Serbian dairy sector loses RSD 10.5 billion in revenue as herds and farms shrink

Revenue of Serbian companies engaged in milk production has fallen by about RSD 10.5 billion, according to figures cited on RTS, the public broadcaster. The number of employees in the sector is also declining, the livestock herd is getting smaller and some farms have stopped production altogether.

Ненад Будимовић of the Serbian Chamber of Commerce, speaking on the RTS Morning Program, described dairy as one of the most demanding branches of agriculture. He pointed to its slow capital turnover and to frequent swings in output, volumes, prices and consumption.

Export barriers and EU rules

Budimović said Serbia is adopting European Union rules as a candidate for membership. As a result, markets to which Serbia exports, above all the CEFTA countries (the Central European Free Trade Agreement), are applying European standards, which he described as an obstacle to Serbian exports.

He recalled that the sector went through a crisis at the start of the year. According to him, it has stabilized in recent months, but there are now warnings of possible problems with the farm-gate price of milk.

Fragmented production and the subsidy debate

Budimović said Serbian production is fragmented, with a large number of small holdings producing milk. National rules provide for three quality categories: extra, first and second class.

He also criticized the way the sector is supported. In his words, the state has set aside a large amount of money for milk premiums, but the results have not followed.

Through livestock associations, he said, the Chamber proposed distinguishing between producers who can significantly raise output and those with two to five cows who produce smaller volumes. Both groups need support, he said, but in different forms.

Demand for milk from processors has risen slightly, Budimović said. At the same time, imported dairy products are cheaper because production costs in the EU are lower. He named butter, milk powder and cheeses such as Trappist, Gouda and Edam.

Comparison with EU producers

Budimović said financial support can motivate farmers to produce more, but that it is hard for Serbian producers to compete with European ones. EU countries have compensation funds that respond in crisis situations, he noted. They also provide special incentives for organic production, and support there is linked to milk quality, not only to volume.

He called for the following measures:

• different incentives for small producers and for large systems able to expand output;
• alignment of Serbian rules on permitted aflatoxin levels, which he said complicate exports to the EU;
• conditions that allow farmers to operate profitably.

Production figures

According to the latest available data cited in the report, Serbia produces 1.39 billion liters of milk a year. About 850 million liters end up in dairies. Nearly a third is used by households, sold at green markets or fed to young animals.

Budimović said the country has enough milk for its own needs. In his assessment, preserving the sector requires new markets, export-oriented products, harmonized regulation and better education for farmers.

The figures and views in this article come from the RTS report and from Budimović, and no official forecast for milk prices was given. For more coverage, see the latest news section.