This article was published in NIN weekly magazine on July 28, 2011
One of the four year plans in the Soviet Union envisaged that each chicken should be fed with food worth 25 kopeks a month. During the inspection, officials found out that on one farm they spent 23 kopeks a month buying food for a chicken. The head of the farm was immediately sent to Siberia. The head of the next chicken farm inspectors visited heard the story and told inspectors they spent 27 kopeks buying food for a chicken. He too ended in Siberia. When inspectors came to the third farm, the farm’s head was completely bewildered and decided to play it safe: “We give each chicken 25 kopeks and they eat whatever they want”, he said. And he retained his job.
The time of these jokes is long gone. Nevertheless, they can still be didactic when thinking about the proper role of the State in the agriculture sector. Thankfully, no Ministry of Agriculture in Serbia ever was in the business of determining how much a chicken should eat a month, but the different policies adopted over the years obviously had a big influence on the sector. Have they contributed to its development?
Serbia can gain a lot by improving production, but also storage, processing and distribution of agricultural produces. Experts have calculated that with an increase of one liter per cow per day, the country could earn an additional 50 million Euros per year! If the production of cereals increased 300 kilos per hectare a year, it could boost country’s income by 100 million Euros a year. But in order for this to happen, farmers need to have the correct knowledge about various breeds, seeds, fertilizing and feeding practices and the like. Acquiring and disseminating this knowledge is a key role of what is called “extension service”. Large, well-capitalized modern farms employing professional agronomists may have the resources and awareness needed to find and implement on their own the best technical solutions to raise productivity of their land. But these farms account for a small fraction of the agriculture sector. All experts acknowledge that, for the others, rebuilding an effective extension service in Serbia should be a top priority and that, at least initially, financial support from the state for this effort will be needed.
Serbia has a competitive advantage in producing fruits, vegetables and livestock. And yet, Serbia’s most important policy measure and the bulk of the financing in the sector go to the “area payment” that leaves out pastures and most producers of fruits and vegetables. It absorbs 80 to 85 percent of the agricultural budget while reaching out to only about 20 percent of farmers. Does it actually foster necessary structural changes required to improve agriculture competitiveness and create the environment for farmers to improve their capacity to generate a higher income under market conditions?
Another issue has been the lack of stability in agriculture policies over the years. As a consequence, there is a significant uncertainty for farmers, food processors and input suppliers, which is an obstacle to investment. Further, are policies continued or changed on the basis of evaluation of their impact? In Germany, a specific law from 1969 requires cost-benefit analysis for all new proposed policy measures that have a significant financial implication. Hence, it can rarely occur that measures are introduced for which the budget item is not there. The European Union (EU) outlays a strategy, policy objectives, and policy measures for a seven-year period. Its member countries are forced to have an ex-ante assessment prior to the introduction of a policy measure and have to institute a regular ex-post evaluation of the measure. In some countries, there is official or public evaluation in place and open debate on agriculture policies. Sometimes new sector strategies and programs even have to be agreed upon by Parliament. Could some of these practices - introduced to ensure the effectiveness and enhance the stability of agricultural policies - be good for Serbia?
Finally, it is critical to think about agriculture not just in terms of production, but in terms of trade. The state can play an important role in this regard. For instance by switching more resources from income to investment support and ensuring that Serbia has efficient and modern certification bodies to guarantee and promote the quality, traceability and safety of Serbian agricultural produces in domestic and foreign markets. Encouraging specific investments in cooling, packaging and transport facilities and guaranteeing safety standards would help Serbian raspberry producers speed up delivery of fresh raspberries to foreign markets, thereby leading to higher prices on the farm level and contributing to higher income of farmers’ households. Wouldn’t it be better than squabbling each year over the price of raspberries which, by the way, is determined by the market, contrary to the chicken feed of the introductory joke?