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LinkingLinkingLinkingLinkingLinking
AgriculAgriculAgriculAgriculAgriculturturturturturalalalalal
Markets toMarkets toMarkets toMarkets toMarkets to
ProducersProducersProducersProducersProducers
Market Profiles and Competitiveness
Inventory Report
Subsector Profiles
September 2004
Revised October 2005
L A M PL A M PL A M PL A M PL A M PL A M PL A M PL A M PL A M PL A M P
LinkingLinkingLinkingLinkingLinking
AgriculAgriculAgriculAgriculAgriculturturturturturalalalalal
Markets toMarkets toMarkets toMarkets toMarkets to
ProducersProducersProducersProducersProducers
DairDairDairDairDairy Productiony Productiony Productiony Productiony Production
SubSubSubSubSubsectorsectorsectorsectorsector
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PREFACE
The Dairy Production Subsector Profile is 1 of 10 in-depth assessments of different agricultural prod-ucts conducted by the Linking Agricultural Markets to Producers (LAMP) Project team. Thissubsector profile is available in its original form in the compendium Market Profiles and Competi-tiveness Inventory ReportVolume 2, A Subsector Analysis, published in September 2004 under theRural and Agricultural Incomes with a Sustainable Environment (RAISE) Contract No. PCE-100-99-00001-00. Complete information about all the subsectors that the LAMP Project team exam-
ined appears in the Volume 2 report. Individual profiles of the other nine subsectors are also avail-able on request.
For more information about the LAMP Project, please contact:
ARD, Inc.
Ms. Jennifer Ward, Project Manager159 Bank Street, Suite 300Burlington, VT 05401Email: [email protected]: (802) 658-3890
USAIDLAMP
Josipa Stadlera 2471000 SarajevoBosnia Herzegovina387 33 273 590
ACKNOWLEDGMENTS
This report was prepared by the USAID LAMP Project team. Information contained in the reportwas gleaned from many sources:
Personal interviews with producers, processors, producer associations and cooperatives, Instituteof Agriculture BiH, donor organizations, Chambers of Commerce, FBiH Custom AdministrationOffice, relevant complementary projects, and others.
EC Agribusiness and Textiles in BiH, Phase I Agribusiness Report, prepared by Agrisystems and
RES&Co. Development Studies for Sectors with PotentialFood Sector Study, Bosnia and Herzegovina, prepared
by GTZ. Bosnia and Herzegovina Agribusiness StudyFinal Mission Report, prepared by IFC South East
Europe Enterprise Development (SEED). A Market Intelligence Brief for the Agribusiness and Food Processing Sector, prepared by USAID
Business Consulting Sarajevo. Reportsprepared by the U.S. Department of Agriculture (USDA). Various information available on the Internet.
Extrapolation of data and conclusions drawn by the LAMP Project team.
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Market Profiles and Competitiveness Inventory Report: Dairy Production Subsector Profile 1
1.0
OVERVIEW
Dairy Production
Subsector
Milk production is considered to be strategically important to the agricul-tural industry and the people of Bosnia and Herzegovina (BiH). More than80% of the territory is suitable for raising livestock; hence milk produc-tion. Livestock rearing is the most prevalent form of agricultural produc-tion, employing a large percentage of the farming population. Improvingconditions for the dairy sector has been a priority of the BiH governmentsince the war, with an aim to provide for domestic consumption, productsfor export, and overall economic development.
In prewar 1991, total annual milk production was estimated at 875 mil-lion liters (L). Annual average consumption of fresh milk per capita wasestimated to be 110.9 L, 6.3 L of yogurt, 7.4 kg of cheese, 0.6 kg of butter,and 3.6 kg of cream. (See sidebar and Table 1 for other characteristics ofprewar milk production in BiH.)
1.1 Prewar Status
Main Characteristics of Prewar Milk Production
Small milk producers dominated. Most farms had no more than three cows. Low milk production per cowabout 1,400 L/year (3.8 L/day). Limited organized collection and marketing of milk from small farms (1216%). Most milk
was for family use and the sale of homemade products in local markets. Genetic potential of native cows for milk production was very low. Cattle selection and
genetic improvement were not developed in the private sector. State farms had higher production per cow. These farms supplied only a small percentage (29%) of total milk
production in relation to public consumption; see Table 1. State farms received government subsidies. Small private farms were not a development priority and received
no assistance. A great part of agricultural resources and production was organized through large agribusiness conglomerates
(agrokombinats). These conglomerates integrated inputs and services with agricultural production, process-
ing, marketing, and exports.
Table 1. Prewar Milk Indicators in BiH
Number of cows
Total annual milk productionAnnual milk production per cow
Milk bought from agrokombinats% of total milk production sold to dairy processorState farms share of total milk produced
Farmers share of total milk produced
Development Indicators Amount
Source: BiH Statistic, 1991.
623,000 head
875,000,000 L1,410 L
105,000,000 L1229%
71%
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Market Profiles and Competitiveness Inventory Report: Dairy Production Subsector Profile
SWOT ANALYSISFOR DAIRY PRODUCTION
Strengths
Foreign direct investments in dairy industry
Strong existing processing capacity Favorable conditions to enter milk production
Consumer preference for domestic dairy products
Regionally recognized cheese types
Economically competitive forage production
Readily available labor at competitve cost.
Weaknesses
Small farms and segmented land holdings
Farmers lack of knowledge of improved practices, such as feed formulations and herd management
Poor infrastructure (roads)
Poor quality of raw milk; poor sanitary conditions Low income and, hence, buying power of general population
Low production per cow
Obsolete milking technology
Under-used processor capacity at current levels of production
Processors lack of management know-how
Insufficient cold-chain capacity and poorly organized milk collection in some areas
Expensive milk production (per liter) owing to uncaptured economies of scale
Lack of quality management systems
Undetermined legal status of producer/farmers makes it difficult to get loans
Late or lack of payment to farmers for milk produced
Poor connection between extension services and producers and between agriculture institutions Nonexistent programs to improve cattle breeding and breeding centers and markets for selling cattle
with improved genetics.
Opportunities
Processing capacity available to support increased raw milk production
Potential to replace imported dairy products
Exploit the market for recognized cheese types
Low-cost potential to increase milk yields and quality
Geographic advantage for producing short shelf-life products.
Threats Rural populations migrating to cities
Aging farm population
Poor rural sector liquidity
Competitive equalization price supports for domestic products not likely to develop
Institutions for quality control (export-import) and regulatory oversight are not developing adequately
All levels of government jurisdiction will continue to delay unifying milk price and quality legislation (i.e.,
FBiH floor price for raw milk).
2
1.0 Overview
(continued)
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Market Profiles and Competitiveness Inventory Report: Dairy Production Subsector Profile 3
1.0 Overview
(continued)
Impact of War on Milk Production
Number of cows reduced by 60%.
Total milk production reduced by more than 60%, in parallel with a decline in milk
production per cow. State-owned dairies not able to modernize their processing facilities.
Dairy sector infrastructure (e.g., barns, feed mills) destroyed, as was more than 80%
of farm equipment. Significant farm holdings not accessible because of land mines.
