10AGRICULTURAL BUDGET IN THE FUNCTION OF ORGANIC AGRICULTURE DEVELOPMENT IN SERBIA AND MONTENEGRO
Gordana Radovic1, Dejan Zejak2, Vladimir Pejanovic3 *Corresponding author E-mail: gordana.radovic09@gmail.com
A R T I C L E I N F O
Review Article
Received: 27 May 2023
Accepted: 15 June 2023
doi:10.59267/ekoPolj2302645R
UDC 657.312.3:631.147(497.11) (497.16)
Keywords:
organic agriculture, development, incentives, agricultural budget, Serbia, Montenegro
A B S T R A C T
Organic agricultural production requires higher financial investments than conventional agricultural production. Seed prices are higher, labor costs are higher, and there is the additional cost of certification. That is why the existence of incentive measures of agricultural policy is necessary for organic agriculture. The aim of the paper is to present the incentives paid from the agricultural budget for organic agriculture in Serbia and Montenegro. The authors conclude that subsidies for organic agriculture, although they are paid continuously and are a significant incentive, have a small percentage share in the agricultural budget in both countries. In Serbia, 1% and 3% of registered farms in Montenegro practice organic agriculture.
JEL : Q18
Introduction
Oiganic agricultural production is a very current subject of research in the scientific works of researchers and scientists at the global level. Agricultural policy measures are necessary for organic agriculture. According to (Wu, Marette, 2020) the development of this production has seen an expansion in the last three decades, because "policy makers have tried to develop regulations for providing sufficient incentives to farmers to adopt organic farming".
In the literature, there are positions according to which organic production can be characterized as sustainable agricultural development, as well as that "the organic
1 Gordana Radovic, Ph.D, Research associate, "Dnevnik-Poljoprivrednik" AD, Bulevar oslobodenja 127, Novi Sad, Republic of Serbia, Phone: +381641378643, E-mail: gordana. radovic09@gmail.com, ORCID ID (https://orcid.org/0000-0001-9770-6306).
2 Dejan Zejak, M.Sc, Biotechnical Center, Rakonje XV/13, Bijelo Polje, Republic of Montenegro, Phone: +38269427091, E-mail: zejakd@gmail.com, ORCID ID (https://orcid. org/0000-0002-1184-8846)
3 Vladimir Pejanovic, M.Sc, Master of Engineering Management, IT Department, Faculty of Technical Sciences, University of Novi Sad, Trg Dositeja Obradovica 6, Novi Sad, Republic of Serbia, Phone: +381 63 8435527, Email: vladimirpejanovic@uns.ac.rs, ORCID ID (https://orcid.org/0000-0002-0314-4144).
production is based on an essential connection between agriculture and nature, with a focus on respecting the natural balance" (Mihailovic, Brzakovic, 2018; p. 127).
The development of this method of agricultural production was conditioned by the need to preserve a healthy environment, as well as food safety. Some authors (Clark, 2020) present the results of their research, which say that "organic farming is more efficient in its use of non-renewable energy, maintains or improves soil quality, and has less of a detrimental effect on water quality and biodiversity". According to (Katic et al., 2008; p. 271) organic production is a type of production that ensures the harmony of environmental protection requirements and production based on natural processes. Bearing in mind that organic agriculture is a labor-intensive activity, its importance is also in the employment of residents of rural areas, especially women, which is also important for reducing the depopulation of these areas (Pejanovic, 2013).
Organic agricultural production requires larger financial investments considering that it has higher production costs. First of all, labor costs are higher, input prices are higher, and the cost of certification puts an additional burden on producers. On the other hand, it is necessary to pass a minimum of three years, which is necessary for the conversion of the land, in order for the production to be considered organic. Only then can producers make their first income. In order for organic production to take place and develop in the correct way, continuous education of producers is also needed (Mihailovic et al., 2007, p. 88). In addition to education about production methods, financial education is also important, because "the level of farmers' financial knowledge is low" (Zakic et al., 2017; p. 1651).
