Download - Dairy Production Subsector

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Markets toMarkets toMarkets toMarkets toMarkets to

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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

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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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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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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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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


60.00 for 2nd class

36.00 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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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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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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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


16/29


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


17/29


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


18/29


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.


19/29


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


Cottage cheese type

UHT milkShort shelf-life products

Cottage cheese type

UHT milk

Short shelf-life productsPowdered milk

UHT milk


Cottage cheese type


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


Semi-hard cheese


Cottage cheese type



Semi-hard cheese

UHT milk


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


20/29


Dairy Name

and Location


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




Cottage cheese type


Cottage cheese type


Cottage cheese typeSemi-hard cheese


Cottage cheese type

UHT milk



Cottage cheese type

Semi-hard cheese


Whey


Pasteurized milkCottage cheese type


Milk


Semi-hard cheese

UHT milk



Semi-hard cheese


Cottage cheese type


21/29


Dairy Name

and Location


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


Cottage cheese typeSemi-hard cheese


Cottage cheese type

MilkYogurt


Whey


Cottage cheese type

UHT milkYogurt

Cheese


Cottage cheese type

Semi-hard cheeseButter


Soft and hard cheese


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


22/29



Pasteurized milkCottage cheese type

Yogurt

Yogurt

Yogurt


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


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.


23/29


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


24/29


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


25/29


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


26/29


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)


27/29


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


28/29


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


100 for 1st 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.


29/29

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.