Four large state farms with 2,100 cows were destroyed.
Milk supply chain (collection stations, milk cooling tanks, vehicles) ruined.
Most of the specialized institutions that supported the dairy sector ceased operation.
1.2 Current
Situation
In recent years in both entitiesthe Republic Srpska (RS) and the FBiHdairies have collected from 10% to 12% of the total milk produced. Rea-sons for such low collection rates are related to high levels of milk sold
locally and calf feeding. The prevalence of subsistence milk productionfurther accentuates this situation. However, it is likely that collection ratesare much higher in the more developed dairy areas (perhaps 30% or more)and much lower in the mountainous areas. See Table 2.
In 2004, collected quantities increased significantly over 2003, with RScollection increasing 15% to 65.5 million L/year and FBiH collection in-creasing 30% to 56.6 million L/year. Overall, milk collection jumped from94.7 million L/year collected in 2003 to 122.2 million L in 2004, an in-crease of 23.5% within one year. BiH yields are relatively low comparedwith other European countries and have considerable margin for improve-ment, as shown in Table 2; also see Graph 1 (p. 4).
Table 2. Quantity of Milk Produced and Processed in RS and FBiH, 2004*
No. of
Cows
131,000153,000284,000
23,965,000
RSFBiHTotal
EU 25
Yieldvariance
Productivity
per Cow (L/yr)
2,9001,9484,848
5,889
3,928
Total Production
(L/yr)
385,000,000298,000,000683,000,000
141,129,885,000
Collected
Quantity (L/yr)
65,500,00056,640,000
122,140,000
128,428,000,000
Collected
(%)
1719
91
*Updated figures obtained from both entities statistical departments.European Commission (Eurostat and Directorate General for Agriculture-D1).
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Market Profiles and Competitiveness Inventory Report: Dairy Production Subsector Profile4
RS FBiH
Graph 1. Total Milk
Produced and
Collected in RS
and FBiH, 2004
400
350
300
250
200
150
100
50
0MillionLite
rsofMilk
Collected QuantityTotal Production
Graph 2.
Percentage of Raw
Milk Collected in
2002 by Entity/
Country (except as
noted for BiH
before the war)
1.3 The Situation
in Neighboring
Countries
Table 3. Farm Gate Prices by Entity/Country
Entity/
Country
RS
FBiHSM
CroatiaGermany
HollandEU average
0.43
0.500.450.48
0.540.48
0.48
Farm Gate
(KM/L)
Source: Updated figures from RS and FBiH statistical departments.
Cost to Dairy
(KM/L)
Support
(KM/L)
0.11
0.140.100.15
0.54
0.640.570.590.630.52
0.540.54
1.2 Current
Situation
(continued)
Source: RS and FBiHstatistical departments.
100
80
60
40
20
0Prewar
BiH
RS FBiH Croatia SM EU
Percentage
As Graph 2 shows, a significant percentage of milk in Croatia and SerbiaMontenegro (SM) is collected for sale into commercial channels, whichis on par with the EU. These countries also have more developed process-ing industries that collect and process large volumes of raw milk.
Farm gate prices are equivalent in all neighboring countries (see Table 3).However, Croatia and FBiH have the highest prices: 0.63 and 0.64 KM/L,respectively. Some cantons, though, have additional subsidies (e.g., SarajevoCanton, 0.10 KM/L).
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Market Profiles and Competitiveness Inventory Report: Dairy Production Subsector Profile 5
In more advanced markets, dairy products typically comprise a mixtureof high-volume, fast-turnover, low-margin products like fluid milk andvalue-added products like aged cheese. In BiH the market structure tendsstrongly toward lower margin, fast-turnover products. According to in-formants in the sector, this situation derives from cash flow constraintsthat prevent most Bosnian dairies from tying up working capital in prod-
ucts with longer-term returns, such as cheese. Consequently, as milk pro-duction grows, seasonal imbalances may skew production by causing cy-clical surpluses in the spring/early summer season. The poor quality ofraw milk going into the processing plant in turn limits the quality andscope of their dairy industry so that BiH dairies can only produce shortshelf-life products and UHT milk. Graph 3 shows the percentage of dairyproducts produced by entity/country.
1.4 Structure of
Dairy Industry
Production
2.0 DEMAND
PROFILE
2.1 Summary ofTrends
The dairy industry is experiencing a severe postwar crisis. Its productscannot compete with imports, and the industry struggles to regain its pre-
war productive capacity. With about 90% of fluid milk and 50% of dairyproductsand growingshares of domestic demand being met by BiHproduction, there is a window of opportunity for the BiH dairy sector tocompete with foreign products by producing quality domestic productsat a competitive price. BiH dairies are at a point where strategies to estab-lish and build market share are of paramount importance.
Some positive trends are emerging: the dairies have been privatized, dairyfarming is currently profitable (when subsidies are taken into accountand farmers are actually paid), and there seems to be general agreementamong politicians on the importance of the dairy sector. Under theseconditions, milk production is poised to be the engine that develops
important agricultural regions and provides employment for a largenumber of agricultural households and processors. Strengthening thecompetitiveness of this sector would be a strategic investment by thegovernment. Foreign investment in domestic dairies is also helping tostimulate improvements in domestic milk quantity and quality. Forexample, when Meggle (an international German-owned dairy) boughtBihac Industry of Milk Products, Meggle educated suppliers and investedin lacto-freezers and equipment for the most productive farmers.
Graph 3. Product
Structure of Dairy
Industry
10090
80
7060
5040
30
2010
0RSFBiHCroatiaSMEU
Source: Dairy production in Bosnia.Mlijekoprodukt doo and LariveBosnia, Sarajevo, 2003. Ministry ofAgriculture, Water Managementand Forestry, RS and FBiH (fi-nanced by IFAD).
Short shelf-life products
UHT milk
Hard cheese
Powdered milk
Other
Percentage
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Market Profiles and Competitiveness Inventory Report: Dairy Production Subsector Profile6
2.2 Current
Subsidies
The minimum purchase price for cow, sheep, and goat milk of 3.6% fatcontent in the FBiH is 0.50 KM/L. In both entities, 1 L of milk containingat least 3.2% fat receives a subsidy of 0.10 (RS)0.14 (FBiH) KM/L. Somecantons also have their own milk production subsidies. Moreover, thereare subsidies for cattle breeding (multi-jurisdictional) and milk testing (RS).
Total agricultural subsidies in the RS are currently budgeted at 32,969,611KM for 2005. Premiums for cow, sheep, and goat milk are:
0.10 KM/L for cow milk with a minimum of 3.2% butterfat and 3%protein.
0.15 KM/L for goat milk with a minimum of 2.8% butterfat and 2.50%protein.
0.15 KM/L for sheep milk with minimum of 4% butterfat and 3.80%protein.
When calculating the premium, all quantities of produced and sold milkare averaged at an estimated butterfat content of 3.2% for cow and goatmilk and 6% for sheep milk. Total amount is 7,500,000 KM.
