 30 Pesticides. . . . . . . . . . . . . . 30 Certified Seeds. . . . . . . . . . . . . . . . 31 Animal Feeds. . . . . . . . . . . . . . . . . . 31 Mechanization. . . . . . . . . . . . . . . . . . 31 AGRICULTURAL TECHNOLOGY. . . . . . . . . . . . . . 32 IV. AGRICULTURAL PRICES AND SUBSIDIES.4 . . . . . . . . . . . AGRICULTURAL PRICE POLICY. . . . . . . . . . . . . . . . . . . 34 Historical Perspective . . . . . . . . . . . . . . . . 34 The Mechanism of Protective Prices for Basic Agricultural Commodities. . . . . . . . . . . . . . . . . . . . 35  IV. AGRICULTIJRAL PRICE AND SUBSIDIES (cont'd) P .ces of Major Agricultural Products . . . . . . . . . . . 37 Agri_ultural Terms of Trade, 1978-1988 . . . . . . . . . . 38 Yugoslav Prices for Primary Products in Relation to Border Prices . . . . . . . . . . . . . . . . . . . . 39 Fertilizer Pricing . . . . . . . . . . . . . . . . . . . . 40 Conclusions and Recommendations . . . . . . . . . . . . . . 40 SUBSIDIES TO AGRICULTURE . . . . . . . . . . . . . . . . . . . . 42 Producer Price Premiums . . . . . . . . . . . . . . . . . 43 Agricultural Input Subsidies . . . . . . . . . . . . . . . 43 Lending Interest Subsid -s for Agriculture . . . . . . . . 44 Compensation Payments . . . . . . . . . . . . . . . . . . . 45 Food Commodity Reserves . . . . . . . . . . . . . . . . . . 45 Recommendations . . . . . . . . . . . . . . . . . . . . . . 46 V. FOREIGN TRADE . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Foreign Trade in Perspective . . . . . . . . . . . . . . . 48 Trade of Agricultural Commodities, 1975-88 . . . . . . . . 48 E-port Patterns of the Major Agricultural Commodities . . . 49 Import Patterns of the Major Agricultural Commodities . . . 51 Agriculture and Relations with the European Economic Community . . . . . . . . . . . . . . . . . . . . . . . 53 Government Policies Affecting Trade Performance . . . . . . 54 VI. AGRICULTURAI. REFCRM AND STRATEGY . . . . . . . . . . . . . . . . 57 The Sector Setting in a Reform Context . . . . . . . . . . 57 Social Sector Agriculture . . . . . . . . . . . . . . . . . 59 Private Agriculture . . . . . . . . . . . . . . . . . . . . 61 ANNEX I CROP PRODUCTION ANNEX II LIVESTOCK PRODUCTION ANNEX III AGRICULTURAL SERVICES AND INPUTS ANNEX IV AGRICULTURAL PRICE POLICY ANNEX V SUBSIDIES TO AGRICULTURE ANNEX VI FOREIGN TRADE AND MArJ(ET POTENTIAL ANNEX VII TABLES MAP IBRD 20807 This report reflects the findings of G. Ablasser (leader), 0. Honisch (Bank) and M. Bral (FAO/CP), who participated in a mission to Yugoslavia in June/July 1989.  YUGOSLAVIA AGRICULTURE SECTOR UPDATE EXECUTIVE SUMMARY (i) Yugoslavia's agriculture sector has been performing poorly in the 1980s and continues to deteriorate. The main reasons are the difficult situation in the economy at large and unfavoraole government policies .owards the sector. Agriculture accounts for about 19% of the cotWntry's work force, 14% of Gross Social Product, under 10% of exports and less than 9% of investments. (ii) The sector's role in the macro-economic context is significant in several respects. In the medium term, a potentially favorable supply response from private agriculture would make a major contribution to government's economic adjustment and staGitlization efforts. In the longer term, provided constraints are alleviated and incentives improved, the sector should be able to achieve greater international competitiveness and sustain a larger contribution to domestic food supplies and to economic value added generally than is presently the case. Increased domestic and foreign trade in the sector would tend to increase overall efficiency of resource use and thus contribute to overall economic growth in tbe country. There are prospects fir increasing agricultural exports. Among the other features, agriculture will remain a principal source of household income in many rural areas. The relatively large size of the agricultural labor force, while adversely affPcting labor productivity in the sector, currenLly also helpg to alleviate employment problems in other sectors and as such has a stabilizing effect. Agricultural activities can be expected to play an important role in alleviating rural pove-ty, the prevailing ferm of poverty in Yugoslavia. Moreover, a large share of workers employed abroad is drawn from the agricultural labor pool, and growing future labor requirements in the domestic industria'l and service sectors will to a significant extent be met from this source. (iii)