EU is a significant producer of organic food on a global scale. Financial support through the CAP also contributed to this. A group of authors (Krstic et al., 2017; p. 968) state "the assets meant for organic agriculture, from the European Agricultural Fund for Rural Development (EAFRD) for the period of 2014-2020 are 6.4% of the total EAFRD fund." The author (Ignatenko, 2020) points out that "the highest level of development of the organic agriculture was reached by Italy, France and Germany" ... "these three countries have been designated as the "countries of good practices" in the EU. According to (Sredojevic et al., 2017), in order to encourage investment and improve the competitiveness of economic entities in the organic sector, better quality credit lines for investments are needed, as well as support from other agricultural policy measures, primarily stimulating tax relief.
In Serbia, according to researchers (Tomas-Simin et al., 2019; p. 265), organic agricultural production "is legally a well-regulated area, but still not developed to the necessary and possible extent". The accelerated development of organic agriculture was recorded at the beginning of the 21st century, especially in Vojvodina, and this is also the result of well-organized producers (Pejanovic, Njegovan, 2011). According to research data (Radovic, Jelocnik, 2021; p. 22) "the share of organic farms in the total number of agricultural ventures is about 1%. Serbia's portion in the global supply of organic food and agricultural products is only 0.2%". Certainly, there are numerous
reasons for the underdevelopment of organic agriculture in Serbia, among which is the low level of incentives, which was a significant limitation for faster development (Radovic et al, 2011). The authors (Roljevic-Nikolic et al, 2017; 334) based their analysis on a comparison with the European Union and on that occasion came to the conclusion "intensive growth of organic farming in the EU provides a stable support both in terms of rate and financial resources, while in Serbia has been changed not only amount of support from year to year but also types of support". The financial support of the state is necessary for the development of organic agriculture in Serbia, given that most producers do not have their own accumulation, i.e., sources of self-financing, as well as the unfavorable lending conditions of commercial banks (Radovic, 2018).
In Montenegro, organic agriculture is of vital interest to the state. Bearing in mind that organic agriculture is based on the principles of sustainable development and maximum environmental protection, it is clear why it is of strategic importance for this country, where ecology is of vital interest. Particularly favorable agro-ecological conditions exist in Bijelo Polje, Berane, Andrijevica and Plav. According to the author's assessment (Zejak, 2020), good agroecological conditions are also the result of the fact that due to the economic crisis, farmers use little artificial fertilizers and chemical agents even in conventional production. In the last ten years, the areas under organic certified production have increased by 30% (Batakovic, Matavulj, 2022). As in other countries, in Montenegro, subsidies from the relevant ministry contribute significantly to the development of organic agriculture (Zejak et al, 2022).
Materials and metods
The aim of the paper is to present the incentives paid from the agricultural budget for organic agriculture in Serbia and Montenegro. For this purpose, the authors use the method of analysis and synthesis, as well as the descriptive and static method. The research uses available statistical data, as well as data from the relevant ministries on the amounts of subsidies for organic agriculture in both countries. For the purpose of the research, the current normative framework, i.e. laws, rules and regulations, is analyzed.
Research results
Organic production has existed in Serbia and Montenegro since the 1990s. Subsidies have been paid from the agricultural budget in Serbia since 2005, and in Montenegro since 2006. As part of the research, the level of these incentives, their percentage participation in the agricultural budget by individual years, as well in the entire analyzed period.
Serbia
The initial forms of organic agriculture appeared in Serbia in the 80s of the 20th century. More significant results were recorded during the 90s of the 20th century, when the first export of organic products was conducted. However, these products were sold in small quantities on the domestic market. Some authors are of the opinion that the mentioned
period can be ignored because organic agriculture was then minimally represented within the entire agricultural production (Sredojevic et al, 2017). The organized making has existed since 2000. The first law was then passed for this type of production, which was harmonized with the regulations of the EU. Also, the necessary regulations and other normative acts were adopted at that time. In addition to state institutions, foreign development agencies, as well as the non-governmental sector, provided significant support for development. The current Law on Organic Production was adopted at the session of the Republic Assembly, held in May 2010, and entered into force on January 1, 2011 (Zakon RS, 2010).
A more precisely defined normative framework enabled a faster development of this type of production. For example, from 2010 to 2019, the total number of producers in the organic production system in Serbia increased by 45 times (Radovic, Jelocnik, 2021). The development was also the result of the activities of the national association "Serbia Organika", which was founded in 2009.
In addition to the law, the current normative framework consists of rulebooks, the most important of which are: Rulebook on control and certification in organic production and methods of organic production (RS Rulebook, 2020) and Rulebook on documentation to be submitted to the authorized control organization for issuing a certificate, as well as conditions and the method of selling organic products (Regulations of the RS, 2016).