Incentives to improve livestock production in the dairy industry areequivalent to 8,683,000 KM in 2005. This amount includes 7,500,000 formilk plus the 983,000 KM shown in Table 4, plus 200,000 KM to supportthe upgrading of dairy industry technology. The table also shows howsubsidies shall be allocated.
The RS government plans to provide 200,000 KM of support for dairy
industry technological improvements through its Rural DevelopmentProgram by promoting the purchasing of equipment in unfavorable areas.
In 2005 the FBiH has allocated 15.74 million KM of its budget for primaryagricultural production subsidies; this figure does not include each of FBiHs10 cantons own subsidies. The total amount set aside to strengthen thedairy industry (firms) in 2005 is 6,887,900 KM. The funds will be distrib-
Republic Srpska
Table 4. Allocation of Herd-Improvement Incentives (2005)
Type of Premium (Improved)
Heifers
Sheep
Rams
Goats
Buck goats
Total
300.00 for 1st class
180.00 for 2nd class
60.00 for 1st class36.00 for 2nd class
100.00 for 1st class
60.00 for 2nd class
36.00 for 1st class
100.00 for 1st class
*Unit for all herds is by head.
Amount (KM) Planned Number *
1,000
1,000
5,0004,000
300
200
200
100
983,200 KM
Federation of
Bosnia-
Herzegovina
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uted among the 10 cantons according to their share of total agriculturalproduction. Farmers can only apply for subsidies if they have a businessplan (e.g., contracts with buyers). Payments will not be made in advance.FBiHs incentive structure is shown in Table 5.
Besides FBiH subsidies, each canton typically provides its own subsidiesfor dairy production. The total amount of this planned expenditure for2005 dairy industry support in all cantons unfortunately is not precise; itis estimated to be near 3 million KM, particularly significant in Sarajevoand Tuzla cantons. Every yeareach canton government, in or-der to use the federal budget forsubsidies, must support agricul-ture and allocates funds for pri-
mary production. Table 6 pro-vides known production subsidylevels for the cantons for whichinformation is available.
In prior years, both entityministries similarly supporteddairy production with subsidiesfor raw milk. The subsidies in theRS were based on 3.2% fat and3.0% protein; in the FBiH, 3.5%fat. The subsidized quantities1 (in liters) in 2003 and 2004 were:
RS: 55,696,522 RS: 65,509,551
FBiH: 39,067,271 FBiH: 56,641,317
7
Table 5. Dairy Incentives
Type of Incentives AmountKM/Unit Total
0.14 KM/L
200 KM/head
150 KM/head
20 KM/head
1.5 KM/head
3,000 KM/canton
6,440,000
100,000
72,9000
200,000
45,000
30,000
6,887,900
46,000,000
500 head
486 head
10,000 head
30,000 head
10 canton
Federation of
Bosnia-
Herzegovina
(continued)
Cantonal
Government
Support for
Agricultural
ProductionTable 6. Canton Subsidies (Production)
Una-Sana
Posavina
TuzlaZenica-Doboj
Bosnia-Podrinje
Middle Bosnia
Herzegovina-Neretva
West Herzegovina
Sarajevo
Hercegbosnia (Livno)
Total
Amount (KM)
166,400
96,340
390,000
109,500
762,240
Canton
1The quantities given are adjusted to the 3.2% (RS) and 3.5% (FBiH) fat contents. Theseproduction figures are only for milk delivered to dairies. There are no data on the realproduction of raw milk in BiH.
2003 2004
Production of raw cow, sheep, and goatmilk (4th quarter of 2004 and 1st3rd
quarters of 2005)
Raising quality heifer herds of up to 30cows
Raising quality heifer herds of more than
30 cows
Raising breeding sheep
Identification (marking) of breeding sheep
Support of livestock development by
cantonal selection services
Total
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2.3 Domestic
Production
2A Product Profile lists the major domestic dairy producers appears as Appendix 1.
There are roughly 55 dairies in BiH, mostly private, with a total capacityof approximately 1.5 million L/day. Only 36% of that capacity is actuallybeing used. The ownership structure of these dairies has changed in re-cent years. There is now just one state-owned dairy, which is in litigation.Some of bigger dairies with capacity of 50,000200,000 L/day (e.g., thoseformer state-owned dairies in Sarajevo and Zenica) have old facilities andequipment. Two-thirds of dairies are small, privately owned with a dailycapacity of 2,00010,000 L. Some small dairies are earning money byoffering cooling equipment and services to farmers.
Dairies buy milk directly from farmers or at collection points and thentransported to a dairy. However, farmers do not sell all of their milk todairies but also sell directly to households and on green markets. Farmerswho cannot sell to dairies usually sell fresh milk and processed milk prod-ucts (e.g., sour cream and cottage cheese) at outdoor markets.2
Current factors in the BiH market that impact domestic dairies:
Significant imports of dairy products, especially from neighboring coun-
tries. Imports have remained stable since the free trade agreement (FTA)became fully effective 1 May 2004.
Exports have doubled since the FTA went into effect (from 5.5 millionKM in 2003 to 11.8 million in 2004).
Many milk products that receive export subsidies are legally being sold inBiH. This is especially the case for long shelf-life milk products likecheese, butter, and powdered milk.
Concerned industry representatives have suggested certain mitigating mea-sures to withstand negative influences such as those described above:
Implement and enforce stricter milk quality standards.
Introduce systematic measures (e.g., countervailing duties) by whichdomestic producers can compete against subsidized imports on a levelplaying field.
Allow dairy cattle to be imported with fewer restrictions to increasethe quantity and quality of dairy cattle. (Animals must meet certainveterinary and health conditions.)
Improve BiH dairy industry technology and productivity through tech-nology transfer and training in improved practices so that the dairiescan catch up.
According to estimates provided by the statistical departments in RS andFBiH, 22% of milk and related products are imported. Some key prod-ucts (among them fresh and condensed milk and powdered milk) arebeing imported at the 1015% customs regime. For the new FTA part-ners, they now exportoften subsidizedmilk without any tariffs.
2.4 Imports
8
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Through this subsidized milk trade, these trading partners have capturedsubstantial market share in BiH. Some BiH processors are importing thesesubsidized products and then reconstituting this milk for in-country sale.
Croatia, Slovenia, and Germany supply the largest share of importeddairy products, which account for over 60% of all imports, bringing in
primarily yogurt and fluid milk. Germany supplies most of the importedcheese. Imports from other countries account for the rest (see Table 7).
Officially, 57,500 MT of dairy products were imported in 2004 valued at114 million KM. The export value of dairy products in 2004 was approxi-mately 11.8 million KM. Dairy products from the EU often benefit froman export subsidy. Raw milk and milk powder imports from the EU areminor. Graph 4 shows the market share of dairy imports to BiH by thecountry of origin.
Table 7. Countries Exporting Dairy Products to BiH, 2004
Country
Croatia
GermanySlovenia
SerbiaMontenegroHungaryAustria
Czech RepublicNetherlands
United StatesDenmark
OthersTotal
Share (%)
Source: Foreign Trade Chamber of BiH.
