Comparison of agricultural prices in Croatia and European ...



REPORT ON CROATIAN AGRICULTURAL PRODUCER PRICES

Prepared by:

Ramona Franić and Ornella Kumrić

University of Zagreb, Faculty of Agriculture

Department of Agricultural Economics and Rural Sociology

Zagreb, 2008

Contents

Introduction 3

Methodology 4

Data sources and availability 4

Analysis 5

Trends in producer prices of agricultural products in Croatia 5

Price analysis by sectors 5

Comparison of average agricultural producer prices between Croatia and EU countries 12

Agricultural commodity prices in Croatia and other Western Balkan countries 21

Conclusions 29

References: 31

Annex 32

Introduction

Since the beginning of 1990s, prices of agricultural products in Croatia were determined predominantly by market influences, and less by the state intervention through a system of production support and guarantee prices (for industrial plants, wheat and milk), and other forms of state intervention (tariffs and import duties). From 1995 to 1998, agricultural price policy was based on a combination of producer and input subsidies, and high levels of tariff and quantity-based import protection. The system of floor prices and subsidies remained fairly stable and support measures focused on wheat, oilseed crops, sugar, tobacco, milk production, and fertiliser and seeds. Consumers bore most of the cost of these policies, in that they were obliged to pay high prices for raw and processed agricultural commodities. The budgetary cost to government was small, even if the economic cost was high.

Price policy reform was initiated in 1998, in conjunction with the reform of trade policy required for WTO membership. To compensate farmers for the reduction of import protection and associated floor (producer) prices, area payments were introduced for most major crops. While the thrust of these reforms are an improvement in policy, with the price distortions from domestic support being removed to a great extent, and consumers theoretically benefiting from lower food prices, there are still significant problems which have not been addressed at all. Price distortions still exist because of the highly variable levels of external protection referred to above, and the numerous changes associated with the design and implementation of these reforms has inevitably created uncertainty among producers. Administratively, the complexity of these policies, with more than 50 different forms of crop payments and 70 different forms of payment for livestock production, has also raised administration costs.

In 2003 new price and subsidy policy has started, trying to adjust as much as possible to trends of the Common Agricultural Policy of the EU. The main purpose of this reform was to increase competitiveness of Croatian farm producers by stimulating commercial producers and larger production units. The system of area payment was therefore modified by additional criteria (production units, farm register) and the capital investment model was introduced as a structural support measure. However, these measures have not resulted with greater increase in price competitiveness till 2005.

In this report we analyse the producer prices of the main agricultural commodities in Croatia and compare it with EU average, producer prices in neighbouring countries (Slovenia, Hungary) and Western Balkan countries, trying to understand the position of Croatian agriculture and its chances on current European and future (enlarged) European market environment.

Methodology

The first part of the report provides official data of the Croatian Bureau of Statistics (CBS) on average producer prices of agricultural commodities. Average producers’ prices are calculated on the basis of collected data on quantities and values of agricultural products. These data have been collected, analysed and compared with the FAOSTAT database for the period 1995-2005, and so for the main agricultural commodities: cereals (wheat and maize), oilseeds (soybeans, sunflower, rapeseed), sugar beet, potatoes, apples, cattle meat and cow milk. The prices were expressed in EUR/t, by the official average annual exchange rate of the Croatian National Bank (see Annex, table 1). Short comments on trends of agricultural producer prices in Croatia in the period 2006-2007 are added at the end of sections.

In the second part we compare Croatian agricultural producer prices with European average and prices in neighbouring countries – members of the EU (Slovenia, Hungary). The prices were collected and price averages calculated for three selected years (1995, 2000 and 2005) for soft wheat, maize, tobacco, sugar beet, potato, apple, chicken meat and cow milk, and expressed in EUR/100 kg, as in EUROSTAT database, which was the data source for this analysis.

The final part of the analysis is comparison of Croatian producer prices with prices in Western Balkan countries: Bosnia and Herzegovina, Macedonia, Serbia and Albania, in the period 2000-2005. The analysed commodities in this part of the report are: wheat, maize, oilseeds, sugar beet, tobacco, potatoes, apples, grapes, cattle meat, pig meat, sheep meat, chicken meat, eggs and cow milk. Prices are expressed in EUR/t.

Different analysed periods (or chosen years for the analysis in the case of Croatian-EU comparison) and also commodity coverage in all three parts of the report are the result of data availability and different data sources available at the time of writing the report.

Data sources and availability

The data analysed in the first part of the report are provided by the Croatian Bureau of Statistics (CBS), and compared to the FAOSTAT database. FAOSTAT provides rich database, however in some cases these data do not follow the CBS data, especially in the last year of the analysed period. The differences arise probably due to a change in data collection methodology of the CBS. In 2005, the CBS has for the first time gathered the mentioned data concerning private family farms by using the interview method done by interviewers on a selected sample. This meant abandoning a long lasting method of collecting data by using the estimation method done by agricultural estimators on the basis of cadastre data.

The data source for the comparison with the EU prices was EUROSTAT. Due to limited data availability, the average EU prices were calculated only for commodities and countries covered by EUROSTAT. The same source was used for comparison with Slovenian and Hungarian agricultural prices.

Comparative analysis with other Western Balkan countries was made on the basis of papers presented at the 4th Conference of Slovenian Society of Agricultural Economists (DAES, 2007) except Albania. For Albania, the price estimation was made on the basis of FAOSTAT data, relative to a Croatian price trends, and expressed in EUR. Due to a lack of data, Montenegro was left out of the analysis.

Analysis

Trends in producer prices of agricultural products in Croatia

In the period 1995-2005 producer prices of agricultural commodities in Croatia show constant rise, due to input price increase and exchange rate trends (EUR/HRK, see Table 1 in Annex). Basic indices of agricultural producer prices are shown in the following table:

Table 1: Basic indices of agricultural producer prices in Croatia, 1995=100

|1995 |1996 |1997 |

|1995 |6.757247 |5.229850 |

|1996 |6.805527 |5.433979 |

|1997 |6.960719 |6.161849 |

|1998 |7.139159 |6.362284 |

|1999 |7.581823 |7.122027 |

|2000 |7.633852 |8.287369 |

|2001 |7.471006 |8.339153 |

|2002 |7.406976 |7.872490 |

|2003 |7.564248 |6.704449 |

|2004 |7.495680 |6.031216 |

|2005 |7.400047 |5.949959 |

|2006 |7.322849 |5.839170 |

|2007 |7.336019 |5.365993 |

Source: Croatian National Bank

2) Excel file: Croatian vs. EU prices_220508.xls

3) Excel file: Croatian vs. Neighbouring prices_060708.xls

4) Excel file: Croatian vs. FAO and WB prices_220508.xls

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