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The 2004 Serbian wheat crop is up 500,000 mt from the drought-reduced 2003 crop
Weather conditions during 2003 were particularly unfavorable to cereal production in Serbia. Serbian producers planted 12 percent less wheat than in the last crop year as a result of the new Serbian Government planting subsidies for industrial crops (sugar beet, soy and sunflower). Spring drought conditions in 2003 reduced wheat yields and thus total production to 1.4 million MT, which was below average (1.9-2.2 million MT).

In MY02/03 winter wheat (predominant in Serbia) and spring wheat crops were affected with very long winter temperatures below freezing and further stressed by a persistently dry spring during plant germination and emergence phase. For wheat, out of a total 600,000 HA planted in the fall 2002, 220,000 were damaged. The most effected regions were north and central Banat, all Backa and east and central Srem. All these regions are in Vojvodina, the so-called “bread basket of Serbia”.

Most wheat production in Serbia is concentrated in small to medium sized private farms. The balance of the Serbian wheat crop is produced by large “socially owned” state farms. The availability of appropriate storage on farms is very limited. Therefore, smaller producers prefer to sell their production in post-harvest months to the Serbian State Reserves or to the open market. They also allocate some portion for on-farm feed and to be processed in small/medium size private feed and flour mills.

Fall planting in 2003 was more efficiently done compared to 2002, despite a lack of inputs (seeds and fertilizers), but with much better weather conditions in October and November of 2003. Total area planted is estimated 630,000 HA, and with an average yield of 3 MT/HA could result in production of 1,900,000 MT. With normal weather conditions in MY03/04 Serbia will produce between 35-40 percent more wheat than in MY02/03 and will be able to refill State Stock Reserves; have sufficient wheat for domestic consumption; and probably export small quantities.

After successful planting in November when conditions were optimum, at the beginning of December 2003 temperatures dropped significantly which had some negative impact on wheat that was planted later. Wheat planted in nearly sprouted well. Precipitation was above average this year. Snow covered most of the central parts of Serbia, while Vojvodina as the main wheat region had snow cover for the first time at the end of January 2004. Temperatures were around –10 C, but in January and February 2004, there was no significant damage to winter wheat. During January-March wheat regions had between 250 and 280 liters of rain and snow per square meter, which was almost double the amount during the same period of the last two dry years.

During February and March 2004, farmers will need some 200,000 MT of mineral fertilizers. Imported fertilizers account for 70 percent of domestic needs. Traders are also offering fertilizers for payment in kind of wheat.
Traders are currently offering to farmers 1 kg of fertilizer for 0.8 kg of the 2003 wheat crop and 1 kg of fertilizer for 1 kg of the 2004 wheat crop.

Current State Reserves of wheat are estimated to be 100-130,000 MT. According to some sources Commodity Reserves currently has the lowest level of wheat stocks over the last ten years.

In addition to restricting trade in wheat in summer 2003, the GOS began a campaign to buy up to 250,000 MT of wheat from farmers at below market prices. Thus, farmers refused to sell their wheat. While Serbian wheat prices were running at roughly 11 dinars/MT (USD 200/ MT), the State Commodity Reserves offered only 8 dinars/MT (USD 145/MT), while world wheat prices were at USD 220/MT. The State Stocks bought only 3,170 MT of the 2003 wheat crop out of total 250,000 MT first announced. Domestic milling companies purchased most of the wheat from farmers. In 2003 and in 2004 the State Stock Reserves have very limited wheat stocks since they exported some 170,000 MT during 2002.

Serbia exported 620,000 MT of the MY01/02 wheat crop, when production was considered to be about average, at 2.25 million MT. Many international grain trading companies were present in Serbia exporting wheat to the Middle East and to North African countries. Wheat was exported for an average price of 5.5 dinars/kg (100 USD/MT).

In the early months of 2003 the GOS exported an additional 71,000 MT of the CY01/02 wheat crop at a price of $100/MT. In May 2003 the State announced that there was a need to import grain, but at a much higher price.

The entire Balkan region was affected with drought during 2003 (Hungary, Croatia, Bulgaria, Romania and Ukraine) and wheat prices were high in the region. The 30 percent duty on grain imports to Serbia kept grain prices high, compared to neighboring countries.

In June 2003, the GOS banned exports of wheat, while high customs duties of 30 percent stopped traders from importing wheat. Some 35,000 MT of Russian wheat was imported in August and September 2003 using the Free Trade Agreement Serbia signed in 2000 with Russia. According to this Agreement, Russian wheat was imported to Serbia without any customs duties.

Montenegro is traditionally importing wheat from Serbia. After the GOS decision to ban all wheat exports from Serbia in June 2003, Montenegro had to find other sources (Hungary) to import wheat. Montenegro was specifically included in the June 2003 restriction due to the GOS’ suspicion that wheat would be re-exported through Montenegro.

Until February 2003, prices of wheat ranged between 6 and 7 dinars/kg (110-125 USD/MT). When it was clear that less wheat was planted and that drought would impact wheat production, prices increased to 11 dinars/kg (200 USD/MT). The price of wheat continued to increase during fall planting reaching 14 dinars/kg (255 USD/MT) in the end of December 2003. Currently wheat is 15-15.5 dinars/kg (273-288 USD/MT). Wheat prices will start to fall when significant quantities of imported wheat enter the Serbian market and when more precise forecasts of the new crop can be given.

Current flour prices are running between 20 and 23 dinars/kg (363 and 418 USD/MT). The current price for a loaf of bread (500-600 grams) is 25-27 din/loaf (0.45-0.49 USD/loaf) in Belgrade.

Serbian Stock Reserves are providing flour type 850 for production of so-called “cheap bread” of 13 din/loaf (0.24 USD/loaf). From March 1, this cheap bread will be sold for the same price but the loaf size will be smaller, 500 grams instead of previous 700 grams. State is milling some 20,000 MT of wheat monthly with subsidies. This wheat flour is regularly distributed but only to few large bakers in Serbia.
MGR Archive 6.2.2005
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Russia Rapan $ 700
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EU Prices Baldo €660
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