Import (thousands of KM)
36,260
29,01227,418
6,4363,8023,536
2,6731,948
956945
1,034114,020
31.825.4
24.05.63.3
3.12.3
1.7
0.80.80.9
100
9
2.4 Imports
(continued)
32%
25%
24%
6%
3%
3%
2%
2%
1%
1%
1%
Croatia
Germany
Slovenia
Serbia and Montenegro
Hungary
Austria
Czech Republic
Netherlands
United States
Denmark
Other countries
Graph 4.
BiH Dairy
Import
Market
Share by
Country of
Origin
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Market Profiles and Competitiveness Inventory Report: Dairy Production Subsector Profile10
Tariff Rates
2.5 Exports
2.4 Imports
(continued)Most of the foreign companies have established a representative officelocally for marketing (e.g., for Croatia, Lura/Dukat ZagrebLura Sarajevo)or have a distributor (e.g., for Alpiko Sarajevo and Megamix Sarajevo).Also, some foreign investors have established their own in-country opera-tions (e.g., MeggleBihac and Ljubljanske MlekarneTuzla).
Dairy products are usually retailed together with other food products,and there are only a few specialized retail stores (e.g., the Slovenian dairyproducts distributor Alpiko has a few specialized stores).
There are no quantitative restrictions on imports of dairy products for keytrading partners (Croatia, SerbiaMontenegro). Tariff rates for dairy prod-ucts are:
From non-FTA countries, milk and cream up to 1% fat content andpackaging less than 2 L, the tariff is 10% + 0.15 KM/kg.
From non-FTA countries, milk and cream up to 45% fat content andpackaging less than 2 L, the tariff is 10% + 0.45 KM/kg.
An additional 1% of customs fee is applied to all imported goods.
BiH has FTAs with Albania, Bulgaria, Croatia, Macedonia, Moldova,SerbiaMontenegro, and Turkey. BiH is not yet a member of the WorldTrade Organization but, as of September 2005, is in accession negotia-tions.
Export opportunities are limited in the dairy sector for the following rea-sons:
High floor price for milk in FBiH.
Poor quality of raw milk limits the export potential of exportable-quality dairy products.
Lack of a veterinary certification system that is capable of monitoringand enforcing product safety.
Hygiene and sanitary conditions inside milk-processing facilities.
Outdated and/or obsolete equipment and processes.
Lack of modern packaging equipment and machinery.
Poor financial condition of companies, coupled with weak businessacumen.
This situation is unlikely to change in the near future, given the timerequired to correct the deficiencies listed above and the slow privatization
process that delayed earlier investments and improvements. See Table 8.
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Per-capita annual consumption of dairy products for the BiH populationof 3.7 million is approximately 120 L of milk (on a fluid basis). Of that,approximately 100 L are consumed as fresh milk. The dairy sector has notyet recovered from the livestock lost in the 19921995 war, which deci-mated numbers. There are approximately 284,000 dairy cows and aver-age yield is low: about 1,9002,000 L per lactation. Table 9 shows that,according to FAO, BiH in 2003 produced approximately 476,000 MT ofmilk and milk products in a market that consumes 533,000 MT/year ofcommercially processed milk and milk products (i.e., about 11% is im-ported).
Until recent years, a significant portion of domestic dairy consumptionwas imported, including fluid milk. Most local dairies produce pasteur-ized milk, yogurt, and fresh/cottage cheese. Domestic, long shelf-life (UHT)milk is now over-supplied, which is a major change of circumstances from2003. Compared with UHT milk and yogurt, the production of hard,
aged cheese is low because of low-quality raw milk. Long shelf-life prod-ucts account for 34% of total dairy production. Cheese accounts for 10%.Production of cream, spreads, flavored milk drinks, butter, and flavoredyogurts is almost nonexistent.
11
Table 8. Exports of Milk and Milk
Products from BiH, 2004
Country
Croatia
SerbiaMontenegroMacedonia
United StatesSloveniaOther
Total
%(thousands of KM)
9,032
1,771694
196134
711,834
76.2
15.05.9
1.71.10.1
100
Source: Foreign Trade Chamber of BiH.
2.5 Exports
(continued)
2.6 Demand
(Domestic)
Table 9. Dairy Sector Market Indicators
Total BiH productionAverage annual production growth
Total importsAverage annual imports growthTotal exports
Average annual exports growthTotal domestic production + imports
Average annual market growth
Growth
(%)
Source: FAOSTAT database.
1998 1999 2001 20022000YearMilk and Milk Products
(thousands of MT)
538.7
26,300
1,000
565.0
588.1
9.1734,780
32.24
4,000300.00622.910.25
556.0
5.4731,780
8.63
2,00050.00587.765.65
515.9
7.2174,240
133.61600
70.00
590.10.41
475.8
7.7868,714
7.44
82537.50544.5
7.74
2.26
26.72
38.38
0.95
2003
475.8
0.0057,593
16.18
61425.58
533.42.04
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Market Profiles and Competitiveness Inventory Report: Dairy Production Subsector Profile12
2.6 Demand
(EU)
In general, BiH is unlikely to ever be a significant exporter of mostdairy products. Currently, domestically produced quantities are small andcannot even satisfy local demand. Until the last two years, BiH productshave rarely been available in regional markets. However, there has beenan increase in BiH exports in the last two years, relative to imports, par-ticularly of BiH cheeses (about 5% of cheese import volumes in 2003).
Regional trade disadvantages include difficult transportation condi-tions through mountainous terrain and the lingering political problemsand conflicts in southeast Europe. There is also strong competition fromItalian and German products in the Croatian and Slovenian markets (es-pecially for milk and cheese products). It would seem that the best oppor-tunity for future dairy product exports would be to supply niche productsfor specialized markets (e.g., goat milk and cheeses made from goat andsheep milk).
BiH dairies do not export to the EU because it is not registered as athird country. BiH does not have registered processing facilities, nor can it
demonstrate that required disease control mechanisms are in place. Themain Central European countries exporting food products to the EU areHungary, Poland, and the Czech Republic. For the export of animal prod-ucts, a certifying body at the state level and slaughterhouses certified toEU standards are needed.
Key competitiveness factors of milk products include their packaging,quality, ancillary services, marketing, and supply-chain management.
Ten to twenty private dairies sell UHT milk in Tetra-pack packaging and
in fat contents of 1.5%, 2.8%, and 3.2%. Almost all fluid milk is sold in theform of UHT products. Tetra-pack packaging is imported from Austria,Slovenia, SerbiaMontenegro, or Sweden. PVC cups for yogurt and sourcream are produced in BiH (Sarajevo); their quality is very good and theyare sold at prices competitive with imports.
Packaging design and advertising material are often developed withthe support of local packaging suppliers and commercial artists. Produc-tion is outsourced to local marketing companies, graphic designers andprinting enterprises, or, in some cases, to Serbian and Croatian compa-nies.
