Eight Years Since Joining the EU, Croatian Agricultural Production Remains Lower Than Before Accession

Croatia has paid a total of 33 billion kuna in support during the first multiannual financial period since joining the EU, and despite very high subsidies, the Republic of Croatia has not managed to reach the value of agricultural production it had before accession. The value of agricultural production in 2012 was 20.9 billion kuna, while last year it reached 19.24 billion kuna and is still lower than in the year Croatia joined the EU, according to the statement.

This is the conclusion of experts from SMARTER, a consulting company specialized in agriculture and the food industry, which conducted an analysis of the impact that EU accession had on Croatian agriculture.

– Agriculture experienced a cumulative shock from strong competition in the open EU market, new EU agricultural policy rules, and the loss of the traditional CEFTA market upon joining the EU. Long-standing unresolved structural issues in agriculture led to a loss of over 5 billion kuna in agricultural production value in the first three years – emphasized Zvjezdana Blažić, a consultant at SMARTER.

She explained that it was only in 2015 that the decline was halted and the value slowly began to rise/stagnate, and since 2018, the growth has been more significant, but we have not yet reached the production value we had in the year before joining the EU. Last year, in the year of the COVID-19 pandemic, the production value amounted to 19.2 billion kuna.

The amount of money allocated for agriculture has not followed significant changes in production structure nor had a greater impact on the growth and development of the sector. The value of support in agriculture, fisheries, and rural development grew from an initial 2.3 billion kuna, or about 304 million euros, in 2013, to nearly 6.8 billion kuna, or about 909 million euros, paid out in 2020.

For direct payments, a total of 2.2 billion euros has been paid out so far in the programming period. For rural development, 1.77 billion euros have been paid, and an additional payment of 2.3 billion euros is expected (through payment N +3 years). There are also special national programs – CMO programs (wine, bees, and others) – for which nearly 40 million euros have been paid. The total value of paid support in agriculture, fisheries, and rural development amounts to 4.46 billion euros / 33 billion kuna from 2013 to 2020.

– The structure of agricultural production is changing little and slowly. A significant breakthrough in results has only been achieved in crop production, which is not the subject of interest in any strategic document currently being discussed – how to strengthen it and connect it vertically and horizontally, so that the growth of crop production continues and connects with livestock production and processing (crop rotation, protein crops, NON-GMO, infrastructure, storage, silos, financing, payment instruments). We must adequately value and maximally support the results of crop production because it will be difficult to maintain them considering the growing ‘green’ demands – warns Blažić.

The value of the purchase of all agricultural products in 2020 amounted to 7.87 billion kuna, almost at the same level as in 2019, and compared to 2013, the value of the purchase of all agricultural products is 17% lower.

In the total value of the purchase and sale of agricultural products, family farms participate with 3.19 billion or 40%, while legal entities and craftsmen achieve 4.68 billion kuna, or 60%. However, it should be noted that a large part of the sales of family farm products occurs outside official sales channels.

SMARTER emphasizes that there have been no significant changes in the structure of agricultural production. The share of cereal production has fallen, but the share of industrial crop production, especially oilseeds and soybeans, as well as fodder crops, is growing strongly. The share of milk production has significantly decreased, but it has increased in the production of pigs, cattle, and poultry. The share of vegetable production is increasing, while the share of fruit production is significantly decreasing. A decline has also been recorded in wine production, while the share of olive oil production is increasing.

The export of agricultural products in 2020 grew by 8%, while imports decreased by 6% compared to 2019. Indicators in foreign trade should also be viewed through the aspect of the difficult international flow of goods at the beginning of the year, as well as the decrease in demand (domestic, especially tourist) – all of which affected the reduction of imports, they emphasize at SMARTER.

– The structure of Croatia’s foreign trade shows that we have a surplus in the exchange of cereals, oilseeds, fish, and meat and fish products. Cereals and oilseeds generate 77% of the surplus. In all other categories, a deficit is recorded – the largest deficit is in the exchange of meat, milk, and eggs, animal feed, fruit, and beverages. Thus, meat, milk, and eggs, as well as animal feed, generate as much as 46% of the deficit – explained Blažić.

Financing Agriculture in the New Programming Period (2021-2027)

In the new programming period, Croatia will have a total of 3.42 billion euros available. The first draft from the Ministry of Agriculture shows that through agricultural policy measures funded from the EU budget, an estimated amount of 1.87 billion euros will be directed for direct payments, of which 25% for climate and environment. For rural development measures, the estimated amount is 1.49 billion kuna, of which less than 20% of funds is planned for investments, and as much as 35% for climate and environment. Investments in areas with natural constraints should be 20%, knowledge exchange and innovation 2.5%, etc. For sectoral measures – the Wine Envelope and beekeeping program, 61.5 million euros are allocated.

SMARTER’s estimate is that this new financial framework, the Strategic Plan within the CAP, which should fit into the Green Deal and two key EU strategies – From Farm to Fork and the Biodiversity Strategy, needs to be adapted to Croatian needs to bring about a significant breakthrough so that the Croatian agricultural sector does not continue to lag in competitiveness and productivity. Regarding environmental/climate issues related to agriculture (e.g., biodiversity, greenhouse gas emissions), Croatia achieves slightly better results than the EU average, so it would be logical for funds to be directed more towards interventions that will contribute to strengthening production.

– All our analyses of the state of agriculture over these 8 years since Croatia joined the EU, as well as the new changes in the CAP that are strongly focused on climate and environment, show that Croatian agriculture could face further stagnation, especially in the crop sector, which will be under pressure (less pesticide use, eco-schemes, etc.), as well as livestock, which has been identified as key in excessive greenhouse gas emissions. The first draft of the strategic plan for Croatia, in our opinion, will hardly contribute to the goals set by the Agricultural Strategy and the increase in the value of agricultural production to 30 billion kuna by 2030. Environmental protection and economic competitiveness are equal and complementary, and should not emphasize only one component – this is the conclusion of SMARTER.

Regionalization of production, horizontal and vertical linking of production and processing, producer associations, investments in processing and development of value-added products, as well as strong promotion of domestic production with constant cooperation of all stakeholders, are key for the development of agriculture and raising self-sufficiency in food production. Croatia lacks knowledge, investments in modern technologies, and greater focus on production and export. Without production, new jobs, and modernization, as well as raising productivity and competitiveness of agricultural production, there will be no development of rural areas, retention of populations in the countryside, and a strong breakthrough from the current situation, are key messages from SMARTER.

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