In the initial years, there were only individual certificate holders, while the organization of production through group certification has been developing since 2011. Then the Rulebook on control and certification in organic production and organic production methods was adopted (RS Rulebook, 2011). According to official data, there were a total of 6,261 producers in organic production in Serbia in 2019, of which as many as 5,727, i.e. 91%, were subcontractors, who were in the group production system (Simic 2020; p. 32). According to the last published official data, in 2021 there were a total of 6,421 producers involved in organic production, which represents about 1% of the total number of registered agricultural farms, according to the results of the last Agricultural Census (Cvijanovic et al., 2012). In 2021, there were 23,527 hectares under organic production, and organic fruit growing was the most represented in the production structure, which covered 36% of the total areas. In the same year, 2021, an increase in the number of sheep, cattle and poultry was recorded in the system of organic livestock production (Organic News-63).
The institutions responsible for the organic agriculture in Serbia are: the Group for Organic Production at the Ministry of Agriculture, Forestry and Water Management and the Expert Council for Organic Production. The importance of the development of organic agriculture was also recognized by the Committee for the Village of the Serbian Academy of Sciences and Arts, which included this production in the development priorities within the National Program for the Revival of the Village of Serbia (National Team for the Revival of the Village, 2020).
Incentives from the agricultural budget
Subsidies for organic agriculture are defined every year by decrees on the distribution of incentives in agriculture and rural development, which are adopted by the Government of the Republic of Serbia. The method of realization of subsidies is defined by the rules, namely: the Rulebook on the use of incentives in organic plant production and the Rulebook on the use of incentives for organic livestock production. Only registered agricultural holdings are entitled to these incentives, which are also obliged to have a contract with an authorized organization for the certification of organic agricultural production.
Table 1. Agricultural budget and subsidies for organic agriculture 2013-2022
Year Agrarian budget (in millions Subsidies for organic agriculture Participation of subsidies for organic agriculture in the agricultural budget
of RSD) (in millions of RSD) (in %)
2013 44,699.5 200.0 0.45
2014 45,427.2 93.7 0.21
2015 45,308.2 92.0 0.20
2016 40,465.7 91.0 0.22
2017 43,787.6 90.0 0.21
2018 44,109.2 110.0 0.25
2019 54,614.7 108.0 0.20
2020 56,067.9 350.0 0.62
2021 60,271.3 200,0 0.33
2022 78,571.5 380.0 0.48
AVERAGE PARTICIPATION: 0.32
Source: Ministry of Agriculture, Forestry and Water Management of the RS, Regulations
2013-2022. Edited by the authors.
Annual allocations from the agricultural budget for subsidies for organic agriculture, as well as the average allocation for the analyzed period (2013-2022), were less than 1%. The total subsidies for organic production were the highest in absolute terms in the last analyzed year (Table 1). Specifically, in 2022, total incentives for organic production amounted to RSD 380 million. Of this amount, RSD 80 million was reserved for incentives for organic crop production, and RSD 300 million for incentives for organic livestock production (Regulation, 2022).
The amounts of incentives in organic crop and livestock production are higher compared to incentives in conventional production, and the percentage difference is shown in
Table 2 and Table 3.
Table 2. Subsidies for organic plant production 2014-2022
Year Increase in subsidies for organic production compared to conventional production (in %) Subsidies for organic production per hectare (in RSD)
2014 40% 8.400
2015 40% 8.400
2016 40% 2.800
2017 70% 3.400
2018 70% 6.800
2019 120% 11.440
2020 400% 26.000
2021 550% 26.000
2022 250% 31.500
Source: Ministry of Agriculture, Forestry and Water Management of the Republic of Serbia
The biggest difference in the amounts of incentives in organic and conventional crop production was in 2021. The highest absolute amount of incentives per hectare was in the last analyzed year, i.e. in 2022 (Table 2). The maximum amount of incentive per user, for organic crop production, was RSD 630,000 in 2022. (Regulations of the RS, 2021).