The law on Quality Control of Imported and Exported Goods (BiH
Official Gazette No. 13/03) states that a label must clearly indicate the nameof the product; the manufacturers complete address; name and addressof the importer; and important information such as net weight in metricunits, ingredients, instructions for use (if necessary) and storage, and anyimportant information and warnings. If an original label is in English (e.g.,standard U.S. label) or any other language, the seller must prepare trans-lated stick-on labels for the imported products. The importer is respon-sible for sticking these translated labels onto their products prior to retail
3.0 BASISOF
COMPETITION
3.1 Packaging
(size, types,graphics)
2.6 Demand
(Regional)
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Market Profiles and Competitiveness Inventory Report: Dairy Production Subsector Profile 13
distribution. There are no specific packaging requirements. Table 10 showsthe type of packaging used for most dairy products.
Other types of packages in use include:
Carton box: Pure-Pak 0.5 and 1 L
Carton box: Brik-Pak 0.5 and 1 L (UHT milk)
Plastic bottle: 0.3, 0.5, and 1 L
Ecolean: plastic bag for liquid milk products
Polietilen and other plastic folio
PVC plastic cups: 180500 mL
Plastic boxes and canisters: 320 kg.
Dairy processors are responsible for the quality of products in BiH. TheBiH law on Food was adopted by the parliament and published in the BiHOfficial Gazette No. 50/2004 on November 9, 2004. This law provides thebasis for the assurance of a high level of protection of human health andconsumers interests related to food. It establishes common principles andresponsibilities as well as institutional arrangements and procedures to
ensure the safety of food and feed. The law follows the principles of theEU legislation regarding food and feed safety. The detailed rules and regu-lations needed for its implementation are not yet drafted. Therefore, thelaw is not yet implemented.
As long as the regulations according to the new BiH law on Food arenot yet in place, the law on Food Safety Control, including the regulationson the quality of milk and dairy products inherited from former Yugosla-via, are still in force. In addition, the State Veterinary Office and the Enti-
Source: Dairies in RS.
3.1 Packaging
(size, types,
graphics)
(continued)
3.2 Quality
(grading, quality
control/quality
assurance)
Governmental
Quality Control
Oversight
Item
Milk, 2.83.2% fat
Yogurt, 2.83.6% fat
Sour milk, 3.23.6% fatFruit yogurt
AB yogurtKefir, 3.2% fat
UHTsterilized milk, 1.53.2% fat
Sour cream, 1220% fatFresh cheese and krika sir
Hard and semi-hard types ofcheese: Edamer, Kackavalj, Trapist
Cream cheeseKajmak
Butter
Package
PET folio, 1 L; carton box, 1 L
Carton box and plastic bottles, 0.5 and 1 L; PVCcups, 180200 mL; PET, folio 1 L
PVC cups, 180200 mL, 400500 mLPVC cups, 159200 mL
Carton box, 0.5 L; PVC glass, 180200 mLCarton box, 0.5 and 1 L; plastic bottle, 0.5 L;
PVC cups, 180 mLCarton box, 1 LPVC cups, 180200 mL and 400500 mL
PVC cups, 0.5 kg; PET vacuum folio, 0.5 and 1 kg;plastic canisters, 1020 kg
N/A
PVC cups, 70100 gPVC cups, 70250 gAlufolio, 250 g
Table 10. Commonly Used Packaging
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Market Profiles and Competitiveness Inventory Report: Dairy Production Subsector Profile14
ties Ministries of Agriculture issue specific requirementsthose require-ments are in accordance with the Office International des Epizooties(OIE)requirements (e.g., imported products must originate from areas free ofcontagious diseases that must be reported to the OIE).
The present system of food control is based on laws and regulations
from former Yugoslavia. The ordinance on Microbiological Wholesome-ness of Food stipulates maximum content of different micro-organismsin food products. The Public Health Institute at the state level is autho-rized to control food safety. Furthermore, there are some similar institutesin both entities and in the cantons in the FBiH. Because not all of theseinstitutes have sufficient laboratory capabilities, other laboratories can becontracted for testing. The exporter/importer covers all expenses of prod-uct testing. The Veterinary Inspection Service is responsible for microbio-logical testing, and the veterinary labs are performing the analysis. Cur-rently these institutions do not coordinate their activities efficiently, andthey are not funded adequately to carry out these responsibilities.
The BiH law on Food regulates the official control of food safety, hy-giene, and quality. The control includes inspection, review of declarationsand documentation, sampling and analysis, review of records regardingthe traceability of food and feed, and enforcement and efficiency of self-verification systemsthat is, HACCP for food operators and GMP/GoodAgricultural Practices (GAPs) for agricultural producers. The law also stipu-lates the establishment of the BiH Agency for Food Safety, which plays akey role in the governments policy on food safety. The agency, in collabo-ration with the entities competent bodies, will be in charge of developingthe needed rules and regulations for the implementation of the law. TheBiH Council of Ministers issued the decision on the establishment of theAgency for Food Safety, and a budget for 2005 was allocated. Since Octo-
ber 2005 the agency has a temporary director.As can be inferred from the foregoing discussion, the currently ap-
plied system does not support a consistent policy on food safety andcreates considerable confusion for the food processors. A new and EU-compatible system is not yet in place.
Dairies, left largely to establish their own quality assurance (QA) mea-sures, have used this freedom as an opportunity for competitive marketpositioning. For instance, some dairies have gone to extraordinary lengthsto introduce EU standards into their value chains and improve their sup-pliers practices; other dairies have sought to compete on cost, with mini-mum attention to QA. This will change with the full implementation of
the law on Food. The dairies have to install HACCP systems and farmershave to apply GAPs.
QA starts with the condition of the cows from which the milk comes.Dairies that are seeking to establish a reputation for quality are workingwith their farmers to improve the dairy cows health condition. Trainingsessions are organized to teach farmers better milking practices and milkhygiene in order to improve the quality of the raw milk. Some dairies arenow starting to analyze raw milk for bacteria and somatic cells and are
Governmental
Quality Control
Oversight
(continued)
Dairies QA
Measures
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Market Profiles and Competitiveness Inventory Report: Dairy Production Subsector Profile 15
introducing quality-based payment systems. The analysis for bacteria andsomatic cells are either done in company-owned laboratories or in publicveterinary laboratories.
Buyers conduct acidity tests on site. Their agents use acidity tests todetect adulteration and low milk fat. By law the dairies are allowed to
reject milk that contains less than 3.2% fat. Dairies report that problemsare usually with the smallest producers who have just one or two cows.Such testing ensures that the milk meets basic processor requirements.Because the milk is paid based on milk fat and protein content, dairies aretesting milk for these parameters. This analysis is done by the larger dair-ies themselves or by veterinary laboratories.
Another qualitative factor is farmers adoption of the dairies preferredpractices. Many dairies prefer that their suppliers follow feeding, clean-ing, and other practices that will reliably yield a certain standard of milk.The sanctity of contracts in BiH is not assured, which makes it difficult forprocessors to enforce standards. However, in lieu of contracts, some dair-
ies are increasingly active in establishing supply agreements with farmersthat specify buying conditions, including quality, price, payment sched-ules, and purchase quantities.
At present, services provided for and by the food chain in general arequite limited. For example, professional market integrators such as adver-tising and marketing agencies are generally not available for the small- tomedium-sized dairies. Refrigerated warehousing, product tracking, quali-fied independent laboratories, and trade associations provide very limitedservices. The larger dairies initiated the establishment of a BiH Dairy Pro-cessors Association as a lobby group for their interests.
Dairy processors themselves are only now beginning to recognize theneed for upstream support to their farmers and downstream services forwholesalers and retailers.
The new regulations coming into effect regarding labeling requirementswill require some additional processor investment. For those processorswho are responsive to consumer/market-driven demands, the investmentwill be well rewarded. The labeling requirements are standard in anydeveloped market, and are only a first step in effectively marketing anyfood product.
The more daunting tasks will be those related to identifying theappropriate target audience for the dairy processors product lines and/or
adapting their product line to their target audience.
The new law on Food Safety and the corresponding secondary legisla-tion will affect producers quality standards. The producers will be forcedto implement quality management systems in line with EU requirements.This will secure markets in neighboring countries already applying EUquality and food safety standards as well as open market opportunitiesfor niche products on the large EU market.
Dairies QA
Measures
(continued)
3.3 Services
3.4 Marketing
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3.5 Market
Movement
16
Overall, the BiH demand for food has decreased and its structure haschanged. The drop in demand is due to a decrease in population by ap-proximately 15% and a decrease in purchasing power by about 40%. Theaverage per-capita income of the 3.7 million inhabitants is about 1,530KM/year (World Bank GNI estimate, 2003). Despite this decline, domes-tic production is far from satisfying domestic demand (i.e., the internalmarket continues to present opportunities for locally supplied produc-tion). But domestic production must also meet the requirements of con-sumers, processors, traders, and supermarkets regarding consistency, sta-bility, quality, food safety, labeling, packaging, and regular supply. In thisregard, BiH still lags behind competitors such as Slovenia, Croatia, andHungary. Processing is now being done strategically by companies (e.g.,Meggle) that are operating more broadly within the free trade area, shift-ing processing of fruit yogurts, for instance, to one country and process-ing of liquid yogurt in a different country.
The domestic consumption of milk is estimated at 134 L per capitaper year. Consumers in BiH have demonstrated significant demand for
aseptically packaged UHT milk and for stable fermented products. In-creased demand is also observed for fruit yogurts, sour cream, soft cheese,and milk in 0.5-L packaging. The main competitors are coming fromCroatia, Slovenia, Germany, and Hungary.
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Dairy Name
and Location
Table 1.A Major BiH Domestic Dairy Processors
Current Operations
(L/day)
Maximum Processing
Capacity (L)Capacity
Utilization (%)
Product Line
Assortment
UHT milk
Short shelf-life products
Cottage cheese type
UHT milkShort shelf-life products
Cottage cheese type
UHT milk
Short shelf-life productsPowdered milk
UHT milk
Short shelf-life products
Cottage cheese type
UHT milkShort shelf-life products
Cottage cheese type
Hard cheese
Short shelf-life productsPasteurized milk
Cottage cheese type
UHT milk
Short shelf-life productsCottage cheese type
Hard cheese
Hard and semi-hard cheese
UHT milkShort shelf-life products
Semi-hard cheese
Short shelf-life products
Cottage cheese type
Short shelf-life productsCottage cheese type
Short shelf-life productsCottage cheese type
Semi-hard cheese
UHT milk
Short shelf-life productsCottage cheese type
Semi-hard cheese
Hard and semi-hard cheese
Mlijekoprodukt
Kozarska Dubica
Meggle
Bihac
PPM
Tuzla
Inmer
Gradacac
DTD Snjegotina
Teslic
Milkos
Sarajevo
Natura Vita
Teslic
Livno Dairy
Livno
Mljekara
Banja Luka
Vlasicka mljekara
Travnik
ZIM
Zenica
Bianka
Zvornik
Milko Culic
Prijedor
Vita-Vi
Capljina*
60
39
60
30
88
20
90
53
16
25
30
13
63
143
120,000
85,000
60,000
30,000
22,000
20,000
18,000
16,000
15,000
15,000
15,000
6,300
12,500
10,000
200,000
220,000
100,000
100,000
25,000
100,000
20,000
30,000
95,000
60,000
50,000
50,000
20,000
7,000
17
APPENDIX 1
*Vita-Vi Capljina produces 10,000 L of milk per day; however, because that quantityexceeds the dairys processing capacity, it sells excess milk to Konjic Milk.
Continued on next page
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Market Profiles and Competitiveness Inventory Report: Dairy Production Subsector Profile18
Dairy Name
and Location
Table 1.A Major BiH Domestic Dairy Processors
Current Operations
(L/day)
Maximum Processing
Capacity (L)
Capacity
Utilization (%)
Product Line
Assortment
45
60
80
94
21
50
23
60
94
30
83
83
13
50
67
9,000
9,000
8,000
7,500
4,200
4,000
3,500
3,000
3,000
3,000
2,500
2,500
2,500
2,500
2,000
20,000
15,000
10,000
8,000
20,000
8,000
15,000
5,000
3,200
10,000
3,000
3,000
20,000
5,000
3,000
Saraj Milk
Maglaj
Pudja perkovicLivno
Agrocentar
Gornji Vakuf
Smajic
Celic
Mljekara Sipovo
Sipovo
PedjeniBileca
Milksan Capljanka
Sanski Most
ZZ Kupreska
Kupres
Dule
Dragaljevac
Sirko
Gracanica
Susa
Livno
Sanmilk
Prijedor
Jezerka
Jezerski
Glogovac
Nevesinje
ZZ Pavlovica Rostovo
Novi Travnik
Short shelf-life productsCottage cheese type
Hard and semi-hard cheese
Short shelf-life products
Cottage cheese type
Short shelf-life products
Cottage cheese type
UHT milkShort shelf-life products
Cottage cheese typeSemi-hard cheese
Short shelf-life productsPasteurized milk
Cottage cheese type
UHT milk
Short shelf-life productsCottage cheese type
Short shelf-life products
Cottage cheese type
Semi-hard cheese
Short shelf-life productsPasteurized milk
Whey
Short shelf-life products
Pasteurized milkCottage cheese type
Hard and semi-hard cheese
Milk
Short shelf-life productsCottage cheese type
Semi-hard cheese
UHT milk
Short shelf-life productsCottage cheese type
Short shelf-life products
Semi-hard cheese
Short shelf-life products
Cottage cheese type
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Dairy Name
and Location
Table 1.A Major BiH Domestic Dairy Processors
Current Operations
(L/day)
Maximum Processing
Capacity (L)
Capacity
Utilization (%)
Product Line
Assortment
33
25
8
50
75
8
73
17
20
56
30
75
17
25
Short shelf-life productsMilk and yogurt
Cottage cheese type
Soft cheese
Short shelf-life productsPasteurized milk
Cottage cheese typeSemi-hard cheese
UHT milkShort shelf-life products
Cottage cheese type
MilkYogurt
Short shelf-life productsPasteurized milk
Whey
Short shelf-life products
Cottage cheese type
UHT milkYogurt
Cheese
Short shelf-life products
Cottage cheese type
Semi-hard cheeseButter
UHT milkShort shelf-life products
Soft and hard cheese
Short shelf-life products
Pasteurized milk
Cottage cheese type
Semi-hard cheeseCottage cheese type
Semi-hard goat cheese
Goat milk and cheese
Mljekara
Sokolac
Milgor
Gorazde
Eko milk
Begov Han
Euromlkjeko
Kljuc
Mlijekoproduct
Brcko
Perfetto Plus
Nevesinje
Mlijekoprodukt
V. Kladusa
Agroplod
Odzak
ZZ Promilk
Prozor
Milko Miljkovac
Doboj
Ekomlijeko
Bijeljina
Vitmark
Teslic
Bukovica
Tomislavgrad
ZZ Zmijanjka
Celinac
Signamilk
Novi Grad
2,000
2,000
2,000
1,500
1,500
1,500
1,200
1,100
1,000
1,000
1,000
900
600
500
500
3,000
6,000
8,000
20,000
3,000
2,000
16,000
1,500
6,000
5,000
1,800
3,000
800
3,000
2,000
Continued on next page
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Short shelf-life products
Pasteurized milkCottage cheese type
Yogurt
Yogurt
Yogurt
Short shelf-life products
Cottage cheese type
Hard cheese
UHT milk
UHT milk
Data not available
Data not available
Counting West Milk and
Sappit Dairy
Not counting West Milk
and Sappit Dairy
Dairy Name
and Location
Table 1.A Major BiH Domestic Dairy Processors
Current Operations
(L/day)
Maximum Processing
Capacity (L)
Capacity
Utilization (%)
Product Line
Assortment
Matic
Bijeljina
Gaj-Gradina
Gacko
Maja
Gacko
Ad-tipo
Olovo
Ex-Prom
Ilijas
Ruja
Hrasnica
Orman
Livno
West Milk
Sarajevo
Sappit*
Posusje
Dramon
Pale
Stolac d.o.o.