Table 3. Subsidies for organic livestock production in 2020
Type of subsidies Increase in subsidies for organic production compared to conventional production (in %)
Premium for milk produced by the organic production method 40%
Cattle fattening 40%
Fattening lambs 40%
Fattening kids 40%
Pig fattening 40%
Lactating cows 40%
Bee hives 40%
Production of edible fish 40%
Cows for raising calves for fattening 40%
Quality breeding dairy cows 40%
Quality breeding fattening cows and bulls 40%
Quality breeding sheep and rams, goats and male goats 40%
Quality breeding sows and boars 40%
Parent hens of heavy type 40%
Parent hens of light type 40%
Parent turkeys 40%
Quality breeding queens of carp fish 40%
Quality breeding queens of trout fish 40%
Source: Rulebook on the use of incentives for organic livestock production, Sluzbeni glasnik
RS number 25/2020.
In Serbia, the increase in subsidies for organic livestock production, compared to conventional production, according to current regulations, is 40% for all types of domestic animals (Table 3).
Montenegro
Organic production in Montenegro has existed since the beginning of the 90s of the 20th century.The development was supported by the realization of numerous projects, which were financed by international organizations, as well as the Ministry of Agriculture, Forestry and Water Management. Professional support was provided by the Biotechnical Faculty in Podgorica. Organic agriculture has been developing more rapidly since 2004, when the first law and by-laws in this area were adopted, and then the first producers were certified (Sebek, 2020). According to data (Zejak, 2010), the association "Production of healthy food" was founded in Niksic in 2004, and the "Center for Agricultural Development" in Bijelo Polje, as the first in this area. According to (Mirecki, 2014) "in Montenegro, the Law on Organic Production currently in force was adopted in 2013 and was harmonized with the Council Regulation No. 834/2007". In the current period, the law, which was adopted in 2013 (Law of Montenegro, 2013), is in force, and the drafting of the new Law on organic production is underway.
In addition to the law, the current normative framework consists of rulebooks, the most important of which are: Rulebook on detailed rules and conditions for crop and livestock organic production (Regulations of Montenegro, 2014), Rulebook on detailed content, method of registration and management of the Register of entities in organic production (Regulations Montenegro, 2015), Rulebook on the method and methodology of professional control in organic production (Regulations of Montenegro, 2015a), Rulebook on the content and size of the organic production sign (Regulations of Montenegro, 2016), Rulebook on detailed conditions and rules for processing, packaging, transport and storage of organic products (Regulations of Montenegro, 2016a), Rulebook on closer rules and conditions of organic production for aquaculture animals and seaweed (Regulations of Montenegro, 2017).
In addition to the Ministry of Agriculture, Forestry and Water Management, institutions of importance for the development of organic agriculture in Montenegro are: National Certification and Control Body "Monteorganica", which was founded in 2005, and National Association of Organic Producers of Montenegro "Organic Montenegro". The association was founded in 2011.
In Montenegro, 255 hectares were under organic production in 2006, and 4822.77 hectares in 2020. There were only 15 producers in organic production in 2006, and 423 in 2020 (Zejak et al., 2022). According to "Monteorganica" data, in 2021 there were 424 producers in organic crop production, of which the most, 371 producers were engaged in fruit growing. Other producers were engaged in farming, production of medicinal herbs and vegetables, while 64 producers were engaged in organic livestock production, among which the most, as many as 56, engaged in beekeeping (Batakovic,
Matavulj, 2022). Based on the above, it can be concluded that in Montenegro, in 2021, there were a total of 488 producers in organic production, which represents 3.29% of the total number of registered agricultural farms in this country. Specifically, according to statistical data of the Ministry of Agriculture, Forestry and Water Management in Montenegro, there were 14,831 registered agricultural farms in July 2021 (https:// www.gov.me/mpsv).
Incentives from the agricultural budget
Subsidies for organic farming are paid per hectare and head. The costs of organic certificates, as well as the placement of organic products, are also subsidized. Every year, the Directorate for Payments publishes a public call and criteria for support measures, and producers apply for support by submitting a control report, which was carried out by a certification body (Batakovic, Matavulj, 2022).