Visegrad
Totals
500
500
500
500
500
500
500
0
0
532,800
532,800
800
800
800
600
8,000
500
500
150,000
150,000
1,618,300
1,318,300
63
63
63
83
6
100
100
0
0
33
40
*Although Sappit Dairy has closed and its facility is idle, it could be purchased and become operational again.Note: All data are based on LAMP estimates. Processed milk in the dairies was calculated on the basis of standard whole
milk with 3.6% fat.
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Name
Table 1.B Milk Aggregators
Location Daily Milk Suppy (L)
APPENDIX 1
(continued)
Andjelika d.o.o.
ZZ Konjic Milk
PD Butmir Farm
ZZ Gradacacki Farmer
ZZ Zenica
ZZ Agrosemberija
ZZ Gracanka
PO Vrbas
ZZ Agrojapra
ZZ Mala dolina
PD Semberija
ZZ Tarcin
ZZ Bioprodukt
Association of women in agriculture
ZZ Poljar
ZZ Novi PocetakZZ Obudovac
ZZ Pavlovica Rostovo
MK Modrica
ZZ Rubus
ZZ Bobar
Irgos d.o.o.
Bazilika
ZZ Progres
ZZ Guraca
ZZ Sprecanka
ZZ Eko Posavina
Cooperative Union USKPO Kalin
PD Mladen Stojanovic/Farm Land
ZZ Agroman
ZZ LAN
Susa
Kemefah
Kalesija
Konjic
Sarajevo
Gradacac
Zenica
Bijeljina
Gracanica
Gornji Vakuf
Donji Agici
Tuzla
Bijeljina
Tarcin
Mostar
Tesanj
Zeljezno Polje
TeslicObudovac
Novi Travnik
Modrica
Sapna
Bijeljina
Banovici
Donji Vakuf
Odzak
Kladanj
Kalesija
Derventa
Una Sana CantonBugojno
Nova Topola
Tomislavgrad
Derventa
Visoko
Kiseljak
13,300
3,500
7,000
6,800
3,000
4,000
7,000
4,000
2,500
4,700
2,500
2,500
1,000
4,000
3,500
2,0001,800
1,500
1,500
1,300
1,200
1,700
1,000
500
800
1,500
500
2,000
17,500
2,650
1,400
21
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Market Profiles and Competitiveness Inventory Report: Dairy Production Subsector Profile22
Name
Table 1.C Service Providers
Location Service
SAMAX
Jambopet
SANO
Proven
Plastika Bozic
DeLaval
Krehic
Brovis
UNAVET
Bosnavet
Cattle Breeding Centre
Veterinary Service (private veterinarians and public
veterinary stations; only FBiH)
Association of Farmers, Agric Engineers and Technicians
Agrokomplex Nutrition
Mix d.o.o.
MMB Inex Coop
Rakic d.o.o.
Mlin Ljubace
Agrocentar
Agrosemberija
Andjelika
Ismet Hodzic
Milk Processing
Gelux
Banja Luka
Laktasi
Laktasi
Sarajevo
Doboj East
Sarajevo
Zenica
Visoko
Bihac
Zenica
Banja Luka
Countrywide
Gracanica
Gracanica
Orasje
Samac
Batkovic-Bijeljina
Ljubace
Tuzla
Bijeljina
Kalesija
Sarajevo
Sarajevo
Gradiska
Farm machinery
Plastic bottles
Feed
Plastic cups
PET bottles
Milk equipment
Feed
Feed
Semen
Semen, feed
Semen
Animal health services
Dairy herd improvement
Feed
Feed
Feed
Feed
Feed
Agricultural machinery, milk equipment
Cattle import, milk equipment, feed
Cattle import
Cattle import
Milk equipment
Milk equipment (Westfalia)
Training
Institutions
Agricultural Faculty Banja Luka
Technological Faculty Banja Luka, HACCP team
Agricultural Institute Banja Luka
Extension Agency Republika Srpska
Selection Service Republika Srpska
Agricultural Institute (Zavod) Bihac
Veterinary Institute Vaso Butosan Banja Luka
Municipality Extension Services (few municipalities in Western RS and UnaSana Canton)
Agricultural Institute (Zavod) Tuzla
Agricultural Institute Bijeljina
Extension Service District Brcko Extension Service Posavina Canton
Veterinary Institute Tuzla
Veterinary Institute Bijeljina
Veterinary Institute (Zavod) Orasje
Agricultural Faculty Sarajevo
Agricultural Institute Sarajevo
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Market Profiles and Competitiveness Inventory Report: Dairy Production Subsector Profile 23
APPENDIX 1
(continued) Extension Service Zenica-Doboj Canton
Extension Service Sarajevo Canton
Extension Service Bosansko-Podrinjski Canton (Gorazde)
Agricultural Faculty Mostar
Agricultural Institute Mostar.
Banks
Federal Investment Bank
Micro-finance Institutions
Leasing Institutions (Volksbank, HYPO Alpe Adria Bank, Raiffeisen Bank).