Table 4. Agricultural budget and subsidies for organic agriculture 2006-2022
Year Agrarian budget -without donations and credits (in millions of €) Subsidies for organic agriculture (in 000 of €) Participation of subsidies for organic agriculture in the agricultural budget (in %)
2006 7.9 120 1.52
2007 10.8 150 1.38
2008 14.8 165 1.12
2009 19.8 165 0.84
2010 18.7 350 1.87
2011 15.7 685 4.35
2012 14.6 568 3.90
2013 14.1 100 0.71
2014 14.0 150 1.07
2015 15.0 200 1.34
2016 16.2 250 1.54
2017 16.9 300 1.78
2018 18.8 350 1.86
2019 22.3 400 1.79
2020 24.4 400 1.64
2021 27.2 450 1.66
2022 41.9 450 1.07
AVERAGE PARTICIPATION: 1.73
Source: Ministry of Agriculture, Forestry and Water Management of the Montenegro https://www.gov.me/mpsv/agrobudzet. Edited by the authors.
The total amount of these subsidies had the largest share in the agricultural budget in 2011 (4.35%). In the following years, participation decreased, but it is important that continuity in this support has been maintained. The average share of subsidies for the development of organic production in the agricultural budget, from the first year of their introduction, and ending with 2022, was 1.73% (Table 4).
Agricultural producers registered in the Register of Agricultural Farms and the Register of Organic Production Subjects are entitled to subsidies paid from the agricultural budget as part of the measure for sustainable management of natural resources. The current amounts of subsidies in organic crop and livestock production are shown in Table 5.
Table 5. Subsidies in organic crop and livestock production in 2022
Type of subsidies Subsidy amount (in €)
for perennial crops 400 €/ha
for agricultural production 250 €/ha
for vegetable production 350 €/ha
for conditional head of cows and heifers 100 €/head
for conditional head of sheep and goats 100 €/ head
for poultry 2 €/ head
for bee colonies 40 €/colony
Source: Batakovic, Matavulj, 2022, p.10. Edited by the authors.
The largest amount of subsidies in organic production, in 2022, was in fruit growing. In Montenegro, the largest number of producers in organic agriculture is engaged in fruit growing.
Table 6. Types and amounts of subsidies for the placement of organic products in 2022
Type of subsidies Subsidy amount (in €/kg/lit/pc.)
for stone fruits, for apples 0.25
for berries 0.50
for southern fruit 0.70
for vegetables 0.30 - 0.80
for field crops 0.10 - 0.20
for confectionery products 0.40
for honey 2.00
for products of animal origin 2.30
for products of plant origin 1.50
for fruit juices 0.80
for alcoholic beverages 0.10
for eggs 0.10
Source: Batakovic, Matavulj, 2022, p. 10, Edited by the authors.
In addition to subsidies for organic crop and livestock production, producers who are registered in the Register of Agricultural Farms and the Register of Organic Production Subjects are also entitled to subsidies for marketing, i.e. placement of organic products. In order to realize the right to subsidies, it is necessary to have a certificate issued by an accredited body for organic production, as well as to have relevant evidence of the placement of organic products on the market (Batakovic, Matavulj, 2022). The types and amounts of subsidies for the placement of organic products are shown in Table 6.
In Montenegro, the right to subsidies can be achieved by certification and control bodies, if they meet the prescribed criteria defined by the public invitation. By exercising the right to subsidies, they are obliged to provide free services to producers. €85,332.12 was reserved for these incentives in the agricultural budget for 2022 (Batakovic, Matavulj, 2022, p. 10).
Conclusion
Organic agriculture is a potential model of agricultural development in Serbia and Montenegro. In both countries, the majority of producers own small areas of agricultural land, and due to the lack of financial resources, they do not use chemical preparations and fertilizers, so that the land is suitable for organic production. Therefore, incentive measures of agricultural policy are needed in order to develop and maintain this production. Subsidies are necessary because organic agricultural production has higher costs compared to conventional production. The costs are primarily increased by labor costs, because this production is labor-intensive, that is, it requires a lot of manual work. There is also the additional cost of certification, which significantly burdens the total costs.
Incentive measures of agricultural policy for organic agriculture exist in Serbia and Montenegro and were introduced at approximately the same time. In Serbia in 2005, and in Montenegro in 2006. In both countries, there is a necessary normative framework, i.e. laws and regulations, as well as appropriate support from institutions, and there are also organizations responsible for the development of organic agriculture. Based on the conducted research, it can be concluded that, both in Serbia and Montenegro, subsidies, although they are a significant support for the development of organic agriculture, have a small percentage share in the agricultural budget and on an annual level, as well as an average percentage share in the entire analyzed period.
Conflict of interests
The authors declare no conflict of interest.
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