Financial
Institutions
APPENDIX 2
FBIH Milk
Subsidies by
Canton
Subsidy
Type
Table 2.A Unsko Sanski Canton (dairy sector)
Incentive
Amount Unit
Breeding heifers Head 250 650 162,500
Selection work for heifer Head 6 650 3,900
Planned
Number
Total
Amount (KM)
Subsidy
Type
Table 2.B Posavski Canton (dairy industry)
Unit
Per Unit
(KM)Total
Amount (KM)
Subsidy
Type
Table 2.C Middle Bosnia Canton (livestockdairy industry)Incentive
Amount (KM) Unit
Breeding heifers 250 Head 300 60,000
Breeding sheep 20 Head 2,250 45,000
Breeding goats 30 Head 150 4,500
Total 109,500
Planned
Number
Total
Amount (KM)
Subsidy Type
Table 2.D Zenica-Doboj Canton (dairy industry)
Unit
Total
Amount (KM)Breeding heifers Head 240,000
Support to dairies for buying up raw milk Liter 150,000
Total 390,000
Artificial insemination of cows Pregnancy head 20.00 22,000
Milk production Liter 0.06 74,340
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Milk production Liter (min.: 2,000) 0.15
Breeding heifers Head (min.: 2) 250.00
Total for dairy Not precise
24
APPENDIX 2
FBIH Milk
Subsidies by
Canton
(continued)
Subsidy Type
Table 2.E Sarajevo Canton (livestockdairy sector)
Unit
Registered
Farm (KM)
Unregistered
Farm (KM)
Subsidy Type
Table 2.F Hercegbosnia (Livno) Canton (livestockdairy) industry)
Unit Planned Number Total Amount (KM)
Subsidy Type
Table 2.G District Brcko (livestockdairy industry)
Unit KM/Unit Total Amount (KM)
Breeding heifers Head
Breeding sheep Head
Premium for cow, Liter
sheep, and goat milk
Total 1,000,000
Note: Funds for district Brcko government support for agriculture provided in the
Districts budget. This year, the district has allocated 988,830 KM for all incentives in
agricultural production. As compared with last year, more than 50% of the totalbudget is for dairy production.
Breeding heifers Head 400 400.00
Keeping herd of milking cows Head 150 50.00
Keeping herd of milking sheep Head 20 10.00
Keeping herd of milking goats Head 20 10.00
Production of raw cow milk Liter 0.10 0.10
Processed raw milk Liter 0.03 0.03
Total Unknown
(approximately
1,500,000)
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Market Profiles and Competitiveness Inventory Report: Dairy Production Subsector Profile 25
APPENDIX 3
Entity
Agricultural
Subsidies
A schedule for all 2004 subsidies is shown in Tables 3.A and 3.B, indicat-ing the extent of BiH support to the dairy sector in relation to other agri-cultural sectors.
Livestock
Table 3.A FBiH Distribution of Subsidies in 2004
Subsidy Unit Total Subsidy (KM)0.14 KM/L
0.70 KM/kg
0.60 KM/kg
0.52 KM/kg
2.50 KM/piece
2 KM/piece
0.07 KM/kg
0.09 KM/piece
1 KM/kg
5 KM/piece200 KM/head
15 KM/head
1.50 KM/head
3,000 KM/canton
Maximum Amount47,000,000 L
1,700,000 kg
476,667 kg
350,000 kg
105,000 piece
20,000 piece
3,500,000 piece
500,000 piece
110,000 kg
10,000 piece1,000 head
4,000 head
30,000 head
10 canton
6,580,000
1,190,000
286,000
182,000
262,500
40,000
245,000
45,000
110,000
50,000200,000
60,000
45,000
30,000
9,325,500
Production of cow, sheep, and goat milk (4th quarter
of 2003 and 1st3rd quarter 2004)
Beef calves fattening
Lamb fattening
Pig fattening
Raising of heavy-breed chickens
Raising of light-breed chickens
Raising fish (trout)
Raising fish (sea bass, gilthead)
Honey production
Raising queen beesRaising heifers
Raising sheep
Identification (marking) of breeding sheep
Support of livestock development by cantonalselection services
Total livestock production
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Market Profiles and Competitiveness Inventory Report: Dairy Production Subsector Profile26
Table 3.B RS Distribution of Subsidies in 2004
Livestock Unit Planned No. of HeadsAmount (KM)
Raising quality heifers
Raising quality guilts
Raising quality boars
Breeding sheep
Breeding rams
Breeding nanny goats
Breeding buck goats
Breeding fillies
Breeding hens and roosters
Raising 18-week-old egg layers
Head
Head
Head
Head
Head
Head
Head
Head
Chicken
Chicken
300 for 1st class180 for 2nd class
60 for 1st class
36 for 2nd class100 for 1st class
60 for 1st class36 for 2nd class
100 for 1st class
60 for 1st class36 for 2nd class
100 for 1st class
500
2.50 for heavy breeds
2.00 for light breeds
0.50
900
600
1,200
60050
3,0002,500
200
300200
100
80
30,000
20,000
300,000
APPENDIX 3
Entity
Agricultural
Subsidies
(continued)
a) Premium for cow, sheep, and goat milk:
KM 0.10/L for cow milk with minimum of 3.20% butterfat and 3%protein
KM 0.12/L for goat milk with minimum of 2.80% butterfat and 2.50%protein
KM 0.12/L for sheep milk with minimum of 4% butterfat and 3.80%protein.
b) When the premium is calculated, all quantities of produced and sold
milk are averaged at butterfat of 3.2% for cow and goat milk and 6%for sheep milk.
c) Subsidy for purchase of queen bees is KM 5/queen.
d) Subsidy for determining quality of milk on EU standards is KM 5/sample.
e) Subsidy for supporting development and improvement livestockreproduction centers in cattle production.
f) Subsidy to semen suppliers for veterinary units and other entitiescapable of performing artificial insemination is determined at KM 3/dosage of semen.
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Table 3.C FBiH Cantons and Their Agricultural Subsidies (2004)
Canton Amount (KM)
Table 3.D Sarajevo Cantons Agricultural Subsidies (3,500,000 KM)
Sector Amount
Livestock
Raising quality heifers (with pedigree) 500 KM/head
Raising quality heifers (incomplete pedigree) 300 KM/headRaising breeding sheep (2 years old) 20 KM/head
Production of cow milk 0.10 KM/L
Raising egg layers 1 KM/piece
Raising fattening chicken broiler 0.30 KM/piece
Beekeeping 10 KM/beehive
Plant production
Commercial production of cereals 50 KM/0.1 ha
Fruit Growing
New orchards 300 KM/0.1 ha
New berry orchards (strawberry, raspberry, blackberry, and currant) 300 KM/0.1 ha
Cantonal
Agricultural
Subsidies
Una-Sana 1,000,000
Posavina 1,200,000
Tuzla 700,000
Zenica-Doboj 1,050,000
Bosnia-Podrinje 250,000
Middle Bosnia 650,000
Herzegovina-Neretva 50,000
West Herzegovina 50,000Sarajevo 3,500,000
Hercegbosnia (Livno) 100,000
Total 8,550,000
In 2004 the government of each of BiHs 10 cantons decided to supportagriculture with 8.55 million KM for primary production subsidies (seeTable 3.C). Funds from the cantons will be used to support the livestocksector and crop and fruit producers as well as for subsidizing interestrates for agricultural loans. An example of how agricultural subsidies aredistributed is shown in Table 3.D.